This Labor Day weekend is expected to see busy roads and skies. After all, this will be the final summer holiday trip before parents start preparing for another busy school season.
People are willing to take long trips on increased financial confidence, backed by rising income levels and a healthy labor market. This calls for investing in the travel space.
Expect Busy Skies on Labor Day
This Labor Day weekend is likely to be very busy. The Airlines for America (A4A) has projected 16.5 million passengers on U.S. carriers, reflecting a 3.5% increase from last year.
This will result in around 2.36 million passengers travelling on U.S. airplanes each day, an increase of 79,000 from last year. Aug 31 is expected to be the busiest, with an estimated 2.76 million flyers.
In order to meet the spike in holiday travel, U.S. airlines have added nearly 92,000 more seats compared to the same period a year ago. A4A Vice President and Chief Economist John Heimlich said in a statement that “this Labor Day, U.S. airlines are enabling more passengers than ever before to take to the skies to see loved ones or visit exciting destinations because of improved accessibility for all.”
Airlines have already provided inflation-adjusted fares this year, making traveling more affordable. Their on-time arrivals as well as departures, proper baggage handling and lesser number of complaints are encouraging more passengers to fly compared to last year.
Roads Will be Packed as Well
Last time the American Automobile Association (AAA) measured the number of cars on the road during Labor Day weekend was in 2015, when a whopping 53 million people had traveled. This holiday period could witness even more traffic, as this year has already seen record travel via roads.
Both Memorial Day and Independence Day travel saw an uptick of 5% in traffic compared to last year. While 41.5 million Americans traveled around Memorial Day, 46.9 million took a trip during the Independence Day weekend.
By the way, Labor Day travelers drove more than 75 million miles last year and utilized around 3.5 million gallons of gas, per a report from Hum by Verizon Communications Inc. (VZ - Free Report) , a vehicle tracking system.
Expect a similar reading this time, if not more. This is because AAA has projected the busiest Labor Day travel in Colorado in 13 years. More than 640,000 Coloradans will travel 50 miles or more over the Labor Day weekend. Inhabitants of Ohio, Idaho and Virginia are also expected to cover long distances over the Labor Day weekend.
What’s Driving Travel This Labor Day Holiday Season?
Skeptics may be saying that the highest gas prices in four years may be hampering travel this weekend. After all, the national average gasoline price is currently at $2.84 a gallon, which is 48 cents more than this time last year.
But, that’s not going to affect travel this weekend. Consumers are pretty confident about their well-being and are now not afraid to spend. According to the Conference Board, the consumer confidence index climbed to 133.4 in August from a revised 127.9 in July, the highest level since October 2000 and surpassed the post-recession high of 130 scaled this February. In fact, the only other period when consumer sentiment was higher was in the Internet-fueled boom of 1997 to 2000 (read more: US Consumers Most Confident Since 1990s Internet Boom: 5 Picks).
Consumers’ optimism was largely driven by strength in the labor market. The jobless rate dropped to 3.9% in July. The current unemployment rate is now at a nearly two-decade low, while the U.S. economy added jobs for 94 successive months in July, the longest stretch on record.
Wages and salaries already grew in the second quarter at the fastest pace in almost a decade, while the overall economic output expanded at a 4.2% annual rate in April-June quarter, the fastest in almost four years. On the whole, the economy expanded 3.2% in the first half of this year and is on track to hit the Trump administration’s annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession (read more: 5 Top Stocks to Ride on Best Economic Growth in 4 Years).
Top 5 Winners
Needless to say, a late-summer surge in travel will benefit, particularly, U.S. airlines and their stocks. Spike in travel also bodes well for leisure and recreational service providers. Another investment area is hotels and motels. More travel will lead to increase in hotel occupancy rate and in turn higher revenue per available room.
We have, thus, selected five stocks from such areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SkyWest, Inc. (SKYW - Free Report) operates a regional airline in the United States. Currently, the company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has jumped 6% in the last 60 days. The company’s expected earnings growth rate for the current quarter and year are 39.6% and 43.4%, respectively.
SeaWorld Entertainment, Inc. (SEAS - Free Report) operates as a theme park and entertainment company in the United States. Currently, the company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has soared 34.4% in the last 60 days. The company’s expected earnings growth rate for the current quarter and year are 65.6% and 104.8%, respectively.
Vail Resorts, Inc. (MTN - Free Report) operates mountain resorts and urban ski areas in the United States. Currently, the company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 0.4% in the last 90 days. The company’s expected earnings growth rate for the current year is 72.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Wyndham Destinations, Inc. (WYND - Free Report) operates as a vacation ownership and exchange company. Currently, the company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has advanced 3.4% in the last 60 days. The company’s expected earnings growth rate for the next year is 9.8%.
Hyatt Hotels Corporation (H - Free Report) develops, owns, operates, manages, franchises, licenses, or provides services to hotels, resorts, residential, and other properties. Currently, the company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 11.2% in the last 60 days. The company’s expected earnings growth rate for the next quarter is 17.8%.
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