Holiday season

2 travel and leisure ETFs for the summer holiday season

Wall Street gets a day off for Memorial Day on Monday, May 30, marking the unofficial kickoff of the busy summer travel season.

“Vengeance trip” is the term we saw after two years under pandemic restrictions.

More than 80% of American adults plan to travel this summer. Meanwhile, air travel has already seen a strong rebound, up 25% from a year ago. Such a recovery in demand should naturally boost the revenues and profitability of the travel and leisure industry.

Meanwhile, investors are also hoping to see higher stock prices. They were surely encouraged by last week’s positive price action in the broader indices, ie , , and .

Yet potential headwinds such as rising prices, geopolitical tensions, re-emergence of COVID-19 cases and even supply chain issues continue to weigh on the sector’s recovery.

Therefore, we might expect further volatility in travel and leisure company stocks. Analysts are paying close attention to airline industry metrics to see if their results can improve, especially despite rising fuel costs.

So far in 2022, the travel and leisure industry has been vulnerable. The Dow Jones US Travel and Tourism Index fell 25.1% since the start of the year (YTD). Likewise, the Dow Jones US Travel and Leisure Index is down 17.7%.

Here are two exchange-traded funds (ETFs) to capitalize on improving travel and tourism metrics in the coming months.

1. Defiance Hotel, Airline and Cruise ETFs

  • Current price: $19.53
  • 52 week range: $17.41 – $25.09
  • Spending rate: 0.45% per year

Following the pandemic, we are seeing new trends emerge in the travel industry. For example, the growth of remote work options means individuals can combine work and play.

The global luxury travel market is also receiving increased attention. It is expected to grow significantly at a compound annual growth rate (CAGR) of 8.8% between 2021 and 2028.

Our first fund, the Defiance Hotel, Airline and Cruise ETF (NYSE:), provides pure-play exposure to the travel and hospitality industries. It was first listed in June 2021.

CRUZ, which follows BlueStar Global Hotel, Airline & Cruise Index, has a portfolio of 55 stocks. Nearly three-quarters of companies come from the United States. Next come those of the United Kingdom (7.4%), Japan (3.2%), Ireland (2.6%) and France (2.3%).

About 39% of holdings are hotels, followed by airlines (35.3%) and cruises (25.8%). Meanwhile, the top 10 stocks account for almost 60% of the $48.3 million in net assets.

Major names include Marriott International (NASDAQ:), Hilton around the world (NYSE:), Norwegian cruise line (NYSE:), Delta Airlines (NYSE:) and Royal Caribbean (NYSE:).

CRUZ is down 8% since January. Readers looking to profit from the growth of the diversified travel and tourism industry might consider further researching this relatively young and small fund.

2. ETFMG Travel Tech ETF

  • Current price: $20.83
  • 52 week range: $18.35 – $32.07
  • Spending rate: 0.75% per year

Digital adoption during the pandemic has impacted how travelers make their arrangements. For example, around 66% of millennials, born between 1981 and 1996, book their trip on their smartphone. And 74% use it to do research for their travel plans.

Recent figures show that the global travel technology market could grow from $8.6 billion in 2020 to $12.5 billion by 2026, at a CAGR of 6.8%.

Therefore, next on today’s list is the ETFMG Travel Tech ETF (NYSE:), which invests in technology-driven companies within the global travel and tourism industry.

The fund began trading in February 2020, shortly before the pandemic started making headlines in the United States. Net assets amount to $261.9 million.

AWAY chart

With a portfolio of 33 holdings, the fund is heavily invested in travel bookings and reservations stocks (54.1%). This is followed by travel price comparison companies (15.6%), travel consulting companies (15.1%) and carpooling and call names (14.6%).

About half of the portfolio is in the top 10 stocks. Among these are the UK-based travel platform Trainline PLC (LON:), Reservation (NASDAQ:), Indian online travel group MakeMyTrip (NASDAQ:), TripAdvisor (NASDAQ:), and Australian Webjet (ASX:).

Despite the growth potential of the tech-driven travel segment, AWAY hit a 52-week low on May 12. It is down 14.5% since the start of the year and 32.7% over the last 12 months. Still, many of these stocks deserve your attention as global travelers begin to pack their bags in the coming quarter.


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