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Is the End of "Revenge Travel" a Threat to Tourism ETFs?
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The term "revenge travel" emerged after the initial waves of the COVID-19 pandemic, describing the pent-up demand and eagerness of consumers to travel again after long periods of lockdowns and travel restrictions. This surge in travel activity was a reaction to the frustration and confinement experienced during the pandemic, leading to a robust recovery in the tourism and hospitality sectors.
However, the era of pent-up travel demand driving global travel recovery post-Covid is over, according to Intercontinental Hotels Group CEO Elie Maalouf, as quoted on CNBC. He pointed out that people began traveling in earnest towards the end of 2020. The firm’s recent quarterly report revealed that travel demand stayed strong through the latter part of the summer season.
Should You Fear the Trend?
After the initial surge, the market is likely to stabilize or even see a decline as the pent-up demand is satisfied. However, investors should not be worried about this waning trend as reaching the pre-Covid level is a natural-phenomenon.
Elie Maalouf highlighted the company's optimistic outlook, citing their bookings for groups and meetings extending into 2024 and beyond as some of the strongest they've observed in a long while. The latest IHG quarterly update indicates a revenue per available room (revpar) increase of 10.5% compared to Q3 2022 and almost 13% compared to Q3 2019.
China: A Challenging Region?
Despite the global positive trends, there has been a 3% decrease in revpar in prominent Chinese cities since 2019, mostly due to their reliance on international travelers. Maalouf attributed the slower recovery in major cities like Beijing and Shanghai to reduced flight capacities. However, domestic travel across the country, especially in mid-sized and smaller cities, has surpassed 2019 levels.
Occupancy and Room Rates at Decent Levels But Inflation is a Concern
The occupancy rate at IHG hotels in the third quarter was recorded at 72%, only 1% below pre-pandemic levels. Average room rates have risen significantly above the 2019 figures, with a rise of nearly 6% in China, 15% in the Americas, and 24% in Europe, Middle East, and Africa (EMEA) and Asia. However, Maalouf noted that these increasing rates are barely outpacing inflation.
U.S. Travel Demand High in Holiday Season
According to industry experts, demand is high this holiday season, especially given that Christmas and New Year's land on weekends. According to a survey by Hopper, 86% of holiday travelers plan to fly for one or both holidays this year, as quoted on USA Today.
ETFs in Focus
Against this backdrop, below we highlight few travel ETFs that could be tapped for gains in the near term.
The underlying S-Network Global Travel Index identifies exchange-traded stocks of companies that are materially engaged in the global travel industry. The fund charges 65 bps in fees.
This ETF is active and does not track a benchmark. The AdvisorShares Hotel ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the hotel business. The expense ratio of 0.99%.
Kelly Hotel & Lodging Sector ETF
The underlying Strategic Hotel & Lodging Sector Index consists of the stocks or corresponding depositary receipts of companies engaged in the creation, development, production, operation, provision, distribution, servicing, licensing, leasing or franchising of at least one of Hotel & Lodging Services or Hotel & Lodging Operations. The fund charges 78 bps in fees.
The underlying BlueStar Global Hotels, Airlines, and Cruises Index is a rules-based index that consists of globally-listed stocks of companies that derive at least 50% of their revenues from the passenger airline, hotel and resort, or cruise industries. The fund charges 45 bps in fees.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Is the End of "Revenge Travel" a Threat to Tourism ETFs?
The term "revenge travel" emerged after the initial waves of the COVID-19 pandemic, describing the pent-up demand and eagerness of consumers to travel again after long periods of lockdowns and travel restrictions. This surge in travel activity was a reaction to the frustration and confinement experienced during the pandemic, leading to a robust recovery in the tourism and hospitality sectors.
However, the era of pent-up travel demand driving global travel recovery post-Covid is over, according to Intercontinental Hotels Group CEO Elie Maalouf, as quoted on CNBC. He pointed out that people began traveling in earnest towards the end of 2020. The firm’s recent quarterly report revealed that travel demand stayed strong through the latter part of the summer season.
Should You Fear the Trend?
After the initial surge, the market is likely to stabilize or even see a decline as the pent-up demand is satisfied. However, investors should not be worried about this waning trend as reaching the pre-Covid level is a natural-phenomenon.
Elie Maalouf highlighted the company's optimistic outlook, citing their bookings for groups and meetings extending into 2024 and beyond as some of the strongest they've observed in a long while. The latest IHG quarterly update indicates a revenue per available room (revpar) increase of 10.5% compared to Q3 2022 and almost 13% compared to Q3 2019.
China: A Challenging Region?
Despite the global positive trends, there has been a 3% decrease in revpar in prominent Chinese cities since 2019, mostly due to their reliance on international travelers. Maalouf attributed the slower recovery in major cities like Beijing and Shanghai to reduced flight capacities. However, domestic travel across the country, especially in mid-sized and smaller cities, has surpassed 2019 levels.
Occupancy and Room Rates at Decent Levels But Inflation is a Concern
The occupancy rate at IHG hotels in the third quarter was recorded at 72%, only 1% below pre-pandemic levels. Average room rates have risen significantly above the 2019 figures, with a rise of nearly 6% in China, 15% in the Americas, and 24% in Europe, Middle East, and Africa (EMEA) and Asia. However, Maalouf noted that these increasing rates are barely outpacing inflation.
U.S. Travel Demand High in Holiday Season
According to industry experts, demand is high this holiday season, especially given that Christmas and New Year's land on weekends. According to a survey by Hopper, 86% of holiday travelers plan to fly for one or both holidays this year, as quoted on USA Today.
ETFs in Focus
Against this backdrop, below we highlight few travel ETFs that could be tapped for gains in the near term.
ALPS Global Travel Beneficiaries ETF (JRNY - Free Report)
The underlying S-Network Global Travel Index identifies exchange-traded stocks of companies that are materially engaged in the global travel industry. The fund charges 65 bps in fees.
AdvisorShares Hotel ETF (BEDZ - Free Report)
This ETF is active and does not track a benchmark. The AdvisorShares Hotel ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the hotel business. The expense ratio of 0.99%.
Kelly Hotel & Lodging Sector ETF
The underlying Strategic Hotel & Lodging Sector Index consists of the stocks or corresponding depositary receipts of companies engaged in the creation, development, production, operation, provision, distribution, servicing, licensing, leasing or franchising of at least one of Hotel & Lodging Services or Hotel & Lodging Operations. The fund charges 78 bps in fees.
Defiance Hotel Airline and Cruise ETF (CRUZ - Free Report)
The underlying BlueStar Global Hotels, Airlines, and Cruises Index is a rules-based index that consists of globally-listed stocks of companies that derive at least 50% of their revenues from the passenger airline, hotel and resort, or cruise industries. The fund charges 45 bps in fees.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)