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Last month I went on a vacation with my family.
As I was browsing through booking websites to book flight tickets, accommodation... there were two trends which I noticed.
The foremost and obvious trend is that prices have gone off the roof.
While I expected revenge travel to last for 3-4 holiday seasons which implies 2 years post Covid, it certainly has become more of a structural trend. Airline ticket prices are up by at least 30-40% as compared to May 2022 while hotel room rates are off the roof.
I am sure most of you have experienced this surge pricing.
As investors whenever we experience trends first hand, our mind immediately starts thinking of stocks. After all, that is primary research which indicates factor like strong demand and pricing power.
The obvious stocks to look for would be aviation stocks and hotel stocks but the problem is that all of what we are experiencing first hand is already in the price. Mr Market and insiders are much smarter and faster.
In fact, in the stock market, the way price action happens, the most important skill is to be first rather than perfect. Anyway, I am sure dozens of articles have been written in news papers talking about top holiday stocks which include hotels and airlines.
While I was booking tickets, I happen to also catch another not so obvious trend.
Let me introduce this trend with a joke.
Wife asks husband why he spoke so softly at home. The husband said he was afraid Mark Zuckerberg was listening. Wife laughed, husband laughed, Alexa laughed, Siri laughed.
The trend which I came across was Artificial Intelligence (AI).
In fact, a lot of our choices are influenced by AI.
What we search on the internet, the choices the internet gives us based on our proffered likes. All of this is artificial intelligence, where the software tries to influence our decision by presenting choices.
AI is everywhere and trust me, as Elon Musk puts it, AI is going to take over the world sooner than you think.
I am sure all of you have experienced AI in some form or the other. The combination of AI and the travel boom is probably a perfect combination if you want to marry a long-term structural trend (AI) with a booming industry.
And the company which can ride the AI trend in the travel industry is...
While Rategain is more inclined to AI and SaaS (Software as a Service). In simple words, Rategain is the company which enables the hospitality industry to function and maximize its revenues.
The firm offers travel and hospitality services across different verticals like hotels, airlines, online travel agents, meta-search companies, package providers, car rentals, cruises, and ferries.
What does Rategain do? Something as basic as providing social media management to leading hospitality services to complex services like managing inventory, room rate pricing, ticket pricing to boost revenues.
Think of it as a company which handles social media marketing, runs campaigns to boost customer engagement, hiring influencers, etc.
That is the simple part. The more complex part involves implementing the right pricing strategy and understanding market positioning of competitors.
The company is the largest processor of data points in the travel industry. It offers products like Demand AI, Revenue AI which tracks AI powered demand index and AI powered revenue management solution platform.
The AI domain is extremely wide with giants like Google, Facebook, and Amazon. However, it is companies like Rategain focus on AI to enrich their clients in a niche industry.
The travel industry is in a structural uptrend and while I believe focusing on airline and hotel stocks will not give you the delta in your portfolio, AI stocks in India like Rategain can play multiple themes in the stock market.
While I believe, Rategain could be a big beneficiary of AI, this article does not analyse the fundamentals and financials of the company and is not recommending the stock or offering investment advice.
Warm regards,
Aditya Vora
Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)
Aditya Vora (Research Analyst) Hidden Treasure has 7 years of experience in the markets as an equity research analyst. He is a Chartered Accountant by qualification and worked with some of the big names on Dalal Street like Motilal Oswal, CRISIL, and IDFC securities. He follows a rigorous process of financially screening stocks. At the same time, Aditya believes an investor's edge lies in capturing qualitative factors. His forte is bottom up stock picking. However, he is also a firm believer in the importance of market cycles. Especially identifying emerging themes at an early stage.
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