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The travel and tourism industry has come to a halt amid coronavirus-led lockdowns. While the lockdowns are being lifted across various corners of the globe, speculation has started on what extent this industry can recover.
Airlines were hit the most. After crashing in the peak of the coronavirus selloff, airlines stocks have gained some footing lately upon receiving the bailout fund, Delta Airlines’ (DAL - Free Report) debt offering, Southwest’s moderate earnings and gradual reopening of the economy.
Industry trade group Airlines for America noted that on average just 17 passengers per domestic flight and 29 passengers per international flight can be seen, even after grounding 50% of the active U.S. fleet, per Reuters. Travel plans are unlikely to recover fast as the virus fear is prevalent. Airlines now have mandated face masks and have ensured temperature checks.
How Will the Travel Pattern be?
The Longwoods survey found that about 82% of people with travel intensions in the coming six months have made changes to their plan. Of them, about 22% have switched to driving from flying as a preferred travel mode. Half of the people canceled have travel completely. About 45% reduced travel plans and 11% switched to domestic from international, as quoted on CNBC.
However, all is not lost. Reservations for Thanksgiving, Christmas and New Year stays are up 38%, 40% and 23%, respectively, compared to the same time last year, a source named Guesty found. It means people still have confidence in a better virus outlook later in the year.
Market experts expect to see a higher demand for vacation rentals and private homes than more crowded places like hotels. InsureMyTrip, for its part, has witnessed a 6% increase in vacation-unit rentals over 2019, along with a dip in hotel bookings.
This travel pattern is going to impact the following ETFs and stocks.
Likely ETF Beneficiaries
First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)
The fund offers exposure to the global automotive industry. With many people preferring road trips and also likely to travel nearby, demand for cars should go higher (read: Tesla Beats Q1 Earnings and Revenue Estimates: ETFs to Soar).
Reopening of economies and long-term travel plans should favor the fund. Airlines occupy only 13.95% of the fund while Trucking takes a solid 42.3% weight.
At the current level, longer-term contracts for WTI crude are pricier than the nearer contracts as demand outlook is more bullish for later months. People’s travel plans that include more road trips should benefit WTI crude ETF too (read: Oil Price Rebound, USO ETF & More).
It is the pure-play U.S. airlines ETF. It is destined for a volatile ride in the coming days given disruptions in business.
Invesco Dynamic Leisure And Entertainment ETF (PEJ - Free Report)
The fund has considerable exposure in leisure and entertainment stocks like Chipotle Mexican Grill, Walt Disney, Hilton Worldwide and Domino's Pizza. Southwest Airlines too has a position in its top-10 holdings.
The fund gives exposure to companies that are engaged in the “Travel Technology Business” by providing technology via Internet and Internet-connected devices to facilitate travel bookings and reservations, ride sharing and hailing, travel price comparison, and travel advice. The sheer downturn in business will keep this fund subdued (read: Solid Lyft-Uber Q1 Earnings Drive ETFs: Is it Safe to Play?).
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Post-Lockdown Travel Plans to Impact These ETFs
The travel and tourism industry has come to a halt amid coronavirus-led lockdowns. While the lockdowns are being lifted across various corners of the globe, speculation has started on what extent this industry can recover.
Airlines were hit the most. After crashing in the peak of the coronavirus selloff, airlines stocks have gained some footing lately upon receiving the bailout fund, Delta Airlines’ (DAL - Free Report) debt offering, Southwest’s moderate earnings and gradual reopening of the economy.
Industry trade group Airlines for America noted that on average just 17 passengers per domestic flight and 29 passengers per international flight can be seen, even after grounding 50% of the active U.S. fleet, per Reuters. Travel plans are unlikely to recover fast as the virus fear is prevalent. Airlines now have mandated face masks and have ensured temperature checks.
How Will the Travel Pattern be?
The Longwoods survey found that about 82% of people with travel intensions in the coming six months have made changes to their plan. Of them, about 22% have switched to driving from flying as a preferred travel mode. Half of the people canceled have travel completely. About 45% reduced travel plans and 11% switched to domestic from international, as quoted on CNBC.
However, all is not lost. Reservations for Thanksgiving, Christmas and New Year stays are up 38%, 40% and 23%, respectively, compared to the same time last year, a source named Guesty found. It means people still have confidence in a better virus outlook later in the year.
Market experts expect to see a higher demand for vacation rentals and private homes than more crowded places like hotels. InsureMyTrip, for its part, has witnessed a 6% increase in vacation-unit rentals over 2019, along with a dip in hotel bookings.
This travel pattern is going to impact the following ETFs and stocks.
Likely ETF Beneficiaries
First Trust NASDAQ Global Auto Index Fund (CARZ - Free Report)
The fund offers exposure to the global automotive industry. With many people preferring road trips and also likely to travel nearby, demand for cars should go higher (read: Tesla Beats Q1 Earnings and Revenue Estimates: ETFs to Soar).
SPDR S&P Transportation ETF (XTN - Free Report)
Reopening of economies and long-term travel plans should favor the fund. Airlines occupy only 13.95% of the fund while Trucking takes a solid 42.3% weight.
U.S. Oil Fund LP (USO - Free Report)
At the current level, longer-term contracts for WTI crude are pricier than the nearer contracts as demand outlook is more bullish for later months. People’s travel plans that include more road trips should benefit WTI crude ETF too (read: Oil Price Rebound, USO ETF & More).
Likely ETF Losers
US Global Jets ETF (JETS - Free Report)
It is the pure-play U.S. airlines ETF. It is destined for a volatile ride in the coming days given disruptions in business.
Invesco Dynamic Leisure And Entertainment ETF (PEJ - Free Report)
The fund has considerable exposure in leisure and entertainment stocks like Chipotle Mexican Grill, Walt Disney, Hilton Worldwide and Domino's Pizza. Southwest Airlines too has a position in its top-10 holdings.
ETFMG Travel Tech ETF (AWAY - Free Report)
The fund gives exposure to companies that are engaged in the “Travel Technology Business” by providing technology via Internet and Internet-connected devices to facilitate travel bookings and reservations, ride sharing and hailing, travel price comparison, and travel advice. The sheer downturn in business will keep this fund subdued (read: Solid Lyft-Uber Q1 Earnings Drive ETFs: Is it Safe to Play?).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>