September 29, 2023


Unforgettable trip

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 kick-off for the busy summer travel season.

“Revenge travel” is the term we’ve been seeing after two years spent under pandemic restrictions.

Over 80% of American adults plan to travel this summer. Meanwhile, air travel has already witnessed a strong rebound, up 25% from last year. Such recovery in demand should understandably boost revenues and profitability for the travel and leisure industry.

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

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

Therefore, we could possibly expect further choppiness in shares of travel and leisure companies. Analysts are paying close attention to metrics from the airline industry to see if their bottom lines can improve, especially in spite of increased fuel costs.

So far in 2022, the travel and leisure industry has been vulnerable. The Dow Jones US Travel & Tourism Index has declined 25.1% year-to-date (YTD). Similarly, the Dow Jones US Travel & 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 ETF

  • Current Price: $19.53
  • 52-week range: $17.41 – $25.09
  • Expense ratio: 0.45% per year

Following the pandemic, we are seeing new trends emerge in the travel industry. For instance, the growth in remote working options means individuals are able to blend work and leisure travel.

The global luxury travel market is also getting 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:), offers pure-play exposure to the travel and lodging industries. It was first listed in June 2021.

CRUZ Chart

CRUZ, which tracks the BlueStar Global Hotels, Airlines, and Cruises Index, has a portfolio of 55 stocks. Close to three-quarters of the businesses come from the US. Next are those from the UK (7.4), Japan (3.2%), Ireland (2.6%), and France (2.3%).

Around 39% of the holdings are hotels, followed by airline companies (35.3%) and cruises (25.8%). Meanwhile, the top 10 stocks comprise close to 60% of $48.3 million in net assets.

Leading names include Marriott International (NASDAQ:), Hilton Worldwide (NYSE:), Norwegian Cruise Line (NYSE:), Delta Air Lines (NYSE:) and Royal Caribbean (NYSE:).

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

2. ETFMG Travel Tech ETF

  • Current Price: $20.83
  • 52-week range: $18.35 – $32.07
  • Expense ratio: 0.75% per year

Digital adoption during the pandemic has had an impact on the way travelers make arrangements. For instance, around 66% of millennials, born between 1981 and 1996, book their trip on their smartphones. And 74% use it to conduct research for their travel plans.

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

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

The fund started trading in February 2020, shortly before the time the pandemic started making headlines in the US. Net assets stand at $261.9 million.

AWAY Chart

With a portfolio of 33 holdings, the fund is heavily invested in travel bookings and reservations stocks (54.1%). Next are travel price comparison firms (15.6%), travel advice companies (15.1%), and ride sharing and hailing names (14.6%).

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

Despite the growth potential of the tech-focused travel segment, AWAY hit a 52-week low on May 12. It is down 14.5% YTD and 32.7% over the past 12 months. Yet many of these stocks deserve your attention as global travelers start packing their bags in the coming quarter.


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