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Pent-up Demand for Travel Stocks

These travel stocks can benefit from pent-up travel hunger

Fewer corona restrictions and possible vaccination passports are fueling the fantasies about travel stocks. The examines travel titles and says where investment is already worthwhile for investors.

British Prime Minister announced that he will lift all restrictions on the coronavirus pandemic for England by June 21st. As a result, British travel and holiday providers have seen a surge in interest in bookings.

The situation is similar in the USA since President Joe Biden’s promise at the beginning of March that by the end of May all adults willing to vaccinate will receive the desired “picks”. US holiday providers are already looking forward to a rush of a travel-hungry.

As Peter Kern, CEO of the US online travel agency Expedia said some parts of the US are booked out for the summer. He assumes that a similar picture will emerge in Europe as the vaccination rate increases. And the travel rush to the Balearic Islands is probably just a foretaste of what could still happen in Europe.

The signs are increasing that a travel boom is coming up for the summer worldwide. The travel money boxes are well filled for many people. And many feel that they have some catching up to do when it comes to travel. And the vaccination certificate planned by some governments alone gives the battered travel industry hope that the existing headwind will turn into a strong tailwind.

This is also reflected in the travel stock market. The positive vaccine news in November already led to a sharp rise in the price of travel stocks. Negative reports such as the third corona wave in Europe, on the other hand, were less significant. The following table shows to what extent this pays off with individual shares:

travel stocks

Dufry – mother of all reopening bets

The shares of the Basel travel retailer are doing well. Already in November with the positive vaccine news, they had posted a jump in price. In mid-February, Boris Johnson’s opening plan was repeated. Even so, the shares are still 46 percent below their pre-crisis level.

In addition to the existing catch-up potential, there are solid arguments why Dufry shares will develop in the coming months. With Alibaba and the financial investor Advent, two prominent investors have joined the duty-free shop operator. Dufry has thus received a key to the growing market in China.

And in particular high-margin luxury goods in Dufry stores such as perfume, sunglasses or clothes could benefit greatly from increasing global travel. Although the majority of the analysts polled by Bloomberg recommend a “hold” rating and see no price growth on average, buying the share is already recommended.

TUI  – Corona remains a risk

Easter holidays in Mallorca are currently as popular as they are a controversial topic. After Spain and thus also the Balearic Island was removed from the corona risk lists of Switzerland or Germany, bookings there have increased massively. Only: If the number of cases increases again due to the holiday rush and Mallorca becomes a risk area again, tourism professionals such as the German travel company will again come under the wheels.

Which would catch TUI’s share price enormously. In May 2018, worth almost 13 euros, the already weak exchange rate fell from just under 7 to 1.52 euros during the first Corona wave. In the meantime, 5 euros have exceeded again at times. But the majority of analysts advise TUI to sell. The corona situation around travel is still too uncertain for a real recovery in the share. In addition, TUI was moderately profitable even before the crisis. During the crisis, one had to resort to the capital increase, which is unpopular with investors.

Expedia and booking – online is the key

What is the trend in working and shopping also applies to the travel industry. Online is the trump card. Those who are hungry for travel want to book their holiday accommodation by the sea, in a city or in nature with a click of the mouse or by tapping a screen.

The digitization trend is one reason why the stocks of online travel providers and industry heavyweights Expedia and Booking were already popular with investors in the Corona year and compensated for the Corona slump in December. In contrast to Booking with plus 2 percent, the Expedia papers with plus 31 percent continued the positive trend in the new year. The Booking share did not run hot and has greater potential on the stock exchange than Expedia.

LM Group – Swiss online alternative

LM Group, an online travel company, is also listed on the Swiss stock exchange. However, its focus is on Europe. Although shares have more than doubled since the price plunge in March 2020, the gap to pre-crisis levels is still 41 percent.