Travel Stocks: Ready for a Rebound or Hampered by high Inflation?
Happy Friday! Summer 2022 will be huge for travel, do you dig out your swimsuits and happily set off on long-postponed vacations?
Not only us, the S&P 500 is on track for its best two-week performance, with travel stocks leading the market rally.
The major airlines aren't sounding the alarm on the economy yet.
On Thursday, both $Southwest Airlines(LUV)$ and $JetBlue Airways(JBLU)$ raised their quarterly guidance, citing strong demand heading into the critical summer travel season. Both upward revisions came just weeks after the companies initially reported their forecasts last month.
"JetBlue’s operational performance has improved steadily since early April," the companysaid in a filing Thursday."The demand environment continues to be strong, with bookings exceeding Company expectations."
As consumers appear willing to spend on travel that hadn't been accessible at the height of the pandemic. Southwest on Thursday also raised its guidance, and now expects operating revenue to grow between 12% and 15% for the fiscal second quarter compared to 2019. It previously saw a rise of between 8% and 12%.
"The Company continues to experience strong load factors and an acceleration in bookings for summer travel," theairline said in a Thursday filing.These latest forecasts from Southwest and JetBlue built on upbeat outlooks issued by other travel companies in recent weeks, which have all pointed to persistent pent-up demand for travel ahead of the summer.
This indicates that travel firms like $Walt Disney(DIS)$, $Booking Holdings(BKNG)$, and $Airbnb, Inc.(ABNB)$ have lots of room to climb higher in the coming months as the summer vacation season approaches.
$Walt Disney(DIS)$
The Walt Disney Company is a media and entertainment firm. Summer travel demand will generate more revenue for Disney's offline business.
The earnings is also behind the firm as it expects to grow earnings per share to $4.44 in 2022, up more than 91% compared to the EPS in 2021. This pace of growth will slow to, but remain above average for the industry overall, 22% in 2023 and 2024.
$Booking Holdings(BKNG)$
Booking provides reservation services. The firm continues to show strong recovery trends. The total revenues for the fourth quarter were $3 billion, an increase of 141% year-on-year. The net income for 2021 stood at over $1 billion, up from just $59 million in 2020. The company expects to grow revenue by 45% in 2022 and 18% in 2023.
“The pandemic created opportunities for us to be more aggressive in a variety of areas of the market. We were opportunistic throughout the year, for example, in positioning the portfolio to benefit from a flush consumer eager to return to spending and traveling.”
$Airbnb, Inc.(ABNB)$
Airbnb owns and runs an online travel platform. Flexible work arrangements and an increase in international travel due to the easing of virus restrictions will likely help the firm register a strong recovery this year. The company is leading the alternative accommodations market already with six million active listings and over four million hosts across 100,000 cities globally.
Hotels and Cruises
Shares of Marriott International Inc. rallied 6.66% to $170.17 Thursday, on what proved to be an all-around positive trading session for the stock market. This was the stock's second consecutive day of gains. Marriott closed $25.73 short of its 52-week high ($195.90), which the company reached on April 21st.
The stock outperformed some of its competitors Thursday, as $Hilton(HLT)$ rose 5.23% to $138.47, and $Hyatt(H)$ rose 4.67% to $86.55.
Most travel stocks bottomed out and rebounded slightly. In the face of huge summer travel demand, will travel stocks continue to rise?
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Travel Stocks: Correction or Rebound?
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After 2 years of Covid, lockdowns, people are eager to travel again. With this huge pent up demand, the Travel industry is set to rebound. Travel related stocks like airlines, cruise lines hotels, online booking will do better now. However not all travel stocks are created equal.
People with the most disposable income will lead the charge as they seek premium hotels, spend more money on vacations. In recent earnings reports, Wynn Resorts and Marriott point to their high end properties as top performers.
Cruiselines will also do better. Royal Caribbean, Carnival whose share prices have been badly affected by Covid 19 lockdowns, will soar again with new ships, new destinations and their loyal customers.
Airbnb will be a winner as customers look for private accommodation.
Even though there is high inflation, rising oil prices, the pent up demand for travel will continue to help the recovery of travel stocks.
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Global air travel is slowly recovering and many countries have eased their covid restriction; eg. SG removing PDTs
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