Overview of the travel industry
The travel industry has experienced a remarkable resurgence since the pandemic-induced slump. With global restrictions easing and pent-up demand driving bookings, many travel companies are witnessing a robust recovery in their financial performance.
According to the World Travel & Tourism Council, the global travel and tourism sector has reached pre-pandemic levels, with a projected contribution of $9.5 trillion to the global economy. This recovery is fuelled by factors such as increased vaccination rates, pent-up demand, and changes in consumer behaviour.
However, challenges persist, including the after effects of the last few years’ inflationary pressures, geopolitical tensions such as the escalation seen in the Middle East, and potential new covid-19 variants. Investors should carefully consider these factors when evaluating travel stocks for their portfolios.
Top airline stocks to watch
Airline stocks have been among the most volatile in the travel sector, with some carriers showing impressive recoveries while others continue to struggle. Here are two airline stocks that warrant attention:
- International Consolidated Airlines Group (IAG): The parent company of British Airways and Iberia has shown resilience, with its share price recovering significantly from pandemic lows. IAG’s diverse portfolio of airlines and focus on cost-cutting measures position it well for future growth.
- Ryanair Holdings: Europe’s largest budget airline has been a standout performer in the sector since the Covid-19 pandemic. Ryanair’s low-cost model and strong balance sheet have helped it weather the storm and potentially gain market share from struggling competitors.
Investors should monitor these airlines’ capacity utilisation, fuel costs, and ability to pass on increased expenses to consumers. These factors will be crucial in determining their profitability and share price performance.
Hotel and accommodation stocks on the radar
The hospitality sector has shown strong signs of recovery, with many hotel chains reporting occupancy rates approaching or even exceeding pre-pandemic levels. Two stocks in this segment deserve attention:
- InterContinental Hotels Group (IHG): IHG’s diverse brand portfolio, ranging from budget to luxury hotels, provides exposure to various market segments. The company’s asset-light model and focus on expanding in emerging markets could drive future growth.
- Whitbread: As the owner of Premier Inn, Whitbread is well-positioned to benefit from the recovery in business and leisure travel. The company’s expansion plans in Germany and strong domestic UK presence make it an interesting stock to watch.
Investors should pay attention to occupancy rates, average daily rates, and the companies’ ability to adapt to changing consumer preferences, such as the rise of leisure travel (combining business and leisure).
Online travel booking platforms to consider
Online travel agencies and booking platforms have become increasingly important in the post-pandemic travel landscape. Two stocks in this category stand out:
- Booking Holdings: The parent company of Booking.com, Priceline, and Kayak has shown strong recovery, benefiting from its diverse geographical presence and wide range of travel services.
- Trainline: As Europe’s leading independent rail and coach ticket retailer, Trainline is well-positioned to benefit from the growing trend towards sustainable travel and increased rail usage by those who shun air travel for environmental reasons.
Key metrics to watch for these companies include gross bookings, take rates, and their ability to innovate and adapt to changing consumer preferences, such as the demand for more flexible booking options.
Year-to-date October 2024 travel stock performance
When comparing the year-to-date (YTD) share performance of the six companies mentioned in this article Ryanair Holdings is the clear underperformer with its share price having lost 16% by the beginning of October 2024, closely followed by Whitbread’s near 14% drop.