How to make money from your summer holiday

Whisper it quietly, but this year’s summer holiday could be back on! The relaxation of Covid-19 rules in many countries means foreign trips are on the agenda and I, for one, cannot wait for a little sun!

For the hard-pressed international travel industry, the return to normality can’t come soon enough: the past two years have been devastating for many businesses in this sector.

Snap-shot of reduced travel

To give you an idea of how much the travel industry has been affected by the coronavirus, monthly air passenger arrivals to the UK fell from 6,804,900 in February 2020 to 112,300 in April 2020 – a fall of 98.3%, according to the Office for National Statistics*. Meanwhile, accommodation and travel agency businesses saw the sharpest decline in turnover during the first national lockdown, falling to 9.3% of their February levels in May 2020*.

The worldwide impact of coronavirus restrictions has been equally horrendous – and the recovery is taking time, according to statistics compiled by the World Tourism Organization.

While 2020 was the worst year on record for tourism, last year was also challenging with only a modest uptick in the numbers. “International tourist arrivals (overnight visitors) were still 72% below the pre-pandemic year of 2019, according to preliminary estimates**,” it stated.

While coronavirus restrictions are still in place around the world, observers are optimistic that the travel and tourism industry is in for a better 2022. Here, we take a look at the stocks – and investment funds – that could benefit over the coming months as we get our suitcases out of our lofts and set off abroad.

Stocks and funds that could benefit from increased travel

EasyJet

The budget airline will obviously stand to benefit if passenger numbers continue to increase over the summer months. The company is a 4.6%*** holding in the Ninety One UK Special Situations fund that’s managed by Alessandro Dicorrado and Steve Woolley. In recent commentary, they highlighted overweight positions in airlines, airport operators and related businesses. “As the world reopens, travel stocks should be reassessed as the growth businesses they were regarded as prior to the Covid pandemic,” they wrote. Jet2 is also in the fund’s top ten holdings***.

WH Smith

It may be perceived as a high street business, but WH Smith is now a global travel retailer whose outlets are located in destinations such as airports and railway stations. Obviously, the more travellers that go through airports, the higher the footfall. It’s hoped that such a scenario will help boost the company’s revenues.

Alexandra Jackson, manager of Rathbone UK Opportunities fund, talked about WH Smith and SSP the food travel operator in this recent podcast. SSP partners with companies such as Burger King, Starbucks and Upper Crust to run outlets in air and rail destinations across Europe and beyond.

Japan Airport Terminal

Comgest Growth Japan is one of the largest holders of Japan Airport Terminal. In a recent update to investors, co-manager Richard Kaye said that 82% of pre-covid domestic travel had recovered in Japan and border opening moves are now in place. “Japan Airport Terminal would be a major beneficiary,” he said, pointing out that Japan has been reopening its economy for the last 10 years, including a liberation of tourist visas for Chinese visitors. As a result, the country has seen a three-fold increase in tourist arrivals – a trend it hopes will continue. The fund also owns The Oriental Land Company, which owns the Tokyo Disney Resort.

Airbnb

Scottish Mortgage Investment Trust is a long-term holder of Airbnb, the San Francisco based online marketplace for holiday rentals and tourism activities. It has more than 7 million listings around the world and, on any given day, provides lodging services for 2 million guests. Interestingly, the majority of bookings are by people who are between the ages of 22 and 37^. With the ability to stay in an entire residence with your family, this option may appeal to those not yet quite willing to share their space with other people.

National Express Group

And of course, not everyone will be jetting off abroad for their summer holidays. Many may prefer to stay closer to home – and that’s where companies such as National Express Group may score. The British transport group delivers services in the UK, as well as Continental Europe, North Africa, North America, and the Middle East. It’s also hoping to take over rival Stagecoach in an agreed deal. However, the purchase is currently in the hands of the UK’s Competitions and Markets Authority. National Express is currently the 7th largest holding*** in the GAM UK Equity Income fund that’s managed by the experienced Adrian Gosden.

*Source: Office for National Statistics, Coronavirus and the impact on the UK travel and tourism industry, 15 February 2021
**Source: UNWTO, 18 January 2022
***Source: fund factsheet, 31 January 2022
^Source: Biggerpockets.com, November 2020

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