Just because millennials love it doesn't mean you should buy it.
In the last two months I have heard a number of CEOs talk about how, surprisingly, millennials have an affinity for their products.
They tend to point it out to show you there's a trend change you may not be aware about.
Just in the last year, for example, I have talked to CEOs of cruise liners, timeshare companies, recreational vehicles and budget hotels, and all four have told me that millennials make up a surprising percentage of their customers, especially their new customers.
Initially I was skeptical. Aren't cruises for seniors? The cruise CEOs say no. But it wasn't until my then-22- year-old daughter went on one because they are a bargain and great backgrounds for instagramming that I started taking the numbers seriously. The data rings true. Same with the RVs as the good people from Hipcamp, the disrupting camping site that caters to millennials. They love to glamp, which is glamour camping and they do it as a bargain vacation.
The data from both of the new Wyndhams (WYN) , the Wyndham Hotels and Resorts (WH) , the biggest hotel franchiser, and Wyndham Destinations (WYND) , the timeshare colossus, definitively show that millennials don't like to spend a lot of money on hotels, instead they just want a clean room and they are an increasing percentage of those who buy timeshares. I know timeshares have a tough reputation and that's, in part, because they have to be sold not bought. You need a sales apparatus because, otherwise, there isn't enough natural demand. Still, it is possible to buy them at prices that make sense if you have enough information at hand and that fits the depiction of the typical millennial buyer.
There's only one issue: just because millennials like something doesn't mean that you should buy the stock. Yesterday Morgan Stanley put the cruise liner stocks in the hurt locker by pointing out that higher fuel costs and the stronger dollar are contributing to weaker gross margins and order softness. And, once again, we hear that too many cruise ships just came on the market precipitating ticket weakness. It doesn't matter how many millennials are buying tickets if those three factors aren't behaving. They are no panacea.
Millennials may overindex in the RV department but if the assembling costs too much because of a tight labor market and rates get too high too quickly and the RVs think there's endless demand to the point that they have made too many and you have an inventory glut, then the millennials aren't going to rescue you. The RV story was one of the greatest ever told until it wasn't, although it might be again if and when the inventory gets worked off.
Hotels? Could budget hotel traffic be clipped by gasoline prices? It's possible. More important, though, what if higher rates make it so there aren't a lot of new hotels built? What if the chains out there that are for sale get snapped up and a Wyndham Hotels doesn't grow rooms? What if college tuition, now at $72,000, keeps going higher? Is there a level where millennials simply can't afford timeshares even if they love, love, love them?
I think that it's terrific to hear that millennials like something you thought they didn't. That means that the business won't sink as the baby boomers get on their fixed income diets and stop consuming.
But please note how Thor (THO) and Carnival (CCL) and Royal (RCL) trade. Millennials may glamp and cruise but it isn't helping. I like the stocks of both Wyndhams, but I like them because they are cheaper than their compadres yet offer better financials. We get some millennials in there buying, terrific. In the end, though, millennial buying patterns are worth noting, but after what we have seen in the markets lately, there's nothing more to it than that.