Will the Sun Ever Shine Again on the Travel Sector?

On our Covid-19-stricken planet, travel-focused stocks have been facing a barrage of challenges and setbacks.

A photo of a woman in a face mask waiting to board an airplane.

Source: Maridav/ShutterStock.com

Each time the pandemic appears to be waning, it flares anew in various corners of the world… or in all of them.

And each new flare-up triggers a fresh round of lockdowns, coupled with a fresh round of travel cancellations and postponement.

This stop-start cycle has been weighing heavily on travel stocks for the last several weeks.

But the persistent weakness of these stocks feels like the proverbial “darkness before the dawn.”

The global travel industry is, in fact, recovering. And that recovery is continuing to gain momentum, despite occasional setbacks.

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In China, for example, domestic travel during certain holiday periods is now higher than the pre-Covid-19 levels of 2019.

Here in the States, domestic travel is also ramping up sharply, as “staycations” are on the rise.

The so-called “TSA traveler throughput” is now close to pre-pandemic levels.

The latest reports from Sabre Corp. (NASDAQ:SABR), the big provider of reservations data and technology to the travel industry, tell a similar story. U.S. hotel bookings have risen to just 25% below pre-Covid-19 levels.

But Covid-19 fears are still plaguing the worldwide travel industry and will continue to do so until the infection numbers start dropping once again.

The big problem, of course, is the delta variant of Covid-19.

Not only has this variant triggered an “echo pandemic” that threatens to grow even larger, but it has also triggered an incessant onslaught of scary headlines and news stories — some of which contain legitimate, factual information… and some of which do not.

The resulting perception is a mixture of fear and confusion, which is certainly not the perception that would inspire someone to invest in travel-related stocks.

But this perception is not the entire story.

Yes, the current circumstances are troubling and uncertain. And yes, the future course of the Covid-19 pandemic is unknown and unknowable.

That said, we do know at least two critical data points about the Covid-19 travel nexus.

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A Travel Comeback is Possible

First, we know that travel volumes are continuing to rise, month by month, in most major travel markets, despite the scary headlines about the delta variant.

Second, we know that vaccinations rates are rising in every country on the planet.

Now I realize that vaccines have become a political hot potato. But politics is not our beat here at Smart Money; investing is. So as investors, we simply follow the data wherever it leads, without prejudice.

In connection to travel stocks, for example, the vaccination data present relevant and promising information. Stated simply, rising vaccination rates are promoting rising travel activity.

At some point, therefore, rising vaccination rates should boost travel activity enough to flip the outlook for travel-related stocks from doom-and-gloom to recovery and optimism.

Certainly, I have no idea how many more Covid-19 variants may be heading our way, nor how well current vaccines will perform months down the road.

But come what may, I expect the desire to travel will overcome whatever Covid-19-related obstacles try to stand in its way.

Furthermore, I suspect the combinati0n of natural inoculation from prior infections, combined with the worldwide vaccination effort, will produce some level of success against the virus — at least enough to facilitate some degree of “normal” travel worldwide.

Based on official data, for example, 37 million Americans have contracted the coronavirus, while 169 million have completed their vaccines. Those two numbers, together, equal about 63% of the population.

Due to large numbers of asymptomatic cases, the actual total of U.S. infections is probably larger than 37 million.

On the other hand, some of those folks have also completed vaccinations. Net-net, that 63% number is probably not far off the mark.

In Europe, 64% of the population has either contracted the virus or completed a vaccine.

Although it is true that the current vaccines are far from perfect, unvaccinated individuals account for the overwhelming majority of new Covid-19 infections worldwide.

According to the latest reports from the Centers for Disease Control and Prevention, non-vaccinated individuals account for 97% of hospitalizations and 99% of deaths.

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In other words, vaccinated individuals account for less than 3% of all new Covid-19-related hospitalizations and less than 1% of all new Covid-19-related deaths.

Even if we assume that some of the data points I’ve just cited are somewhat off-target, the two most relevant, travel-related ones are clear and undeniable:

  1. Vaccination rates are rising;
  2. And vaccines are providing significant protection against both infection and serious illness… so far.

In light of these two data points, the nascent travel recovery should continue gaining momentum and, eventually, boost stock prices throughout the travel sector.

Travel-related stocks have been suffering for so long now, that even a modest improvement in Covid-19 trends and headlines could propel them to large and rapid gains.

Regards,

Eric Fry

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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.


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