Wanderlust trumps rising costs: why travel shares are still rising
TUI, Airbnb, Royal Caribbean and most major airlines have announced strong outlooks as customers continue to prioritise ‘experiences over things’. IG financial analyst @AngelineOng explains how and which stocks to watch.
(Video Transcript)
Travel shares start flying high
Amid high inflation, it looks like Wanderlust is winning. To agree, TUI reported its first post-pandemic net profit on the back of robust bookings and travel demand in the three months to the end of June.
Many of the others too, Royal Caribbean Cruises, Airbnb, Booking, just a few names, as well as all the major airlines saying that consumers are prioritising travel over things.
Let's have a look at Booking's share price. As you can see, a steady climb. Airbnb, a similar picture there, although it had some issues early on. However, it seems to be from the May period having a quick upward trajectory till July before shaking out a bit.
Pent-up travel demand scoops inflation
But as you can see there, the trend lines for all these stocks, United Airlines as well, saying that outlook remains strong, gives us a sense that many people, after the lockdowns are over, are saying that the pent-up demand for travel is still outweighing those rising costs, outweighing those concerns around an uncertain economy.
Many of the other travel stocks with exposure to this space are also saying that demand remains strong, even though we have this potential softening outlook over there in China. The question is not of demand staying strong in the second half, but where this demand is coming from, and also paying special attention to which stock is more exposed to the movement of this demand.
Just showing you TUI, because after those strong results, its shares did come off, as you can see there, down around currently 3.2%. And this could be because TUI itself says you can see the travel season shift to start earlier, and also as more and more tourists decide on their holidays dependent on climate change.
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