Airplane And Hospitality Industries Set Their Sights On Cuba

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Includes: AAL, ALK, DAL, JBLU, LUV, MAR, UAL, VA
by: Kapitall

By Mary-Lynn Cesar

The U.S. tourism industry is competing to get a foothold in Cuba. The ultimate winner? U.S. travelers.

Cuba may be just 90 miles away from the southern tip of Florida, but you wouldn't be able to tell it was so close by looking at flight prices. According to flight booking service Hopper, round-trip flights from the U.S. to Cuba cost, on average, $717. But Hopper projects that round-trip tickets could fall 50% to $364 as travel restrictions lessen and interest in going to Cuba rises.

Which it already is. Domestic searches for "flights to Cuba" have increased by over 600% since November 2014 (President Obama released a statement on re-establishing a relationship with Cuba in December 2014).

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Cuba even landed on the New York Times' list of "52 Places to Go in 2016," with the village of Viñales claiming the 10th spot.

Americans aren't the only ones interested in setting foot in the long-isolated Caribbean nation. The airline and hospitality industries are eager to capitalize on demand for the next tourist hotspot. Airbnb (Private:AIRB) and Starwood Hotels & Resorts (HOT) received special permission from the Treasury Department earlier this month to conduct business in Cuba.

Although Airbnb launched in Cuba last year, the company's services were only available to U.S. travelers. Now, anyone can book accommodations through the service. The Washington Post reported on March 20 the following average nightly prices for Airbnb's Cuba lodgings: $19 for a shared room, $38 for a private room and $82 for a house. That's considerably easier on the wallet than the all-inclusive trips Americans used to have to book through tour companies, which could set an individual back $2,000 to $3,500 a week.

Starwood will "refurbish and manage" two Havana hotels, the first time in 50 years that an American hotel company has operated on the island. Though whether this will truly be an example of American businesses expanding to Cuba ultimately depends on who wins the ongoing bidding war for Starwood: Chinese conglomerate Anbang Insurance Group or Marriott International (NYSE:MAR).

As the hospitality industry makes inroads into Cuba, the airlines are duking it out in their bids for commercial flight routes to the Department of Transportation. JetBlue (NASDAQ:JBLU) insulted Delta Air Lines (NYSE:DAL) by saying it was the top domestic airline at the JFK airport, to which Delta cried "demonstrably false" before sharing photos of stranded JetBlue passengers. Southwest Airlines (NYSE:LUV) said it could offer cheaper flights than many of its competitors, a claim that United Continental Holdings (NYSE:UAL) rejected. American Airlines (NASDAQ:AAL) criticized Southwest's request for six daily flights between Fort Lauderdale, Fl., and Havana, and Alaska Air Group (NYSE:ALK) for suggesting that there was enough demand in Los Angeles for two daily flights to Havana.

JetBlue and Alaska Airlines aren't only competing for routes to Cuba; both airlines are also rumored potential buyers for Virgin America (NASDAQ:VA) airline.

Businesses are interested in Cuba. So far none of the companies that were first mentioned as potential investors in the Cuban economy have received the green light (if they even sought it). Tourism, on the other hand, is taking off rapidly, and commercial flights to Cuba could begin as early as October.

With that in mind, here is a list of the aforementioned companies which are already doing or may be doing business in Cuba in the near future. Seven of the nine stocks are rallying above their 20-day, 50-day and 200-day simple moving averages (SMA), which suggests that they have strong upward momentum. Is Cuba the source of investor optimism? Or is it merger talk? Or something else entirely?

1. American Airlines Group Inc.: Operates in the airline industry. Market cap at $24.95B, most recent closing price at $41.38.

2. Alaska Air Group, Inc.: Operates as an airline company serving destinations in the western United States, Canada, and Mexico. Market cap at $10.27B, most recent closing price at $82.33. The stock is rallying 3.46% above its 20-day SMA, 11.80% above its 50-day SMA and 9.34% above its 200-day SMA.

3. Delta Air Lines: Provides scheduled air transportation for passengers and cargo in the United States and internationally. Market cap at $38.40B, most recent closing price at $49.33. The stock is rallying 1.96% above its 20-day SMA, 6.09% above its 50-day SMA and 6.20% above its 200-day SMA.

4. Starwood Hotels & Resorts Worldwide, Inc.: Operates as a hotel and leisure company worldwide. Market cap at $14.12B, most recent closing price at $83.66. The stock is rallying 10.50% above its 20-day SMA, 22.89% above its 50-day SMA and 16.58% above its 200-day SMA.

5. JetBlue Airways Corporation: Provides passenger air transportation services in the United States. Market cap at $6.83B, most recent closing price at $21.28. The stock is rallying 2.62% above its 20-day SMA, 1.13% above its 50-day SMA and -7.63% above its 200-day SMA.

6. Southwest Airlines Co.: Operates as a passenger airline that provides scheduled air transportation in the United States. Market cap at $28.70B, most recent closing price at $44.98. The stock is rallying 3.98% above its 20-day SMA, 11.68% above its 50-day SMA and 12.31% above its 200-day SMA.

7. Marriott International: Operates and franchises hotels and related lodging facilities worldwide. Market cap at $18.14B, most recent closing price at $71.55. The stock is rallying 2.23% above its 20-day SMA, 9.28% above its 50-day SMA and 2.12% above its 200-day SMA.

8. United Continental Holdings: Engages in the provision of passenger and cargo air transportation services. Market cap at $21.50B, most recent closing price at $59.82. The stock is rallying 2.21% above its 20-day SMA, 12.83% above its 50-day SMA and 7.61% above its 200-day SMA.

9. Virgin America: Provides scheduled air travel services. Market cap at $1.71B, most recent closing price at $38.48. The stock is rallying 23.36% above its 20-day SMA, 26.04% above its 50-day SMA and 16.99% above its 200-day SMA.

(Monthly return data sourced from Zacks Investment Research. All other data sourced from FINVIZ).