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business newsTrendspotting: Investing in (Non Airline) Travel Stocks
By
Carol Kopp
May 11, 2010 9:30 am
Even if investors want to stay away from the trouble-prone airline industry, there are real reasons other travel stocks are looking interesting again.
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Can you think of any other legitimate investment that's as vulnerable to as many risks as the airlines? Volatile fuel prices, pandemic scares, the credit crisis in Greece, crazy guys trying to set fire to their own sneakers, and now a volcano. The possibilities for misfortune are infinite in their variety, beyond the recent recession that just forced people and businesses to cut back on anything but the necessities.
Even if you’re inclined to stay away from the trouble-prone airline industry, there are real reasons that other travel stocks are looking interesting again to investors. And a volcano or a national debt crisis might be a logistical nightmare for them, but it’s not a show-stopper.
The latest round of earnings reports from travel companies make it clear that Americans are on the move again, at least when the boss is footing the bill. Business travelers are back on the road at levels not seen since before the recession began in 2008.
And leisure travelers will follow, even if they have to watch which way the wind is blowing from Iceland in the coming months.
In fact, Americans may be staying much closer to home. While that gruesome “staycation” time is over, the top-10 destinations for American travelers this year all are in the US, according to a survey of travel agents reported on the blog Gadling.com.
The top destination is Orlando, possibly because nobody in America can escape the promotion for The Wizarding World of Harry Potter at Universal Orlando. Las Vegas follows closely, with plenty of all-inclusive deals still on offer. The rest is a list of all-American big-city favorites: San Francisco, Miami, New York.
Online Booking CompaniesOn May 5, Dow Jones reported that shares in online-travel companies Orbitz (OWW) and Priceline (PCLN) dropped sharply over worries that Iceland's volcano and Greece's debt problems would disrupt travel plans across Europe.
Surely we can think a little longer-term than that. The other side of that story is a better exchange rate on the euro and the pound, which ought to draw more American travelers, at least between volcanic eruptions. And leisure travelers, at least, can be flexible about where they travel to, avoiding problems in Greece, or Thailand, or wherever they happen next.
In fact, the online-travel business is getting interesting again. They made it through the recession, squabbling over what little business came in by cutting their fees. Now comes the real test: not just who will do better in the months ahead, as Americans schedule their summer vacations, but who will do best internationally, where there's more room to grow an online travel business.
Priceline reported Monday that it nearly doubled earnings in its first quarter. But its stock promptly sank after hours, due to its conservative outlook for the current quarter. The company apparently is worried, too, about international events, and also about its ability to impress investors when the year-over-year comparisons aren’t as easy to beat as the last one.
No positions in stocks mentioned.
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