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乱空 wrote a post · Jul 4 04:13

Travel the American Way - Even if it's Expensive - Barrons.com

Due to high inflation and high interest rates, Americans are wary of overuse, and while refraining from groceries and appliances, they are refraining from making big purchases such as new homes.
But even so, there are areas where Americans are happy to splurge. This summer is likely to be another record season.
The AAA predicts that approximately 70 million people will travel 50 miles or more from their homes this year. Meanwhile, the Transportation Security Administration predicts that more than 32 million people will be screened for boarding from 6/27 to 7/8.
At Mauna Lani, a luxury hotel on the island of Hawaii, the number of leisure travelers has increased by about 50% compared to the previous year, and most of them have reserved long-term stays, says Ian Milley, director in charge of revenue management.
Also, people are going farther. According to data from the Conference Board and the Mastercard Economics Institute, intentions to travel abroad have recorded a record high.
Eva Hyland, a 19-year-old college student living in Woodtown, New Jersey, visited Cancun, Mexico for the first time last weekend. After months of planning, she and her family spent 4 days at an all-inclusive resort with family friends.
“It was the first time in my life that big vacation like this,” Hyland said on the phone with Barrons.
The background of the rapid increase
The rapid rise in travel demand may come as a surprise from recent data which suggests consumers are becoming increasingly price sensitive and holding back on everything else.
According to experts, there are many reasons for the travel boom.
One is that the labor market has recovered quite a bit. Nonetheless, Moody's Ratings analyst Claire Lee writes that many Americans choose to spend money on experiences rather than expensive products.
There were three major booms last summer: Barbie, Taylor Swift, and Beyoncé. Wedbush analyst Scott David wrote in a memo last week that there are plenty of high-profile events this year, such as the Paris Olympics and the UEFA European Soccer Championship. He pointed out that the occupancy rate of Paris hotels has gone from around 60% in April to close to 80% in the schedule around the summer Olympics.
Lee wrote that these consumption trends will not change anytime soon. She anticipates that consumption growth over the next few quarters will continue to be driven by spending on services rather than goods, even if total spending slows down.
Reduced airfare prices are also boosting people's travel. Airline ticket prices have continued to rise for the past 2 years, but now they are on a downward trend. According to the latest consumer price index, airfares in May were 5.9% lower than the same month last year. Fitch Ratings senior director Joe Lorena said intense competition among airlines has helped “keep average airfares reasonable.”
Also, not only airfares, but overall travel costs are getting cheaper. According to the consumer price index, car rental and truck rental rates are down 8.8% from last year, while hotel rates are down 1.7%.
This slowdown is something to be welcomed after price increases over the past two years, and may be stimulating previously reluctant travelers.
How to play it
According to Mastercard, while there is a strong desire to travel, consumers are becoming more strategic about when, where, and how they travel.
Investors should be similarly cautious when considering taking advantage of this trend.
The US Global Jet ETF rose about 13% from the beginning of the year to its most recent peak in mid-May. Since then, investors began to worry about the fall economic downturn and began worrying about whether private consumption would remain steady until the end of the year, so it has fallen by about 8%.
However, as Mr. David of Wedbush points out, recent data and comments from travel agencies suggest that even though demand in the fall will moderate, it is far from the edge of a cliff, and there are sectors within the industry that can still grow.
For example, there is a high possibility that overseas travel will benefit from a recovery in Chinese tourists and strong demand from high-income earners. According to a consumption trend survey conducted by the New York Federal Reserve in April, approximately 50% of households with an annual income of 100,000 dollars or more responded that they plan to increase vacation spending over the next 4 months.
This bodes well for airlines such as Delta that have high exposure to corporate, international, and premium revenue sectors, writes Deutsche Bank analyst Michael Linenberg. On the other hand, I see a big downside for airlines that target domestic travelers, such as Frontier Group and Spirit Airlines.
There is a possibility that luxury travel, which is one of the fastest growing segments in the industry, will continue to perform well. In fact, the reason why the stock price of Viking Holdings has risen by as much as 18% since its public offering this year is largely a bullish view of wealthy travelers.
Barons picked Royal Caribbean as their stock pick this summer.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more
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乱空
各種ニュースや情報垂れ流してますが、初心者ですのでお手柔らかに🤣
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