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With the summer quickly winding down, many Canadians are already looking back at their summer travel as a distant memory. Whether it was to unwind on a beach, sightsee ancient ruins, or explore off the beaten path, most love the opportunity to pause the rush and stress of daily lives for a bit. Nowadays, it seems like most places you travel to are getting a bit more crowded and even busier.
The travel sector has been experiencing remarkable and sustained growth in the wake of renewed interest post-pandemic. As domestic travel in the U.S. reaches new heights, technological advancements and a shift in consumer spending from goods to services among developed markets are boosting the sector.
According to the first UN World Tourism Organization (UNWTO), World Tourism Barometer of the year, international tourism ended 2023 at 88% of pre-pandemic levels, with an estimated 1.3 billion international arrivals*. The unleashing of remaining pent-up demand, increased air connectivity, and a stronger recovery of Asian markets and destinations are expected to underpin a full recovery by the end of 2024. The report also underscores tourism's resilience and rapid recovery. The rebound is already having a significant impact on economies, jobs, growth and opportunities for communities everywhere.
What's up with the burgeoning travel boom?
The obvious answer is that consumers unleashed pent-up travel demand when Covid-19 restrictions were lifted, boosting sales at airlines, cruise operators, and other travel businesses. The bigger question is can this persist? Is this a flash in the pan or is there something more to it?
Putting aside pent-up demand, we need to take a closer look at the change in consumer preferences and attitude – namely prioritizing experiences over goods. An ageing population, like the baby boomers, are now in the consumption phase of their life, and are retiring and travelling more. The demand is also coming from younger generations now as well. Often times favouring experiences over material items, millennials are travelling, leading to increased multi-generational demand for the global travel industry.
What's more, global travel is a secular theme – rising income profiles in other parts of the world at different times. For example, according to the UNWTO report*, the Middle East led recovery in relative terms as the only region to overcome pre-pandemic levels with arrivals 22% above 2019.
Despite global uncertainties, travel remains resilient, revealing significant investment opportunities in a dynamic and evolving market. This trend has no doubt caught the investment industry’s attention. For investors, the question is how to capitalize on this trend?
The ETF Experience Podcast
To help answer this question and understand the investment implications and possible opportunities in the travel industry, Chiara Carozzi, Business Development Manager, TD Asset Management Inc. (TDAM) and Damian Fernandes, Managing Director, Portfolio Manager, TDAM recently got together to chat in the inaugural ETF Experience podcast, powered by TDAM Talks.
Chiara and Damian took a deep dive into the thriving travel sector and discussed cyclical and structural growth factors, opportunities to watch for, and how the sector might look going forward. Some of the key topics in the podcast included:
- What are the main factors driving the travel boom?
- Is the current growth trend sustainable?
- How do we identify companies with strong growth potential in the sector?
- How might new regulations for short-term rental companies' impact travel growth?
- What should investors consider before capitalizing on this trend?
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*Source: UN Tourism | World Tourism Organization © Data as collected by UN Tourism, May 2024. Published: 21/05/2024
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