By ODDO BHF AM
In our new Fund Insight, we turn our attention to the tourism sector, which has been through difficult years. But due to the advanced Corona vaccination campaigns and pent-up travel appetite, the situation for the sector has improved significantly in the summer of 2022. Whether this boom will last in times of high inflation and geopolitical conflicts remains to be seen. Nevertheless, from an investor's perspective, it is worth taking a long-term look at the companies that could benefit from global tourism in a particular way.
1. WHICH COMPANIES ARE INVOLVED IN THE HOLIDAY BOOM?
Various industries are involved in the organization and operation of holiday travel. Many of these companies are also listed on the stock exchange. It starts with the booking. Traditional travel agencies/tour operators like the German TUI AG * have increasingly digitalized their business model. In terms of e-commerce, however, providers such as Booking Holdings* or Airbnb* are already "pure players", i.e. 100% digital. Transport to the holiday destination is often provided by airlines. Today, airport operators make a significant contribution by operating or allocating space to retailers who generate sales with snacks, travel accessories or souvenirs. Cruises are an alternative to traditional holidays with Carnival * and Royal Caribbean* as the best-known listed companies. Tourists are a lucrative clientele for restaurants but also for brand and luxury companies. LVMH * and Co., for example, profit very strongly from city tourism.
2. LONG-TERM INVESTMENT PROFILE OF THE TRAVEL AND LEISURE SECTOR
Despite tourism's recovery from the Corona crisis, investors in the tourism sector should be selective. Fundamentally, the travel industry is cyclically sensitive. In bad economic times, holidays tend to be less luxurious, people travel less, and trips are shorter. In addition, airlines and hotels usually must deal with high fixed costs, which makes profits even more volatile, not to mention high fuel prices in the current environment.
In the hotel industry, companies with a high franchise share offer a reasonably high stability of profit development. However, companies such as the online travel agent Booking Holdings* also offer structural growth (more online bookings, a broader range of bookings) despite all their cyclical sensitivity. The business model of luxury companies, which can count on a regular clientele with purchasing power in addition to tourism and are thus not only dependent on travelers, also appears attractive. Operators of shops in airports can also be interesting. The fixed costs are comparatively low, and while waiting for a flight to take off, most people get lost in one of the shops waiting for customers along the walkways in the airport.
