According to the most recent data from the United Nations World Tourism Organization (UNWTO), more than 900 million tourists traveled internationally in 2022 – double the number recorded in 2021, though still just 63% of pre-pandemic levels . For 2023, the UNWTO projects a further recovery of between 80% and 95% of pre-pandemic levels.
Travel and tourism is one of the largest sectors of the global economy: in 2019, before the pandemic, it contributed $9.63 trillion to global GDP (all figures in US dollars). In 2020, as much of the world went into lockdown, that figure dropped to $1 trillion, but rose to $5.81 trillion in 2021—and is expected to keep rising.
Signs of Growth: Is There Money in Travel Industry Shares?
Things are looking better in the travel sector for a number of reasons. The biggest takeaway, according to RBC’s consumer spending tracker, is that people are returning to their pre-pandemic travel patterns – even cutting back on other types of spending to spend on holidays. Many of us are in a “revenge trip” mindset, booking big bucket-list trips to make up for lost time.
Travel industry observers point to other trends that could fuel the sector’s long-term growth:
Baby Boomer Travel Boom: As baby boomers — the generation born between 1946 and 1965 — reach retirement age, they have more time and money to travel. Boomers are expected to travel extensively in the coming years. Demand for new experiences: Many Canadians, especially Millennials and Gen Z, are choosing “experiences” over “things,” while spending less on goods, groceries, restaurants, and new cars. Rise of Travel Tech: Technology is making travel planning more convenient. From booking flights and hotels to finding attractions, travelers can plan their entire trip on their smartphones. It is helping to meet the demand for personalized travel and customized itineraries. Growing LGBTQ2S+ Market: The lucrative LGBTQ2S+ travel market has grown rapidly in recent years. In 2018, before the pandemic, LGBTQ2S+ travelers spent an estimated $218 billion, and they have become a key demographic in the industry. Discovering the Great Outdoors: Months of indoor confinement and lockdown have led to a strong demand for outdoor activities and nature-based tourism, creating a new source of revenue generation for travel companies. Destination weddings are back: Micro weddings are over and destination weddings have begun, with a market value expected to reach $54 billion by 2027. Live abroad—and travel companies are catering to this new crop of digital nomads. how to invest in travel companies
With the worst of the pandemic in the rear-view mirror, the industry is expected to rebound, providing investors with an opportunity to invest in quality names at “discounted” prices.
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Investors can choose to hold individual stocks of major industry players or buy into mutual funds that package the names of travel, tourism and peripheral industries. However, a more cost-effective, lower-risk option may be to invest in a travel-themed exchange-traded fund (ETF), made up of a basket of leisure and business travel companies from a broad spectrum of industries.
One such ETF is the Harvest Travel & Leisure Index ETF (TRVL). The fund holds a diversified portfolio of large-cap companies that own or operate travel-related businesses, including airlines, cruise lines, hotels and booking platforms. TRVL provides exposure to a range of development opportunities within the sector.
“We’ve seen positive headwinds in travel and leisure before the pandemic, but we saw many Canadians who wanted travel exposure buy some airline stock and call it a day,” says Paul McDonald, chief investment officer and portfolio manager. In Harvest ETF. “TRVL was the first ETF to offer Canadian investors a wide variety of travel companies in a single ETF. It invests in airlines, cruise lines, hotels and resorts, casinos and online booking companies like AirBnB that make travel accessible to so many people. All of these companies are classified into different sectors, but they wind up with the same thing: people are traveling more.
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