UBS Select: Despite global turmoil, these leisure stocks still have the potential to soar

Investing.com — The leisure sector covers hotels and the gambling industry. Despite heightened geopolitical uncertainty related to conflicts in the Middle East, the sector still remains relatively resilient.

While elevated oil prices and macro volatility pose risks to global travel demand and consumer spending, structural factors such as diversified geographic positioning, an asset-light model, and ongoing digital/AI integration provide important buffers.

Against this backdrop, UBS highlights several selected opportunities where these companies’ specific advantages may outperform broader cyclical pressures.

Accor Hotels Group (Hotels)

Accor Hotels Group stands out within the hotel sector, emerging as a defensive investment target. Its asset-light business model and globally diversified footprint provide support. The company’s direct exposure to the Middle East is relatively limited (around 8-10%), reducing vulnerability to regional turmoil. Importantly, historical trends suggest that geopolitical shocks often affect hotel demand only temporarily, unless they coincide with a severe global economic recession.

From an operational standpoint, Accor Hotels Group is well positioned to expand profit margins through franchising and efficiency improvement programs, while steady unit growth (around 4%) supports mid-term revenue visibility. In addition, strategic options such as potential asset monetization and capital returns further increase upside potential.

The company is also integrating artificial intelligence into pricing and the customer experience, which could enhance its revenue optimization capabilities over time.

Lottomatica Group (Gambling)

Lottomatica is a high-conviction selected stock in the gambling space. Its strong balance sheet, disciplined leverage management, and structural online growth provide the driving forces. Although gambling is inherently discretionary spending and sensitive to pressure on consumer incomes, Lottomatica’s exposure to the fast-growing online segment offers a key hedge against macro headwinds.

The company expects to generate strong cash flow, delivering meaningful shareholder returns while continuing deleveraging. Its positioning in underpenetrated markets further supports sustained EBITDA growth—even with an economic backdrop that is soft. Compared with peers, Lottomatica’s valuation is quite attractive; its free cash flow yield is compelling, indicating potential for re-rating.

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