The holiday season is on its way, but travel stocks are already enjoying better forecasts

IIt has been an extremely difficult two years for travel and tourism stocks, but as COVID-19 restrictions continue to ease in many countries and companies anticipate a strong holiday season in Europe and America North, investor optimism is felt across the sector.

Major travel companies like Marriott, Airbnb, Booking Holdings and Trivago have all told investors that after a trying pandemic period, business is finally starting to boom again.

“The sentiment is getting better and better,” Axel Hefer, CEO of Trivago, told CNN Business. “This year will be much more normal than last year, from our perspective.”

Despite a series of complications still affecting the travel industry around the pandemic and rising geopolitical tensions in Europe, experts still widely agree that the outlook for the industry looks much more optimistic compared to 2021. .

“According to the latest UNWTO expert survey, tourism professionals (61%) expect global tourism to improve in 2022,” said Maxim Manturov, head of investment advice at Freedom Finance Europe. “Thus, 58% of experts expect the sector to recover mainly in the third quarter of 2022.”

However, Manturov also acknowledges that Russia’s invasion of Ukraine, ongoing complications from COVID-19, and the rising cost of fuel and living may still hamper the industry’s full recovery, noting that “64 % of UNWTO experts (surveyed in December 2021) believe travel will not return to 2019 levels until 2024.”

Earnings reports point to recovery

In early May, we saw Expedia Group Inc. (EXPE) report that revenue totaled $2.25 billion for the first quarter of 2022, representing an 80% increase over the prior year. For the first three months of 2022, total gross bookings were $24.4 billion, up 58% from the same period in 2021. However, it’s also worth noting that these numbers are still in down 17% compared to the first quarter of 2019.

Around the same time, we saw shares of Airbnb (ABNB) beat expectations in both revenue and earnings, with revenue growing 70% to $1.51 billion. dollars – a figure that exceeds estimates of 60 million dollars.

As part of the report, nights and experiences booked through the platform increased by 59% – or 102.1 million in the first quarter of 2022, surpassing pre-pandemic levels. In addition, the value of bookings taken by Airbnb is equivalent to $17.2 billion, an increase of 67% over the previous year.

Despite widespread optimism emanating from Expedia and Airbnb, the shares of the two travel companies have been affected by an industry correction in recent days, leading to a strong downward trend in many leading stocks in the world. field of travel and tourism.

For Airbnb, the recent market correction negated the steady recovery in the company’s fortunes following the COVID-19 pandemic. In November 2021, Airbnb was only $6 behind in recovering its record market value before the emergence of the Omicron variant triggered further market turbulence.

It’s reasonable for investors to assume that the recent downturn is little more than a faltering buying trend to force a correction, and that the performance of companies like Expedia and Airbnb indicate this could represent a new buying opportunity ahead of other brighter earnings reports. are shared across the industry.

Arguments for greater caution

Despite geopolitical tensions and lingering complications resulting from the pandemic, it remains very likely that 2022 will be a blistering year for the travel and tourism industry.

According to November 2021 industry forecasts, we are likely to see business travel spending jump over 37% in 2022 to over $1 trillion. However, experts warn that the industry will not experience a full recovery until 2024.

Although vaccination rates in many countries are high, the uneven distribution of vaccines means that some countries will be forced to impose stricter travel rules than others. This, coupled with ongoing supply chain issues, is expected to slow the rate of increase in spending to 14% over 2020 – significantly slower than the 21% year-over-year growth. scheduled for early 2021.

For many travel companies – and especially airlines which have suffered greatly during the border closures we have witnessed for much of 2020 and 2021 – the pace of recovery is key to securing a more sustainable financial future. .

When it comes to consumer travel, early signs suggest that record inflation rates and a squeeze in the cost of living aren’t deterring consumers from partaking in the upcoming holiday season.

Although there may be legitimate fears for the holiday season due to inflation rates – which the Bank of England has predicted could hit 10% in the UK – holidaymakers appear to have abandoned caution in order to embark on what will be their first vacation. 2020s in many cases.

It remains to be seen whether such a significant cut in the cost of living could impact future holiday seasons, but for now businesses appear to be basking in the glow of more optimistic financial forecasts and a return to business strength.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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