Smart talk plans

Summer travel plans could boost ETF demand

While travel-related companies are showing improved fundamentals, ETFs offering exposure haven’t garnered much attention from investors. That could change as Americans gear up for summer vacation and/or start taking business trips again only to find that booking prices are dramatically higher than before.

“Hotels, for example, can price hotel rooms continuously based on occupancy levels,” mentioned Roxanna Islam, Associate Director of Research at Alerian S-Netwoks Global Indexes. Islam noted that Marriot International (MAR) was able to increase its average daily rate from 3% in January 2022 to 12% in March 2022, compared to the same month before the pandemic in 2019, according to Hopper.

Meanwhile, airlines have raised fares to 34% higher price points this summer compared to three years ago. Naturally, many related companies, such as Booking Holdings (BKNG), Expedia Group (EXPE) and Uber Technologies (UBER) stand to benefit from increased travel for family vacations or in-person meetings.

Five unleveraged ETFs are listed in the travel ETF theme on the ETF database platform, and all of them have been launched since the beginning of 2020. The most important of them is the ETFMG Travel Tech ETF (EXTERIOR), but the fund has just under $240 million in assets. AWAY focuses solely on technology-driven companies within the global travel and tourism industry, such as BKNG and EXPE.

the AdvisorShares Hotel ETF (BEDZ)the ALPS Global Travel Beneficiaries ETF (JRNY)the Defiance Hotel Airline and Cruise ETF (CRUZ)and the SonicShares Airlines, Hotel, CruiseLines ETF (TRYP) complete the quintet. Each of these ETFs still has less than $100 million in assets, but we believe they will gain traction as investors begin to look for opportunities to participate in the re-emergence of travel plans.

As their names suggest, these four are different from AWAY. For example, BEDZ owns MAR and other hotels like Choice Hotel (CHH) and Red Rock Resorts (RRR), but not companies in other travel industries. Meanwhile, CRUZ and TRYP both own MAR, Carnival Corporation (CCL) and Delta Airlines (DAL).

In contrast, TRYP has the top 10 stakes in technology-focused companies like BKNG and UBER, hotels like MAR and Hilton Worldwide Holdings (HLT), and airlines like DAL.

The differences in exposure that these ETFs offer underscore the importance of looking under the hood, as none of these ETFs have achieved a long-term all-time high.

And if you’re wondering, yes, my family is planning a vacation in August and I’ve started traveling again for in-person meetings.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.