7th Feb 2022
2021 was widely anticipated to see the relaunch of the travel industry after the disastrous year of 2020, but the omicron variant has delayed it somewhat. However, industry leaders are still confident that “revenge travel” will bring good news for travel stocks.
2021 was looking hopeful — for a while
By the middle of 2021, travel industry players were feeling optimistic. In the US, almost 2 million people flew on Memorial day weekend1, more than any single day since before the pandemic began, and 29.5% more domestic leisure tickets were sold than at the same time in 20192. European airlines saw international air traffic rates perk up3, and by October, the director general of the International Air Transport Association (IATA), Willie Walsh, stated that “We are past the deepest point of the crisis. While serious issues remain, the path to recovery is coming into view.”4
By early November, when most thought leaders wrote their end of year roundups, the outlook was good. The World Tourism Council (WTC) expected the US travel sector to have risen 35.6% by the end of 2021, compared with 20205. IATA predicted that total passenger numbers would grow from 2.3 billion in 2021 to 3.4 billion in 2022, with the world’s airlines recovering their performance by the end of the year6.
Revenge travel is in the air
One thing was clear: the travel bug is strong. People are eager to hit the road — or air, or seas — again after 18+ months at home. One study found that 90% of people who traveled in 2019 plan to travel internationally in 20227, and the International Travel and Health Insurance Journal (ITIJ) predicts international travel spending to jump 94%8.
It’s a movement that’s been dubbed “revenge travel,” as people yearn to put the restrictions of the pandemic behind them. Families who have missed out on shared milestones and friends who have been isolated from loved ones can’t wait to reunite.
Tina Edmundson, global brand and marketing officer for Marriott International, points out that people feel like the pandemic robbed them of time and experiences, and they are determined to claw them back. “The past 18 months have forced people to reevaluate the importance of travel in their lives,” she explains. “The pandemic made people reprioritize, and travel has risen to the top of the list as many people have developed a new appreciation for travel or it has taken on a greater meaning and higher importance.”9
Expedia found that 68% of Americans say their next trip will be a big one and 41% are looking for excitement or exhilaration, driving a surge in bookings for exotic, long-haul destinations and “dream” vacations. As a result, Expedia refers to 2022 as the year of the GOAT — Greatest Of All Trips.10
Omicron threw a spanner in the works
This desire to travel once more only made the impact of the Omicron variant feel like more of a slap in the face. Many countries lifted travel restrictions at the beginning of November, only to restore them once more. The US, UK, EU, South Korea, Japan, and Israel are among those that tightened restrictions. November saw Thailand drop quarantine requirements for entrants to the country, but mandatory hotel quarantine was back by the end of the month11.
Fitch Ratings had predicted that global air traffic would drop only 35% in 2021 compared with 2019 levels, but it changed that to 50% as Omicron hit, as well as revising forecasts downwards for 2022 and 202312.
Those traveling faced disruption not just from renewed travel regulations, but also because many travel sector employees had either caught COVID-19 or been forced to isolate. Lufthansa, Delta, United Airlines, British Airways, and Alaska Airlines are among airlines that had to cancel flights due to a lack of employees. A single day saw 2,395 flight cancellations and 6,342 flight delays globally13, while the Friday to Sunday period before Christmas brought 7,900 grounded flights and tens of thousands more delays. Meanwhile, at least 2 cruise ships reported infections on board.14
But the setback is expected to be temporary
However, even Omicron can’t extinguish the demand for revenge travel, and it’s generally viewed as a short term setback. “It’s like we are taking two steps forward and one step back,” said United Airlines Chief Executive Scott Kirby15. Even Fitch Ratings analysts predict “an accelerating pace of recovery through 2022 and into 2023” despite their revised numbers16.
Analysts point out that every new variant brings a decline in travel bookings, followed by a surge as infection rates fall again17. Christie Hudson, travel expert at Expedia, said “I think 2022 will be the year of going big and having some of those bucket-list moments.”18
Even business travel, always the last sub-sector to recover from any travel setback, is forecast to rise in 2022. United Airlines Chief Commercial Officer Andrew Nocella said “We should expect really an acceleration of business traffic next year with a lot of pent-up demand.” Robert Isom, president of American Airlines, said that close to two-thirds of corporate customers are doing at least some essential international business travel, and business travel revenues are likely to rebound to 2019 levels by the end of 2022.19
Travel investors can take heart
Despite the disruption of the omicron variant, people with shares in hotel stocks, cruise stocks, and airline stocks don’t need to mourn the death of their portfolio. The desire for travel is only burning hotter the more it’s repressed, so there is good reason to expect that travel stocks will see prices rise. The only question is how long it will take.
For investors who hope to take advantage of the depression of the travel sector to invest in travel stocks while prices are low, one option is Defiance’s CRUZ travel ETF, which offers a way to help mitigate exposure to risk by spreading a single investment across a number of leading air travel, hotel, cruise, and travel stocks.
1“US airlines divided over strength of summer travel rebound” June 2, 2021 https://finance.yahoo.com/m/fffe7160-ed83-3c8a-96cb-36f1e6133db1/us-airlines-divided-over.html
2 “Airline stocks track higher after strong bookings into Memorial Day weekend” June 1, 2021 https://seekingalpha.com/news/3701653-airline-stocks-track-higher-after-strong-bookings-into-memorial-day-weekend
4 “Global airline industry is expected to cut losses in 2022 by 78% to $12 billion in slow pandemic recovery” October 4, 2021 https://www.cnbc.com/2021/10/04/airlines-covid-recovery-2022-losses-to-fall.html
5 “Travel in 2022 Will Be Even Busier Than Pre-pandemic Times, According to New Report” November 15, 2021 https://www.travelandleisure.com/travel-news/world-travel-tourism-council-says-2021-travel-may-surpass-pre-pandemic-levels-in-2022
6 “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/
7 “Travel trends we should expect in 2022” December 23, 2021 https://www.traveldailymedia.com/travel-trends-we-should-expect-in-2022/
8“Rise in international travel spending forecast for 2022” December 1, 2021 https://www.itij.com/latest/news/rise-international-travel-spending-forecast-2022
9 “Revenge travel and the rise of the mobile office” October 9, 2021 https://fortune.com/2021/10/09/what-is-revenge-travel-pandemic-covid-delta-variant/
10 “The GOAT mindset: Expedia reveals 2022’s biggest travel trend” November 30, 2021 https://www.prnewswire.com/news-releases/the-goat-mindset-expedia-reveals-2022s-biggest-travel-trend-301433866.html
11 “Coronavirus: Omicron variant delays Asian leisure travel’s return until … well, when? Let’s hope 2022 sees us taking overseas holidays again” December 29, 2021 https://www.scmp.com/magazines/post-magazine/travel/article/3161248/coronavirus-omicron-variant-delays-asian-leisure
12 “Global Air Traffic Recovery Will Continue in 2022, but Risk Remains” November 30, 2021 https://www.fitchratings.com/research/corporate-finance/global-air-traffic-recovery-will-continue-in-2022-but-risk-remains-30-11-2021
13 “Omicron Variant Causing Flight Cancellations Worldwide” december 27, 2021 https://www.voanews.com/a/omicron-variant-causing-flight-cancellations-worldwide-/6371382.html
14 “Nearly 8,000 flights cancelled due to Omicron surge” December 24, 2021 https://www.france24.com/en/americas/20211224-thousands-of-flights-cancelled-delayed-due-to-omicron-variant
15 “The Omicron variant is starting to weigh on travel: ‘Two steps forward and one step back'” December 1, 2021 https://finance.yahoo.com/news/omicron-variant-starting-weigh-travel-194250060.html
16 “Global Air Traffic Recovery Will Continue in 2022, but Risk Remains” November 30, 2021 https://www.fitchratings.com/research/corporate-finance/global-air-traffic-recovery-will-continue-in-2022-but-risk-remains-30-11-2021
17 “Omicron variant unravels travel industry’s plans for a comeback” December 1, 2021 https://www.business-standard.com/article/current-affairs/omicron-variant-unravels-travel-industry-s-plans-for-a-comeback-121120101201_1.html
18 “Travel in 2022: Is it time to plan those big trips abroad?” November 28, 2021 https://www.cnbc.com/2021/11/28/travel-in-2022-is-it-time-to-plan-those-big-trips-abroad.html
19 “Omicron Variant May Limit Return of Business Travel” December 3, 2021 https://www.govtech.com/transportation/omicron-variant-may-limit-return-of-business-travel