Macro Intelligence: global travel nearly at pre-pandemic levels, a look into 2024 trends

Article written by Juliette Saly (ausbiz)

Spotlight on the travel sector

In this week’s edition of IG Macro Intelligence, we take a look at the travel sector.

Tourism's comeback: nearing pre-pandemic levels

Tourism is clawing back to pre-pandemic levels.

International tourism reached 96% of pre-pandemic levels in the seven months through July 2024, driven by strong demand in Europe and the reopening of Asian and Pacific markets.

According to the latest World Tourism Barometer from UN Tourism, around 790 million tourists travelled internationally in the first seven months of the year, an 11% increase from 2023 and just 4% below 2019 levels. The results support UN Tourism's projection of a full recovery in international arrivals despite ongoing economic and geopolitical risks.

World Economic Forum data show the Middle East has had the highest recovery rates in international tourist arrivals so far in 2024, with a 20% gain above its 2019 level.

In Australia, the latest ABS data show we have not yet recovered to 2019 levels.

There were 658,810 short-term international trips to Australia in 2019, an increase of 55,450 from the same month last year, but still 16.5% below pre-COVID levels in 2019.

New Zealand was the largest source country, representing 17% of all visitor arrivals to Australia.

ABS data

Turbulence ahead? The financial health of top travel firms

• Corporate Travel Management (CTD)

In August, Brisbane-based Corporate Travel Group (CTD) indicated its FY25 revenue and earnings growth would fall short of expectations due to various factors, including macroeconomic challenges and the completion of non-recurring projects.

CTM is targeting 10% revenue growth and 23% to 27% EBITDA margin growth in North America, Asia, and Australia/New Zealand for FY25. However, it expects an 18% revenue decline and a 49% drop in EBITDA margins in Europe as non-recurring projects conclude, resulting in a year-on-year downturn in group earnings.

Shares are down around 30% year-to-date.

Corporate Travel Management daily chart

• Web Travel Group (WEB)

Last week, shares in travel firm Web Travel Group (WEB) (formerly Webjet) plunged after it warned margins in its European WebBeds business remain subdued.

Henry Jennings from Marcus Today wrote in an article for ausbiz that the news shouldn’t have come as a surprise to investors if it had been properly flagged by management.

“How did the directors not know how the Olympics was going to affect margins? The Euros were months ago. Gold medals were months ago. Why has it taken so long for management to fess up to the issues? Maybe they did at the AGM in August, but no one was listening!”

Web Travel Group daily chart

• Flight Centre (FLT)

Flight Centre (FLT) was the latest travel firm to raise the shareholder alarm. Shares plunged 20% after its 1Q25 trading update missed expectations.

Adam Dawes from Shaw and Partners is concerned there could be turbulence ahead:

The airline is also facing a multimillion-dollar compensation bill after illegally terminating hundreds of employees during the COVID-19 pandemic. The Federal Court has ordered that three former employees share in a compensation payment totalling $170,000.

Flight Centre daily chart

Web Travel Group investment overview

• Market analysis: ASX Tradewatch technical data indicate a pessimistic outlook for Web Travel Group shares. The 5-day moving average remains below both the 20 and 50-day moving averages, suggesting a bearish trend.
• Broker recommendations: despite the bearish market indicators, the average broker recommendation from Refinitiv is a "Buy".

Price targets

• Current average target price: $6.41, representing a near 50% increase from current levels
• UBS: recently reduced their 12-month price target for WEB by 44%, adjusting it to $5.60 from a previous $10, citing overly negative market sentiment
• Jefferies and Macquarie: both firms have similarly cut their price targets by approximately 40%.

Web Travel analyst ratings and price target trends

Flight Centre Investment Insights

• Analyst consensus: the average analyst recommendation for Flight Centre is a "Buy"
  • Adam Dawes (Shaw and Partners) and Jun Bei Liu (Tribeca) both advocate buying, as discussed on ausbiz’s "The Call"
  • Jun Bei Liu comments on potential recovery driven by improved consumer sentiment
  • Wei-Weng Chen (RBC Capital Markets) suggests caution, labeling the recent update from Flight Centre as incomplete and potentially indicative of future declines. RBC Capital Markets holds a "Negtive" outlook on FLT, with a price target of $22 per share.

Flight Centre analyst ratings and price target trends

Qantas investment analysis

• Market sentiment: ASX Tradewatch data highlight a positive outlook for Qantas (QAN), showing a strong bullish trend.
  
  Key indicators supporting this view include:
  • The 5-day moving average is positioned above the 50-day moving average
  • Both the 200-day and 20-day moving averages are on an upward trajectory, suggesting sustained positive momentum
• Broker recommendations: despite potential legal challenges, financial analysts consistently rate Qantas as a "Buy".
• Refinitiv data: the average target price for Qantas shares is $7.83, indicating an anticipated gain of nearly 5% from current levels.

Analyst recommendations and stock performance