Best Travel Stocks

Thanks to burgeoning wealth in both top-tier nations and developing economies, travel stocks have generally enjoyed strong growth. In 2017, SelectUSA.gov reported that the domestic travel and tourism industry generated over $1.6 trillion in economic output. More importantly, this demand base supported 7.8 million American jobs. Then, the coronavirus pandemic happened and changed everything.

While all sectors suffered losses, few incurred the magnitude of damage that afflicted travel stocks. As the mysterious virus rippled throughout the globe, people hunkered down. But the advent of recovery and mass-scale vaccination bolster the high-risk, high-reward case of the best travel stocks to buy.

Quick Look at the Best Travel Stocks:

• Expedia
• United Airlines
• Booking Holdings
• Avis Budget Group Inc
• Royal Caribbean

Overview

People are natural explorers and as such, these stocks feed into this inherent impulse. Over the years, the Bureau of Transportation Statistics reveals that American consumers have been increasingly putting up a greater number of miles both in the air and on the ground. Even economic impacts, such as the fallout from the Great Recession, have yet to derail enthusiasm for travel.

Leisure Travel

But this demand base came to a screeching halt in the first quarter of 2020. By February last year, COVID-19 cases started affecting various communities in the U.S. Later, in March, states began to shut down to virtually all nonessential activities. Naturally, this sent a chill down even the best travel stocks as major metropolitan areas that typically draw big crowds became veritable ghost towns due to a range of travel restrictions.

You’d be forgiven if you thought that the travel and entertainment sectors faced a catastrophically permanent decline. In the worst phases of the public health crisis, very few people wanted to venture out, let alone sit in cramped quarters with hundreds of strangers. More critically, vaccines take a long time to develop, usually around 10 to 15 years. Frankly, no country had that kind of time to wait.

But a major breakthrough occurred, with the U.S. government in conjunction with international partners developed and distributed COVID-19 vaccines in record-breaking fashion. This set the stage for these stocks, which have been dormant but recently have enjoyed strong investor demand in the hopes of a return to normal. While still highly speculative, risk-tolerant buyers can potentially extract tremendous profitability in this space.

Business Travel

When you don’t need a travel agent and everything is handled in the office, your business travel needs can be met by the same types of companies. Every business from Delta Airlines (NYSE: DAL), British Airways or Southwest Airlines (LUV) to Marriott International (MAR), Royal Caribbean Cruises (RCL), tour operators and rental car companies could be involved. You might even travel to places like Walt Disney World (DIS) for conventions and conferences. As a result, the business travel sector is rather robust, and business trips represent a massive segment of this market’s activity.

Choosing a Travel Company

Remember, also, that travel stocks can go beyond airlines. Look at stocks like DIS due to the massive crowds visiting Disney theme parks or taking Disney cruises. EXPE is a good stock for anyone who wants to tap into the FinTech, hotel, car rental and travel agency industries. Moreover, CCL is an excellent stock for someone who wants to invest in the cruise industry.

Best Online Brokers for Travel Stocks

Unlike other market sectors, these stocks tend to feature relatively stable trading throughout the spectrum due to consistently positive demand. Indeed, National Geographic published an article in September 2020 that stated travel is “in our genes.” Further, as the U.S. population grows through natural births and immigration, this genetic propensity will buttress the travel industry.

From a structural perspective, the best travel stocks don’t favor particular brokerage platforms over others. Usually, the ones worth investing in are established blue chips, something that any broker can handle. So, your choice will mainly come down to personal preference and desired growth in your investing acumen.

When you know which travel stocks to buy, use this list of Benzinga’s favorite online brokers so that you, too, can gain exposure to tourism revenue across the globe.

Features to Look for in Travel Stocks

1. Diversification: Though not a specific attribute for an individual travel-related firm, if you’re thinking about adding these stocks to your portfolio, you should have multiple brands in mind that cover different aspects of the industry. For instance, you don’t want to load up on airliners only and not consider other sectors, such as cruise ships or recreational vehicles (RVs). In these strange times, the more diversification you have, the better.
2. Market leadership: In a bull market, the intense, wide-reaching optimism tends to gloss over weaknesses in certain companies or industries. That’s the unspoken risk of unfettered market rallies and why we need short sellers to implement rationality into the valuation game. Because COVID-19 heavily disrupted all these stocks, it’s vital that you pick companies with strong market leadership in their core business. If you choose a middling name, you risk a date with irrelevance.
3. Financial stability: This one deserves an asterisk since even when you’re talking about the best travel stocks, they’ve all crumbled badly under the pandemic’s weight. Nevertheless, you should look for evidence of some financial stability in the books. While the economic recovery narrative is encouraging, there’s still a long road ahead. Given this overriding challenge, your travel company of choice should be prepared for a possibly long winter.

Travel Stocks to Watch out for this Year

While 2020 will forever be associated with the immobilizing pandemic, 2021 may turn out to be the year known for the foundations of a brighter future. Remember the human element of this crisis as vacationers stayed home, hotel rooms were empty and air travel slowed significantly.

Countless vacations, graduations, wedding ceremonies, baby showers and a host of other milestone celebrations were rudely put on hold. Many Americans have a bit of a “retail revenge” mentality, which could bolster these stocks. Choosing the proper stocks to buy, then, is as easy as tracking the progress of the market.

Frequently Asked Questions