With the advent of the pandemic early last year, much of our daily lives changed – we experienced food and supply shortages, modified work arrangements, and lockdowns across most regions of the Western world. As a result, certain industries were hard hit with people simply unable to access them, most notably of which is the hospitality and tourism sector.
With the rollout of vaccinations globally, those experiences are quickly becoming a thing of the past. The United States certainly has seen a drastic reduction in lockdowns, while Canada is hopefully on the same path. With this in mind, a simple term is being spoken more frequently – the revenge vacation.
The notion is simple – those of us whom were locked in our houses for the last several months endlessly are looking to catch up on lost travel time. Unable to travel last year, we’re looking for a getaway sooner rather than later, with the expectation being that we may be able to double up our typical annual vacation time as a means of getting the events of the last year off our mind.
When it comes to investing, much like the last year offered abnormal returns for tech based names that offered work from home, or home based solutions for our needs (think Zoom or Peleton), the expectation here is that there is a “return to normal” trade available as well. For those betting on the growth of the travel industry, there’s names such as US Global Jets ETF (NYSE: JETS) that may offer a simple solution.
However, as everyone well knows, we prefer those of the small cap variety. One name that may offer some exposure to the “revenge vacation” crowd is that of InsuraGuest Technologies (TSXV: ISGI). The company is focused on a simple business model: insurance technology, or insuratech.
While operating its several niches, the firms main focus right now sits on the hotel and vacation rental arena. InsuraGuest has built a platform from which it can offer insurance to hotels and AirBnB hosts for its patrons, which can be simply included as a required fee, or the guest can elect to purchase, for a small surcharge on a per night basis.
The insurance itself is classified as “specialized hospitality liability coverage,” which provides an additional layer of protection that prevents the need to make a general liability claim if an InsuraGuest-covered claim occurs. The company deals directly with the guest, with the insurance covering theft, accidental medical expenses, accidental in-room property damage, and accidental death and dismemberment.
On the business side of things, the revenue model for the company is rather simple to understand. The company charges its fees on a per room per night basis, in the arena of $4.95 per night. Here’s an example of how that translates to potential revenue for InsuraGuest.
Lets examine a 200 room hotel on a per day basis using this figure. Assuming 70% occupancy on any given night, that translates to 140 rooms booked, with insurance being charged at $4.95 per each room. This equates to $693 in potential revenue from that single hotel for InsuraGuest for that one day. This may not seem like a whole lot, but just wait. Multiplied by 365 days in a year, this totals out to $252,945 in potential revenue from that single hotel.
From here it becomes a simple numbers game. The more hotels that the company can enlist to use its hospitality liability coverage, the higher its revenues climb. If the company is able to secure business with just a small handful of property management firms (it’s believed that it already does business with a few) that manage a few hotel properties, the potential revenue for the company quickly climbs. Of course, the company recognizes this and has taken steps to expand its distribution.
In November, the company signed an agent producer agreement with USI Insurance, for its liability offerings to be sold through a 7,500 insurance brokerage network. In January, the company also listed its offerings on Guesty, a leading platform for property management services for short-term rentals. More recently, the company also listed its services on Hostfully, another such service. The company has also recently reworked its API to easily integrate with 82 different property management software programs for ease of use integrations.
The hospitality industry has spent the last year simply treading water as a means of staying afloat in what has been the worst black swan event in recent memory for their operations. With the revenge vacation theme on the uptick however, the sector as a whole is potentially heading into a position of strength as they see the return of guests and normal operations. The bet here, is that InsuraGuest will as a result be quickly added to their offerings as a means of offering further protection for their guests and their own operations.
FULL DISCLOSURE: InsuraGuest Technologies is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover InsuraGuest Technologies on The Deep Dive, with The Deep Dive having full editorial control. Additionally, the author personally holds shares of the company. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.