Exchange-traded funds focused on airlines, cruise lines and hotels are soaring ahead of the holiday season as diminishing COVID-19 fears, along with falling gasoline prices, boost a battered industry.
Travel ETFs such as the actively managed AdvisorShares Hotel ETF (BEDZ), which provides exposure to U.S. hotels, resorts and cruise lines, have beaten broader markets over the past three months. BEDZ, for example, has gained 7.3%, while the S&P 500, as measured by the SPDR S&P 500 ETF Trust (SPY), has lost about 1%, according to ETF.com data.
The travel industry in the U.S. has rebounded since the onset of the pandemic in early 2020, which grounded cruises and airplanes, and emptied hotel rooms. Loosened COVID-19 restrictions, rising vaccinations and the cost for a gallon of gasoline falling 34% since June are among factors boosting the industry. Travelers in November boosted spending by 3% during 2019, data from the U.S. Travel Association shows.
ETFs tracking the industry that was hammered by pandemic-imposed travel limitations are gaining ahead of the holidays. The Defiance Hotel, Airline and Cruise ETF (CRUZ) has gained 4.9% in the past three months, while the U.S. Global Jets ETF (JETS), which invests in airlines, was up 2.2% and the ALPS Global Travel Beneficiaries ETF (JRNY) added 2.5% over the same period.
Higher Numbers Anticipated
“We saw strong numbers out of Thanksgiving, which is the most popular travel weekend,” Director of ETF Managers Group Stephen Gardner told ETF.com. “I would expect there to be stronger numbers going into the end of the year with increased travel going to see families around the holidays.”
The ETFMG Travel Tech ETF (AWAY), which launched in February 2020 as pandemic lockdowns were beginning, is an outlier among travel ETFs, with a decline of 7.5% over the past three months. AWAY tracks an index that provides exposure to technology-focused global travel and tourism companies, such as Booking Holdings Inc. and Expedia Group Inc.—websites and mobile applications.
While fund managers anticipate the demand in travel to carry into the new year, they are also wary of the challenges of a potential spike in oil and gas prices and travel restrictions in countries like China, and what that means for the travel industry long term.
Still, almost half of U.S. residents—47%—are still planning to travel this holiday season, according to PwC’s data.
“There’s no reason to think demand is going to tail off, especially with the spring break and summer vacation travel period coming up,” Dan Ahrens, managing director at AdvisorShares Investments and portfolio manager of BEDZ, told ETF.com.
“But the entire world hasn’t opened up yet, and China’s a good example. Such a big, big chunk of tourists are from China,” he added.
Contact Zoya Mirza at [email protected]