Memorial Day is just two weeks away, and the preceding weekend usually marks the start of the summer travel season in earnest.
There’s an exchange traded fund for that: the ALPS Global Travel Beneficiaries ETF (NYSEARCA: JRNY). JRNY follows the S-Network Global Travel Index (TRAVEL). Travel and leisure equities, though correlated, don’t always move in lockstep with each other.
JRNY is home to airlines, casino operators, hoteliers, online booking firms, and other companies that directly benefit from vibrancy in the travel/leisure ecosystem. Many JRNY components hail from the consumer discretionary sector, which is one of the worst-performing groups in 2022. However, that’s a sign that some of the ETF’s holdings aren’t pricing in what’s expected to be a vibrant summer travel season.
“Many companies are now forecasting record travel demand this summer with implications that the long-awaited ‘reopening trade’ has arrived—but travel stocks have not yet reflected this sentiment, even as many companies reported earnings beats this quarter,” wrote Alerian analyst Roxanna Islam.
Adding to the allure of JRNY is that the aforementioned, impressive summer travel expectations come against the backdrop of soaring gas prices — something policymakers won’t be able to solve in a matter of weeks. Translation: Consumers still want to travel, and some JRNY components can pass along inflationary costs to their patrons.
“Travel companies are emphasizing record travel demand this summer now that travel restrictions and mask mandates have diminished. If pent-up demand materializes, the industry should be well-positioned to execute pricing power to offset inflationary costs. Hotels, for instance, can price hotel rooms continuously in response to occupancy levels,” added Islam.
Islam acknowledges that the travel outlook beyond this summer is uncertain, but some of that uncertainty could be cleared up by the return of business travels tied to in-person conventions and meetings. Some employees across a variety of industries want to return to face-to-face interaction, and that’s essential for airlines and hotel companies that are looking to boost Sunday through Wednesday occupancy levels.
JRNY is tied to the theme of a potential resurgence in business travel by way of its depth, including exposure to airlines, hotel companies, and casino operators — the latter of which is important because Las Vegas is one of the convention hotspots of the U.S.
Other travel and leisure ETFs include the VanEck Vectors Gaming ETF (BJK) and the U.S. Global Jets ETF (JETS).
For more news, information, and strategy, visit the ETF Building Blocks Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
