Europe And The Travel Industry... What It Means
The Dynamic Wealth Report
July 26, 2010
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?
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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.
• Brewing Industry (Up 4%)
Who’s to argue… people love their beer. Despite the recent market
turmoil, the brewers are managing to move higher. Companies like
Craft
Brewers Alliance (HOOK) and Boston Beer (SAM) are leading the industry
higher.
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