Travel ETFs Beat S&P 500 in a Month: Here's Why?

The global travel industry is on its way to fully recovering from the effects of the COVID-19 pandemic this month, according to U.N. Tourism, as quoted on CNBC. During the first nine months of 2024, international arrivals worldwide reached 98% of the pre-pandemic levels compared to the same period in 2019. The remaining 2% gap is expected to close by December, signaling a major landmark for the industry.

Many regions have already surpassed the pre-pandemic levels. In the Middle East, international arrivals rose 29% during the first nine months of 2024 compared to the same period in 2019. Africa and Europe have also fully recovered. The Americas are at 97% of the pre-pandemic levels, while Asia-Pacific lags at 85%, mired by the slow return of Chinese travelers.

U.S. Travel Pattern

According to PwC’s 2024 Holiday Outlook Survey, U.S. travel trends this holiday season are similar to those of last year, with a net 46% of consumers planning trips. This year, 43% are opting for destinations within the United States (compared to 42% in 2023), and 8% are planning international travel (versus 7% in 2023).

Meanwhile, according to Deloitte’s 2024 Holiday Travel Survey, American travelers are planning to take an average of 2.14 trips in 2024, up from 1.88 trips in 2023, marking the highest trip frequency since travelling came to life after the pandemic. On average, travelers expect to spend $3,294 on their longest trip, a 4% increase from 2023.

Hospitality Sector Expands Rapidly in the Asia-Pacific

Hospitality companies are preparing for an anticipated surge in middle-class travelers across Asia-Pacific. Hilton HLT operates 1,000 hotels in the region, surpassing its 2025 goal. It has an additional 915 properties in the pipeline.

Marriott International MAR opened the first Four Points Flex by Sheraton in Japan in November and 12 more are expected to open in Japan before the year-end. Meanwhile, business travel is rebounding strongly.

Restaurant Sales to Rise Meaningfully?

More holidaying means more visits to restaurants. Nearly 20% of leisure travelers seek out new restaurants or culinary experiences, according to a new report from Hilton. If this is not enough, many consumers normally plan to visit restaurants during the end-of-year holidays, while others plan to order delivery or takeout for events at home.

Overall, the National Retail Federation (NRF) expects holiday season sales in the United States in 2024 to increase 2.5-3.5% from 2023. This is a slower pace than the 3.9% year-over-year increase in 2023, but is consistent with the average growth from 2010-2019.

 “Laptop Lugging” in Vogue?

As remote work gains popularity, 49% of employed travelers plan to work during their longest leisure trip this season—a huge increase from 34% last year. This trend of laptop lugging, is particularly popular among younger and higher-income individuals. In fact, 58% of Gen Z travelers and 54% of millennials intend to blend work with leisure on their trips.

Leisure & Travel ETFs in Focus

Against this backdrop, investors should keep track of the leisure and travel-related exchange-traded funds (ETFs). These ETFs beat the S&P 500 (up 1%) in the past month and include the following –

Defiance Hotel Airline and Cruise ETF CRUZ – Up 3.9% past week; up 11.9% past month (as of Dec. 9, 2024)

Themes Airlines ETF AIRL – Up 3.0% past week; up 8.3% past month

AdvisorShares Hotel ETF BEDZ – Up 2.4% past week; up 9.4% past month

Amplify Travel Tech ETF AWAY – Up 0.5% past week; up 7.4% past month

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