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Time for Travel ETFs As Summer Travel Season Kicks Off?

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After the Covid-19 pandemic froze the travel industry in its tracks, the summer of 2023 shows a hopeful resurgence of the travel sector. It marks a significant improvement over an already buoyant Summer 2022 mainly due to the ebbing pandemic,as more Americans set to take a leisure vacation this year.

Memorial Day air travel demonstrated the resilience of consumer spending on trips, surpassing pre-Covid levels despite ongoing inflation concerns. Per CNBC, the Transportation Security Administration reported screening 9.79 million individuals from Friday to Monday – the Memorial Day Holiday Weekend.  This marked a slight increase compared to the 2019 holiday weekend.

Setting a post-pandemic record, over 2.7 million people were screened on Friday alone. It happened despite high ticket prices, demand for flights is skyrocketing. Airlines for America research indicates that US airlines are projected to transport a record-breaking 257 million passengers from June 1st to August 31st, 2023, showcasing an unprecedented level of air traffic, as stated in AviationSource News.

Memorial Day is viewed as the unofficial start of the summer travel season. The above-said data indicate that rose days are ahead of us in the travel sector. According to Deloitte, the outlook is rose for a few reasons.

Pent-Up Demand

Travel-starved Americans are now indulging in 'revenge travel,' compensating for the trips missed out during the peak of the pandemic. Approximately 20% of Americans have planned their summer trips as a form of revenge travel. And among those who plan to spend more than in 2022, a notable chunk of travelers is either making up for missed travel (28%) or taking a bucket-list trip (32%), per the data provided by the Deloitte article.

International Travel on the Rise

As most border restrictions have been lifted, the prospect of overseas travel has become more open and convenient. In line with this, the number of people intending to take an international flight has seen a whopping 1.5X growth, escalating from 14% in 2022 to 22% in 2023, per Deloitte.

Higher Consumer Savings

U.S. consumers have been able to maintain savings despite high inflation. Though the saving rate dropped 4.1% in April from 4.5% in March, the level has been hovering in more than 4% range this year. This marks a huge jump from the one-year low of 2.7% we have seen in June 2022. Households are drawing down excess savings cautiously likely due to recession concerns.

Why Consider Travel ETFs?

Every segment within the travel industry stands to benefit from this positive intent to travel, making the investment in Travel ETFs increasingly appealing. Against this backdrop, below we highlight a few travel ETFs (both regular and leveraged) that gained handsomely last week reflecting the Memorial Day spending.

Travel & Vacation Bull 2X ETF Direxion (OOTO - Free Report) – Up 9.7%

Defiance Hotel Airline and Cruise ETF (CRUZ - Free Report) – Up 2.1%

ETFMG Travel Tech ETF (AWAY - Free Report) – Up 1.9%

Kelly Hotel & Lodging Sector ETF (HOTL - Free Report) – Up 1%

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