Patrick Scholes on Downgrading Royal Caribbean and Top Travel Picks

Royal Caribbean Downgrade Rationale

• ⚠️ The decision to downgrade Royal Caribbean from a buy to a hold rating was difficult, given its strong past performance.
• 📉 The downgrade is attributed to a combination of normalization in booking volumes and historically high stock valuations.
• 📊 Booking volumes have slowed to low to mid-single-digit year-over-year growth, a significant decrease from the nearly 20% growth seen earlier in the year.

Industry Normalization and Consumer Behavior

• 🚢 The cruise industry's recovery was late compared to other travel sectors, contributing to the current normalization.
• 📉 Consumer confidence has declined, impacting travel spending and booking trends.
• ✈️ Booking trends are now more reflective of pre-COVID patterns rather than the exceptionally strong recovery seen in the past 6-8 months.

Top Travel Sector Picks

• 🚢 Within the cruise industry, Norwegian Cruise Lines is identified as a potential catch-up name and an underperformer.
• 🏨 In the hotel sector, Hyatt Hotels is mentioned as a stock that has not performed as well as others in the group.
• 📈 While overall travel trends are described as mediocre and lethargic, there are still some relative value opportunities in the sector.