Experiential Travel And Eco Fleets Will Transform RV Demand

Key Takeaways

• Operational integration, digital innovation, and efficiency gains are expected to structurally boost margins and reinforce Tourism Holdings' competitive advantage.
  
• Shifting travel preferences and sustainable fleet investments position the company for stronger demand, premium pricing, and multi-year revenue growth.
  
• Intense market pressures, elevated inventories, and economic uncertainty threaten sustained profitability, while structural industry risks and weak demand may limit future earnings recovery.

Catalysts

Operates as a tourism company worldwide.

• Analyst consensus expects merger synergies and cost-outs to drive medium-term profitability, but this likely understates the upside as Tourism Holdings is yet to fully capitalize on realized and pending efficiency gains across both fleet and corporate, suggesting a potential step-change in net margins over the next two years as operational integration matures.
  
• While analysts broadly agree that digital and technology investments will lift efficiency and revenue, the market may be overlooking the scale of Tourism Holdings' proprietary digital ecosystem-particularly its campervan sharing and dynamic pricing tools-which could structurally raise utilization rates and create a defensible competitive edge, driving materially higher revenue and improved asset returns.
  
• The rapid shift toward experiential, self-guided travel among younger demographics positions Tourism Holdings for multi-year volume tailwinds in rentals and sales, supporting above-market revenue growth as Millennials and Gen Z increasingly prioritize flexible RV travel over traditional tourism.
  
• Accelerating global middle-class growth, especially from Asia-Pacific, is set to dramatically expand inbound tourism to Australia and New Zealand, providing sustained filling power for Tourism Holdings' core markets and pushing rental yield and occupancy meaningfully higher.
  
• Ongoing investment in fleet electrification and sustainable offerings is poised to unlock new premium demand from environmentally conscious travelers, enabling higher pricing power and margin expansion as emission regulations tighten and low-emissions travel becomes industry standard.

Tourism Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tourism Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tourism Holdings's revenue will grow by 4.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.7% today to 13.3% in 3 years time.
• The bullish analysts expect earnings to reach NZ$141.7 million (and earnings per share of NZ$0.66) by about August 2028, up from NZ$24.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.0x on those 2028 earnings, down from 19.8x today. This future PE is lower than the current PE for the NZ Transportation industry at 19.5x.
• Analysts expect the number of shares outstanding to grow by 0.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.13%, as per the Simply Wall St company report.

Tourism Holdings Future Earnings Per Share Growth

Risks

• Persistent softness and volatility in global RV sales, particularly in key markets like North America and Australia, continue to drive margin compression as volumes struggle and pricing pressure intensifies, which could suppress overall group revenues and earnings growth.
  
• Elevated and potentially lingering inventory levels due to underperforming sales risk higher working capital, increased financing costs, and discounting, all of which could weigh on net margins and dilute returns on funds employed.
  
• Prolonged economic headwinds, high inflation, and weak consumer confidence are stalling RV demand and delaying a cyclical recovery, creating uncertainty for sustained revenue momentum and putting medium-term profitability at risk.
  
• Ongoing normalization and downward adjustment of gross margins on ex-fleet vehicle sales, driven by margin pressure and depreciation changes, signal persistent headwinds in achieving historical profitability rates, directly impacting group net profit.
  
• The lack of meaningful guidance, combined with structural industry uncertainties-including potential tariffs, environmental regulations, and shifts in consumer travel preference-creates a risk that required improvements in utilization and market conversion may not materialize, thereby constraining revenue and limiting the upside to future earnings.

Valuation

• The assumed bullish price target for Tourism Holdings is NZ$3.2, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tourism Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NZ$3.2, and the most bearish reporting a price target of just NZ$1.55.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be NZ$1.1 billion, earnings will come to NZ$141.7 million, and it would be trading on a PE ratio of 7.0x, assuming you use a discount rate of 11.1%.
• Given the current share price of NZ$2.23, the bullish analyst price target of NZ$3.2 is 30.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.