The holiday weekend frenzy is spreading! A record number of Americans are ready to hit the roads and the skies to celebrate the Memorial Day weekend that unofficially marks the start of summer.
Travel volume is expected to be the highest in more than a dozen years. Such a spike in travel is being backed by rising income levels and confident consumers, while travelers will get some relief in their wallets when paying for car rentals, airfares and hotels. This calls for investing in the travel space for attractive returns.
Memorial Day Travel Forecast
According to the American Automobile Association (AAA), a total of 41.5 million travelers are expected to take a trip this Memorial Day weekend, reflecting an increase of 5% from last year. The projected figure of those likely to go 50 miles or more away from home also compares favorably with the past 12 years’ figures.
Nearly 36.6 million (about 88%) travelers, an overwhelming majority, are expected to drive to their Memorial Day destinations, reflecting an increase of 4.7% over last year’s numbers. Higher gas prices, by the way, aren’t expected to deter travelers, with automobile travel expected to increase for the fourth straight year.
Travelers are willing to pay the highest gas price this Memorial Day since 2014. Due to the continuous rise in oil prices, a record uptick in demand for gasoline and shrinking global supply, gas prices increased 33 cents from last year to an average $2.72 last month.
But why just road trips? Americans are choosing to fly this summer as well. Around 3.1 million (about 7.5%) are set to travel by air, which marks an increase of 6.8% from last year. This will also be the fifth consecutive yearly rise in air travel volumes.
Additionally, 246.1 million passengers are predicted to fly in June, July and August, according to the Airlines for America (A4A), the industry trade organization for leading U.S. airlines. This will result in an increase of 3.7% over last summer’s record numbers. The nation’s carriers are adding 116,000 seats per day to accommodate another 96,000 passengers expected to fly during this period.
Other modes of transport during the weekend, including cruises, trains and buses, will increase 2.4% to 1.8 million passengers.
What’s Driving Travel this Memorial Day?
Bill Sutherland, senior vice president, AAA Travel and Publishing mentioned that Americans are feeling motivated to travel this Memorial Day on a rise in income levels and growing consumer confidence.
According to the Commerce Department, personal income increased to 0.3% in March. Healthier household finances, as reflected by the increase in income, are expected to drive travel volume.
Wages already rose 2.6% from a year earlier in April. Plenty of job opportunities are also available in many high-paying industries and with the unemployment rate at 3.9% in April after remaining at 4.1% for six consecutive months, there is no immediate reason to think that the job market is souring.
Consumer Confidence High
Americans households remained more or less confident about the economy in early May. As per the University of Michigan, consumer sentiment came in at 98.8 in May, unchanged from April.
This reading was more than economists’ expectations of 98. Lest we forget, consumer sentiment had touched a 14-year high in March.
Will it Cost Less to Travel?
While income is on the rise, costs are expected to reduce considerably this holiday weekend. Car rentals during this period will average $59, which is 11% less than last year and the lowest in the past four years.
During this Memorial Day holiday period, airfares for the top 40 domestic flight routes will be 7% cheaper than last year, per AAA’s Leisure Travel Index. Travelers will also not have to pay higher lodging costs this year. The average stay in a Three Diamond hotel will be 14% less than last year at $183 per night.
VIDEO 5 Top Travel Picks
Needless to say, rise in travel will benefit the travel and tourism industry, which calls for focus on travel and leisure stocks. We have selected five stocks from such areas with a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SkyWest, Inc. ( SKYW - Free Report) operates a regional airline in the United States. The company has a Zacks Rank #2. In the last 60 days, four earnings estimates moved north, with no movement in the opposite direction for the current year. The Zacks Consensus Estimate for earnings has moved 5.7% up in the same time frame. The stock’s expected growth rate for the current year is 35.3% versus the Transportation - Airline industry’s projected decline of 2.9%. Lindblad Expeditions Holdings, Inc. ( LIND - Free Report) provides expedition cruising and adventure travel services. The company has a Zacks Rank #1. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 76.9% in the same time frame. The stock’s expected growth rate for the current year is 155.6% versus the Leisure and Recreation Services industry’s projected rally of 18%. Marriott Vacations Worldwide Corporation ( VAC - Free Report) develops, markets, sells, and manages vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, and Marriott Vacation Club Pulse brands. The company has a Zacks Rank #2. In the last 60 days, three earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has moved 1.9% up in the same time frame. The stock’s expected growth rate for the current quarter is 20.6% versus the Hotels and Motels industry’s projected rally of 6.3%. You can see . the complete list of today’s Zacks #1 Rank stocks here Six Flags Entertainment Corporation ( SIX - Free Report) owns and operates regional theme and water parks under the Six Flags brand name. The company has a Zacks Rank #1. In the last 60 days, eight earnings estimates moved north, while one moved south for the current year. Meanwhile, the Zacks Consensus Estimate for earnings has moved up 4.8%. The stock’s expected growth rate for the current year is 33.8% versus the Leisure and Recreation Services industry’s projected rally of 18%. Town Sports International Holdings, Inc. ( CLUB - Free Report) provide amenities, including swimming pools, racquet and basketball courts, and functional training zones, as well as babysitting services; and fee-based program services, which comprise personal and small group training, children's programs, and summer camps for kids. The company has a Zacks Rank #2. In the last 60 days, one earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 19% in the same period. The stock’s estimated growth rate for the current quarter is 300% versus the Leisure and Recreation Services industry’s projected rally of 12.2%. Looking for Stocks with Skyrocketing Upside?
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