The travel and leisure industry is emerging from the coronavirus pandemic and some market observers believe that marks a new dawn for the group, including hotel operators.
Some of those material changes, including a renewed emphasis on efficiencies and higher operating margins, are already seen throughout the industry. Those trends could support outcomes for various exchange traded funds, including the ALPS Global Travel Beneficiaries ETF (JRNY).
JRNY is coming off a scintillating January performance, but that could be more a start than an end to the ETF’s 2023 story because data indicate this year’s level of occupied room nights could slightly exceed pre-pandemic levels.
“The U.S. hotel industry is projected to achieve 1.3 billion occupied room nights in 2023, slightly exceeding 2019’s total. The 2023 projection is a 56.9% improvement over 2020’s low of 831.64 million occupied room nights. From 2021 to 2022, U.S. hotel demand improved 11.1%,” said the American Hotel and Lodging Association (AHLA) in a recent report.
A strong outlook for the lodging industry is relevant to investors considering JRNY, which tracks the S-Network Global Travel Index, because the ETF allocates 36.14% of its weight to hotels, casinos, and cruise operators with the first two groups commanding the bulk of that exposure.
Potentially adding to the allure of JRNY’s lodging exposure in 2023 is that while the percentage of occupied rooms will be slightly below pre-pandemic highs, the revenue operators extract from the rooms that are occupied is poised to increase.
“The pandemic nearly halved annual room revenue for U.S. hotels, from $170.35 billion in 2019 to $86.01 billion in 2020. Room revenue rebounded to $142.92 billion in 2021 before soaring to $189.07 billion in 2022, surpassing the pre-pandemic comparable,” according to the AHLA. “This momentum is expected to continue in 2023; U.S. hotel room revenue is projected to reach $197.48 billion in 2023 – up 4.4% over 2022 and 15.9% over 2019. While these numbers are not adjusted for inflation, and real revenue recovery will likely take several more years, the trendlines are positive.”
Rebounding business travel could be another catalyst for JRNY hotel and casino components entering 2023. Bookings for conventions and meetings in Las Vegas this year are solid, but a slew of cities where hotels are dependent on business travelers have room to improve gross operating profit per available room (GOPPAR).
“Among the country’s 25 largest markets – those generally most dependent on business travel – 18 were below pre-pandemic GOPPAR into the fourth quarter of 2022,” concluded the AHLA.
For more news, information, and analysis, visit the ETF Building Blocks Channel.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for JRNY, for which it receives an index licensing fee. However, JRNY is/are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of JRNY.
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.