Is Now the Right Time to Increase Exposure to Travel? | ETF Trends

Industry experts have predicted that travel in 2022 will surge beyond pre-pandemic times, with many consumers ready to resume travel after holding off for almost two years.

Underlying passenger flight data suggests that bookings and consumer demand are strong, and most of the current capacity issues seem relatively short-term compared to 2020 and early 2021 disruptions, according to Roxanna Islam, associate director of research at Alerian

Long-term demand fundamentals are further supported by a large annual increase in 2021 aircraft orders reported by airline manufacturers last month, according to Islam. This suggests that airlines are starting to see a recovery in demand, in addition to being in a better position to spend cash. 

On the supply side, while December’s COVID-related staffing shortages may be detrimental to operations during the first quarter, these are easier to overcome relative to factors like global travel regulations. Countries seem less restrictive now than they were during the initial outbreak in 2020 given more widespread vaccine distribution, according to Islam.

There are several ETFs to consider that offer broad exposure to the travel industry, including airlines, hotels, casinos, cruise lines, companies that support those industries, and companies that stand to benefit from the overall global travel industry. 

Three popular options are the ALPS Global Travel Beneficiaries ETF (JRNY), the SonicShares Airlines, Hotels, Cruis Lines ETF (TRYP), and the Defiance Hotel Airline and Cruis ETF (CRUZ).

JRNY is the most diversified of the three offerings and carries an expense ratio of 65 basis points, slightly higher than the category average of 62 basis points. The fund has garnered $7.5 million in assets under management since its inception in September 2021.

Made up of 75 holdings, JRNY’s top holdings currently include American Express, Booking Holdings, Marriott International, Hilton Worldwide, and Boeing.

TRYP is the most liquid fund, by volume, in FactSet’s global hotels, resorts, and cruise lines segment. Launched in May 2021, the fund has $11.5 million in assets and has an expense ratio of 75 basis points.

TRYP has 63 holdings; the top five are Carnival, Royal Caribbean, Norwegian Cruise Line, Delta Air, and Ryanair Holdings. 

CRUZ is the cheapest in the segment, carrying an expense ratio of 45 basis points. The fund has attracted $29.4 million in assets since its launch in June 2021.

Composed of 58 holdings, CRUZ’s top holdings include Marriott International, Hilton Worldwide, Carnival, Delta Air, and Royal Caribbean.

The overlap by weight of JRNY and CRUZ is 24%; JRNY and TRYP is 27%; and CRUZ and TRYP is 71%.

Consumer leisure demand persists, while current capacity issues seem to be temporary, making now a good time to enhance portfolios with higher exposure to travel and leisure.

For more news, information, and strategy, visit the ETF Building Blocks Channel.