The 10 best travel stocks to buy now?

The 10 best travel stocks to buy now?
Let’s take a dive into the travel industry and look at companies hoping for a sky-high recovery.
George Sweeney
Published
September 22, 2022

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Airline stocks have had it tough over the past few years. Hotel stocks are in the same boat. Speaking of which, cruise line stocks have had a nightmare too. The whole travel sector has felt the full impact of a world in lockdown, which has pushed travel stocks down the wishlist for a lot of investors.

Investors looking for travel stocks to buy as potential recovery stocks haven’t quite seen the major bounce back some were hoping for either. But certain travel industry stocks do appear to be on a readjusted trajectory after Covid dealt a major blow to tourism, severely damaging even the best travel stocks and companies.

How to find the best travel stocks to buy

Before you start making decisions about travel stocks to buy now in 2022, it’s worth taking a quick step back to make sure you understand how the travel market works.

Travel and tourism is an ever-evolving industry. So it’s important to get a lay of the land before you dive into travel stocks. 

Global tourism has become a major sector as every corner of the world has become more accessible over time. With the increasing ease of travel, the positive effect on economies around the world and total global GDP (gross domestic product) has been notable.

Although it hasn’t been a perfect upwards trajectory, GDP contribution from the travel market has typically been trending in a positive direction. Of course, that was until 2020 when figures sank back down well below 2006 levels. 

Even with a solid understanding of the travel market, it’s still difficult to find the best travel stocks. It’s an industry that’s undergone plenty of changes over the years. At times, things can feel like smooth sailing, but an unexpected event like a pandemic can come along and blow all your expectations out of the water. 

So, when looking for travel stocks to buy, be prepared to get a bit wet and be aware that there’s likely to be some turbulence with whichever travel shares you decide on.

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Airline stocks

The airline sector was hit particularly badly by Covid, like birds in both engines kind of bad. According to OAG, the current total global airline capacity for domestic and international travel is just over 100m seats. That’s a lot of flying people, but it's a figure that’s down 13.2% from August 2019 to the same month in 2022.

2020 was obviously the most difficult year for air travel. The stats are improving with numbers ticking upwards, but airlines are still in recovery mode. 

The airline industry is one that already runs on tight margins, it’s all about volume of passengers and getting bums on seats. This has made recent years extremely difficult for travel stocks within this segment because it's not a high-margin part of the travel market. 

Reduced passenger numbers mean lower revenues and less profit. But, airline travel is gradually picking up, which is why some believe that certain airline stocks could be interesting plays as recovery stocks once the world is back running at full capacity.

Hotel stocks 

There are over 700,000 hotels and resorts across the world according to Condor Ferries. This part of the travel market was worth $1.52tn in 2019, that’s a lot of chocolates on pillows. Fast forward to 2021, just a couple of years plus one pandemic later, and Statista says this sector shrank to a measly $720bn in market size. 

Some hotels that cater to domestic travellers have managed to keep afloat, but hotel tourism stocks relying on international visitors witnessed a particularly tough time over the last few years. 

Stepping into many hotel lobbies and bars throughout 2020 and 2021 felt like some sort of scene reenactment from The Shining. Fewer kids on tricycles, admittedly, but just as eerily empty. 

In the US, the volume of hotels with a 60% or greater occupancy level is edging closer to 2019 figures. August’s occupancy stats were just 1% lower than the same week in August 2019. But, America is a country that’s big on domestic travel. With only about a third of Americans having a valid passport according to YouGov, these figures make sense. But hotels in other countries that rely much more on international travel are still suffering to a greater degree.

Booking and travel admin stocks 

Travel stocks can sometimes be easier to forecast than other businesses because of the forward nature of bookings. For most travel, whether business or pleasure, everything is booked, and usually paid for, in advance. 

Gone are the days when airline passengers would rock up to an airport and buy a plane ticket over the counter like they do in the movies.

The benefit of this is that we can get much more reliable data and information about where the travel industry is heading in the near future with forecasts based upon actual bookings rather than imaginary projections you may come across like when investing in tech stocks.

Travel and tourism accounted for 10.3% of the total global GDP in 2019. This then dropped down to 5.3% in 2020 and crept back up to 6.1% in 2021. 

Based on the current level of bookings, the contribution of travel and tourism stocks to global GDP is likely to remain below pre-pandemic figures in 2022 with international arrivals still 30% below 2019 numbers. 

Cruise stocks

This was one of the worst hit areas of the travel market during the coronavirus pandemic. For a time, it felt like you couldn’t turn on the news without hearing about a cruise ship that had become a Covid hotbed with whole ships being quarantined and the majority of services stopped altogether. 

After understandably sinking results in 2020, cruise travel stocks also appear to be floating back above the waterline with cruise bookings on the up. 

Worldwide cruise passenger numbers reached 27.5m in 2019, but this dropped to a desperate 7.1m in 2020. The number of passengers saw a massive increase to 13.9m in 2021, but this is still way off the typical standard of numbers this part of the travel market was reaching. 

Will travel stocks rebound in 2022?

The data across most areas of the travel industry is looking positive but many travel stocks have a long way to go before matching previous levels. Also, there are no guarantees that travel will ever be the same again. 

Although plenty of tourism stocks were growing in the pre-pandemic years, life as we knew it is different now. Fewer people are travelling for business, thanks Zoom. And, more people are deciding to staycation, thanks Airbnb

At the same time, showing we can broadly get by without business travel might be the evidence governments need to dissuade a return to a practice known for pollution. Throw in the cost of living crisis and we might not be as eager or able to travel as we were before 2020.

So it would be foolish to presume that Covid was just a blip and it’s a return to business as usual. There’s also the danger that we’re not completely out of the woods yet and it's not outside the realms of possibility that we could get struck with a continuation of pandemic troubles, or even a new completely unrelated pandemic. 

Unfortunately, it looks like a number of emerging markets and developing countries are some of those that have been worst hit and are finding it the hardest to recover. Many of these countries relied on international travellers and just can’t operate on the same level relying on domestic customers alone.

Top 10 travel stocks

If you’re looking for travel stocks to buy, it’s important to take your time because picking investments involves some legwork and finding the best travel stocks isn’t a simple task. 

For investors who want to know what travel stocks to buy now, it’s worth taking a look at what’s been popular in the past. After all, the stock market is forward-looking, so past data will give you some insight into possibilities for today.

Popular travel stocks aren’t necessarily the best travel stocks to buy. But, understanding past sentiment will give you some insights into the decisions of other investors interested in travel industry stocks. 

What we shouldn’t do is use backward-looking data to inform our present and future investment decisions. 

Here’s some data to show you some of the most-bought travel company stocks from the Freetrade platform in 2021:

10 most popular travel stocks on Freetrade in 2021
Company Ticker Description
The Walt Disney Company DIS The maker of Mickey Mouse and a tourism stock with diverse operations inluding hotels, cruises, theme parks, along with media networks and movie studios.
Airbnb ABNB A travel stock with a twist, this global rental marketplace allows people to rent out rooms and homes along with organising experiences.
Carnival CCL Offering cruises across the far reaches of the planet, this UK travel stock is the world’s largest leisure tourism provider.
Rolls-Royce Holdings RR Forget fancy cars, this company is a major builder of airline engines, making it an important UK travel stock.
Norwegian Cruise Line Holdings NCLH This travel company doesn’t just offer trips to Norway, it operates one of the biggest cruise line businesses in the world.
American Airlines AAL An OG of the airline industry, this travel stock has been around since 1930 and is the largest airliner on earth.
Booking Holdings BKNG A travel companies stock that owns major online travel brands such as booking.com, kayak, agoda.com, and OpenTable.
Wynn Resorts WYNN One of the most well-known gambling and tourism stocks based in Vegas owning a number of hotels and casinos in America and China.
Southwest Airlines LUV This travel stock is one of the largest low-cost airline carriers available and operates mainly in the US and Caribbean.
Expedia EXPE One of the largest travel company stocks owning major brands like Trivago, Hotels.com, and Hotwire.

Source: Freetrade 2021

US travel stocks

The majority of the popular travel stocks mentioned above are US-based, this includes some of the main tourism stocks like:

A big piece of momentum working in favour of some US travel stocks is the frequency of domestic travel within the country. This allows certain travel company stocks to perform, even against headwinds like restrictions on international travel. 

One business, in particular, that’s made waves in the US and abroad is Airbnb (ABNB). With a business model that can potentially benefit from both domestic and international travel, plenty of investors are asking the seemingly simple question - is Airbnb a good stock to buy?

Well, like with any stock market investment, there’s no clear-cut answer. On the surface, ABNB appears to be in a solid position as a recovery stock. But, when looking for travel companies to invest in, it’s important to keep in mind that making assumptions about the future never pans out exactly as you’d expect. 

America is also home to major cruise company Norwegian Cruise Line (NCLH), and popular travel company stocks like American Airlines (AAL) and Southwest Airlines (LUV). But, as we mentioned, popular travel shares aren’t necessarily the best travel stocks to buy. 

A good example is Marriott International (MAR). It’s a travel company that owns the third most hotel and resort properties, close to 8,000 globally. And, it’s the largest hotel and resort company in terms of market value, roughly $58.7bn in 2021. Yet these high accolades weren’t enough for it to make it into the most popular Freetrade stocks for 2021. 

This shows you need to look in lots of different places when searching for the best travel stocks. Make sure you use multiple resources and references when doing your research while looking for travel stocks to buy for your portfolio. 

UK travel stocks

Like with most sectors, the UK travel market is much smaller than America’s. This means there are fewer UK travel stocks with a global reach, but we still have some notable travel shares such as Carnival (CCL) and Rolls-Royce (RR).

There are also a number of well-known UK travel stocks that didn’t rank too well in terms of popularity like:

Investors looking for possible travel recovery stocks will have had keen eyes on the share prices of travel companies like IAG and TUI. Likely wondering if British Airways owner IAG can bounce back and eyes up to the sky asking - will TUI shares recover? 

Whether UK travel stocks are popular or not doesn’t have much bearing on their ability as recovery stocks. When you’re trying to find the best travel stocks to buy, it’s also worth making sure you’re not basing your decisions purely on share prices, this could lead you to become either too optimistic or pessimistic. 

Before you consider any potential travel companies to invest in, make sure you understand the business. Don’t just shove travel company stocks into your portfolio simply because they’re popular or the share price is downtrodden.

Travel and leisure ETFs

If you’re not confident picking individual travel stocks to buy, one possible alternative is to explore if a travel ETF might suit your needs.

Travel ETFs (exchange-traded funds) allow you to invest in a basket of travel stocks with a single investment. This is partly why this type of fund is sometimes considered one of the best investments for beginners. Two examples of this type of investment available on the Freetrade app include:

There aren't a great deal of travel ETFs available. So, it’s worth checking with your share dealing account first to see if you can access the particular travel ETF you want to invest in. Also, make sure you take the time to review any additional costs and fees that might be involved with certain funds.

It’s also worth remembering that, while a travel ETF will naturally give you a diversified exposure to the travel sector, that doesn’t mean all risks evaporate. In fact, if an external market force has a significant impact on the sector, like Covid, the benefits of diversification within the space won’t mean much. In that case, the ETF will likely face greater volatility than the broader market.

How to trade and invest in travel stocks

If you’ve considered the investment risks and weighed them up against the potential benefits of investing in travel stocks, here’s a straightforward step-by-step guide explaining how to invest in travel companies:

  1. Compare brokerage accounts to decide which one best suits your investing platform needs. Our investment fees calculator will help you understand the charges you could face.
  2. Open a stocks and shares investment account with your broker of choice. You might want to factor in tax efficiencies here. Think about whether a GIA, stocks and shares ISA or SIPP could help. Once you’ve decided, make your first deposit.
  3. Research the type of travel shares or outdoor stocks you want to invest in. That could mean an airline stock, cruise company stock, hotel booking firm, tourism stock, or travel ETF.
  4. Make sure the travel stock fits in with your overall investment strategy, diversification plans, and that the rest of your finances are in a healthy position.
  5. Select how much of the travel stock you’d like to invest in. You can buy fractional shares on the Freetrade app for US shares, so you don’t have to purchase a full share if it's outside of your budget, or you’d just like to start with a smaller investment and build up depending on its performance. 

For some more guidance, you can read our in depth guide on how to buy stocks and shares. Whichever way you decide to invest in travel stocks, make sure that you only use these shares to play a part in your diversified portfolio. 

As an investor, it’s extremely difficult to pick the travel industry stocks that will succeed in the long run, and this is especially true for travel stocks that have witnessed plenty of hard times lately. Many travel stocks are reliant on international travel picking up and we’re not quite fully back on track just yet. This is a good reason to consider the benefits of long-term investing when making your decisions.

Is this a travel stock rally?

If you look into most metrics evaluating areas within the travel market, you’ll likely see that the underlying business for most travel company stocks is improving. However, this is partly due to the fact that performances for tourism stocks have been pretty abysmal over the last few years. So, year-on-year results have an artificial shine because the starting point was so low if we’re comparing against 2020, or even 2021. 

This makes it hard to choose which travel stocks to buy now in 2022 because each travel company is going to have to keep on pushing with current momentum if it wants to continue building back towards pre-pandemic highs. But even with a down-to-earth travel stock, there are never any guarantees.

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Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio, and any income you receive, can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

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Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

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