“Millennials are killing napkins!” “Millennials are killing mayonnaise!” “Millennials have killed the shopping mall!” If the media is to be believed, millennials are killing off industries that produce and sell material goods. Instead, they are interested in experiences, such as traveling to visit the best cities in the world and create memories. Instead of bemoaning this fact, invest in the travel industry.
Hotels
The first option is to invest in hotels. I’ve covered hotels before, but it’s vital to look at trends. Is one hotel chain more popular than the other? Which hotels are owned by the same parent company? Are there specific, smaller hotels not associated with a chain in popular tourist areas that you might be able to invest in? Answering these questions is key to choosing the right hotel.
However, there’s one new consideration: customer information. Marriott just acknowledged that up to 500 million guests had their information leaked. It would probably be best to avoid Marriott stocks, at least in the short term. When it comes to data breaches, however, it seems the public’s memory is short, and long term, the hotel giant is unlikely to suffer — in America. Under European laws, they will probably face fines.
Alternative Lodging
Hotels are not the only lodging options available. While there are hostels, as well, there is also Airbnb. Though they are not currently publicly traded, CEO Brian Chesky noted they would be ready in 2019 to consider an IPO. It is not a sure thing, however. The company announced in February that Airbnb is profitable.
Airlines
In 2016, Warren Buffett’s Berkshire Hathaway group invested more than a billion dollars across Delta, American, and United Airlines. International travel is on the rise, meaning more people will fly.
American is suffering. While they had a strong 2017 and start to 2018, their stocks have been crashing. Delta has been a roller coaster and is currently climbing. Southwest has also suffered ups and downs but is currently recovering from a dip. United, however, has been mostly trending up. Part of the reason for the dips is oil and fuel prices — which might be their own interesting investment.
The major metric you need to know is passenger revenue per available seat miles (PRASM). It is, essentially, the pricing power of the airlines. PRASM growth is a positive signal and is a sign you should invest.
Online Travel Providers
Online travel providers (OTAs) like Expedia, Trivago, TripAdvisor, and the Bookings Holding Group (owners of companies like Priceline and OpenTable) long ago replaced travel agents. While there are still uses for travel agents, especially for businesses looking to procure travel for employees, the public generally use OTAs.
These services provide an easy way to find and reserve a hotel, rental car, or even a seat at a restaurant. Analysts told Forbes in March that they expected OTAs to continue an upward trend, and they have, so far, been correct.
Cruise Lines
Finally, there are cruise lines. This industry is, in a word, volatile. CNBC reported the three major cruise lines, Norweigen, Royal Carribbean, and Carnival, were among the worst performers in the S&P 500 last year. They all fell by at least 4 percent.
While the orders of beds was at a record high of 244,000, a 45 percent growth to 2025, the industry would need demand to grow by 7.5 to 9.5 percent annually to have 2 to 3 percent yield growth. Morgan Stanley’s Jamie Rollo told CNBC that, historically, demand only grows by about 6 percent, so a 7.5 to 9.5 percent growth in demand is “optimistic.”
There are plenty of ways to get in on the travel industry. The key is to look at all the factors surrounding your chosen facet of the industry. Is there demand? What is affecting the price to the consumer? Where are people traveling to, and what type of accomodations are they staying at when they get there? In the end, while some parts of the industry are volatile, others are still very much worth the investment.
