Europe And The Travel Industry… What It Means
Last week I returned home from my European vacation. As you’d expect, I was never far from the business section of the newspaper… or CNBC Europe. I touched base with the markets, but for a few days I successfully checked out.
Interestingly, I gained a new perspective on some things.
Let me give you an example…
Up till now, I knew the Travel & Tourism industry was recovering. However, I always viewed it as a tentative recovery.
Now my opinion’s totally changed.
While in Europe, I uncovered a little bit of news.
Often it’s little things signaling a bigger shift in economic activity. And this was a perfect little piece of the puzzle falling into place. Find enough of them and you start seeing a trend.
What caught my eye and got me thinking was the latest news on the Eiffel Tower.
Specifically, the Eiffel Tower reported a 3.2% increase in visitors from the first half of 2010. Now, I realize attendance numbers for the Eiffel Tower aren’t market moving events. Often statistics like this are overlooked…
For some reason, the idea kept bouncing around in my head.
I started thinking more and more about Travel & Tourism. I wondered…Could this be an early sign of an industry-wide recovery?
France, as you may know, leads the world in tourism. Paris is a very romantic place. According to the World Tourism Organization, more than 75 million people visit France every year. If The Eiffel Tower is seeing a rebound in activity, France probably is too.
I started digging into the details. I soon found an important clue. Las Vegas, arguably one of the top US destinations, is seeing a similar increase in activity.
According to the Las Vegas Convention and Visitors Authority, visitor numbers are up more than 1.2%. The figures are as of May (the latest data available). It’s nothing to write home about, but it’s a start.
So I continued digging.
I uncovered another clue. This time it was in the cruise industry. The Florida-Caribbean Cruise Association is estimating the cruise industry will grow over 6.3% in 2010.
Sensing I was onto something, I kept looking around for more evidence.
Later that week I found myself renting a car. Unbelievably, the entire fleet was rented out… I couldn’t upgrade or change the type of car I wanted. I heard the same response from a few other rental agencies.
At this point, I became a believer. And I kept finding even more proof.
On the airplane ride home, I noticed our flight was at 100% occupancy. Other flights started waiting lists. And the airports were crowded with people. I clearly wasn’t imagining things either… United Airlines (UAL) just announced revenue per passenger flown is up 27%.
I dug a little deeper.
Passenger load factors for the airline industry overall are up to just over the 81% level… higher than a year ago. And expectations are for the growth to continue.
All of this data means one thing and one thing only… Travel & Tourism activity is exploding higher.
I’d love it if there was a “Travel & Tourism ETF”, but unfortunately none exists.
As a result, I took a closer look at a few individual companies.
Like Avis Budget (CAR), a rental car company. They rent out more than 350,000 cars worldwide. With a billion dollar market cap and improving financials, they have lots of room to grow.
I also found Carnival (CCL), the cruise line company. They operate 88 different ships and are valued at just over $24 billion. They even pay a small dividend on their stock.
As activity in the Travel & Tourism industry builds, companies like these will gain pricing power. That means stronger revenue and earnings… and eventually a higher stock price.
Hotels and casinos are two other areas to look at. However, I’d stick with the bigger players. As for the airlines… “Just say NO!” Don’t waste your time. The economics of the airline industry don’t make sense and they’re practically guaranteed to lose money.
Category: Foreign Markets
