Investing in travel & tourism stocks

Understanding the travel and leisure sector

The travel and leisure sector includes a wide range of activities, from tourism and hospitality to entertainment and recreation.

Tourism includes both domestic and international travel, with people exploring new destinations for leisure or business purposes. The tourism industry contributes significantly to the global economy, generating jobs and revenue in various countries.

Hospitality covers accommodations such as hotels, resorts and vacation rentals, as well as food and beverage services. With the rise of online booking platforms, travellers now have more options than ever before when it comes to finding suitable accommodations that match their preferences and budgets.

Entertainment includes theme parks, casinos, theatres, museums and other attractions that cater to the interests of tourists. These venues offer unique experiences that can attract visitors from all over the world.

Recreation such as sports, outdoor adventures, wellness retreats and spa services are also a part of this sector. Many people seek relaxation or physical activity during their vacations or free time, making recreational offerings highly sought after.

Types of companies in the travel sector

In the world of travel, there are several types of companies that play a crucial role. Let's take a closer look at some of them:

• Airlines are responsible for transporting passengers from one destination to another by air. They offer a range of services, including economy class, business class and first-class seating options.
• Hotels and resorts provide accommodation for travellers during their stay. They come in various categories, from budget-friendly options to luxury establishments offering top-notch amenities.
• Travel agencies assist travellers in planning their trips by providing services such as booking flights, hotels and transportation. They offer expert advice and help customise travel packages according to individual preferences.
• Tour operators specialise in organising guided tours and excursions for travellers. They curate itineraries, arrange transportation and provide knowledgeable guides to enhance the travel experience.
• Online travel and booking platforms have revolutionised the way people book their trips. These websites or apps allow users to compare prices, read reviews and make reservations for flights, accommodations, car rentals and more.

Examples of travel stocks

Here are five companies in the industry:

1. Booking Holdings Inc (BKNG:NSQ): As one of the world's leading online travel companies, Booking operates various brands, such as Booking.com, Agoda and Kayak. With a strong global presence and a wide selection of accommodations, Booking continues to be a dominant player in the industry.
2. Expedia Group Inc (EXPE:NSQ): Known for its popular website Expedia.com, Expedia is a major player in the online travel booking industry. The company offers a wide range of services including hotel bookings, flight reservations and vacation packages through its portfolio of brands, such as Hotels.com and Orbitz.
3. Carnival Corporation & Plc (CCL:NYSE): If you're interested in cruise lines, Carnival can be worth considering. As one of the largest cruise operators globally, Carnival owns well-known brands like Carnival Cruise Line, Princess Cruises and Holland America Line.
4. Delta Air Lines Inc (DAL:NYSE): Delta is one of the major players in the airline industry, known for its extensive domestic and international network. The company's commitment to customer service, operational efficiency and sustainability has helped it maintain a strong position in the market.
5. Airbnb Inc (ABNB:NSQ): Revolutionising the way people book accommodations worldwide, Airbnb has become synonymous with alternative lodging options for travellers. With its unique business model and growing user base, Airbnb stands out as an innovative player in the travel industry.

Pros & cons of investing in travel stocks

Let's take a look at some key points that can help you evaluate the potential opportunities and drawbacks of investing in travel stocks.

Pros of investing in travel stocks

• Growth potential: The travel industry has shown consistent growth over the years, driven by increasing global tourism and expanding middle-class populations in emerging markets.
• Diversification: Investing in travel stocks can provide diversification benefits, as it is a separate sector from other industries such as technology or healthcare.
• Consumer demand: Travel is a priority for many people and this demand for holidays and experiences helps to support the sector.
• Innovation: Travel companies are constantly innovating to meet changing consumer preferences, which presents opportunities for long-term growth and increased profitability.

Cons of investing in travel stocks

• Volatility: The travel industry is highly sensitive to external factors such as economic downturns, political instability, natural disasters or health crises like the Covid-19 pandemic.
• Seasonality: Many travel businesses experience peak seasons followed by slower periods, which can lead to fluctuations in earnings and stock prices.
• Competition: The travel industry is highly competitive, with numerous players vying for market share. This competition can impact profit margins and make it challenging for smaller companies to thrive.
• Regulatory risks: Travel companies must navigate various regulations related to safety standards, visas, taxes and environmental concerns, which can impact their operations and profitability.

Investing in travel ETFs

An alternative way to gain exposure to the travel sector is through ETFs that focus specifically on travel-related stocks. These ETFs offer diversification across multiple companies within the industry. Here’s two we offer on our platform:

Note: Some ETFs may (temporarily) not be available on our platform for your country due to regulatory reasons.