Abstract Aerial Art / DigitalVision via Getty Images
By Devin Ryder, CFA
According to Hopper’s 2022 Summer Travel Guide, more than half of Americans plan to travel for pleasure this summer, indicating a desire to return to the road. Most tourists they go on holiday or to see family and friends: 24% are traveling for the first time since the outbreak of COVID-19. With rising air and gas spending, more than half of Americans planning to travel for pleasure this summer plan to spend more than $ 1,000.
Air fares are rising
Domestic airfare has risen more than 34% from that time last year, averaging $ 383 round trip. The summer airfare is on track to reach a 5-year high, driven by rising aircraft fuel prices, growing demand and lower overall capacity compared to 2019.
Meanwhile, foreign airfare has only increased 2.5% from 2019, averaging $ 912 round trip. More specifically, airfare to destinations on Europe’s wish list will cost tourists an average of $ 868, which has not changed from last year; however, airline tickets to destinations closer to Mexico and Central America, as well as the Caribbean, have increased by 8% and 10%, respectively.[1]
Aircraft fuel prices, such as gasoline and diesel, fluctuate with crude oil prices. American Airlines (AAL) said in February that the price of aircraft fuel rose from $ 1.48 in 2020 to $ 2.04 in 2021; that’s more than a third. It was then estimated that each sustained one-cent price increase per gallon would add nearly $ 40 million to its fuel bill in 2022. During the first quarter of this year, American estimated that it paid between $ 2 million. $ 80 and $ 2.85 per gallon. Consumers do not seem to care about rising fuel costs and the resulting higher flight fares. Ed Bastian, CEO of Delta Air Lines (DAL), said Wednesday that despite having 10% fewer tickets available, March was Delta’s highest sales month, surpassing the 2019 record.[2]
Demand for summer travel
Demand for summer travel has continued to grow at a much higher rate than in recent years, according to Hopper, and has put even more pressure on ticket prices. Domestic travel search demand has expanded 50% faster this summer than in the first four months of 2019, with the biggest acceleration following the end of the COVID-19 omicron wave in February. Demand is expected to remain strong until mid-summer, when it will begin to decline seasonally in late August and September.
In fact, the summer of 2022 has been called the summer of “revenge travel,” a term christened to describe the urge to travel after long pandemics and pandemic restrictions. Americans are taking “revenge trips” to make up for lost time after two years of pandemic-related cancellations, offering more expensive tickets, better hotels and longer stays. Thus, travel remains a top priority for the discretionary spending of consumers who are fed up with staying home. The result is that “revenge travelers” are “more likely to try exotic places, spend more money on travel, or a combination of both.”[3]
A study by short-term rental data company AirDNA found that small / rural and destination / resort markets dominated 2020 and 2021, while 2022 is likely to see a return to large cities. Americans.[4] According to AAA, travel bookings for 2022 have started much better than at this time last year, and consumer confidence in travel is also increasing.[5] In addition, Expedia CEO EXPE Peter Kern predicts that the summer of 2022 will be “the busiest travel season in history.”[6]
Reduction of restrictions
Of course, summer travel will be reinforced by the reduction of restrictions around the world. As COVID-19 moves from the pandemic stage to the endemic stage, the International Air Transport Association (IATA) has called on nations to ease travel restrictions as soon as possible. The IATA recommended removing all travel barriers for those fully vaccinated with a WHO-approved vaccine, allowing quarantine-free travel for unvaccinated travelers with a negative antigen test result before departure, eliminating travel bans and speeding up travel restrictions. in recognition that travelers do not present a greater risk of spreading COVID-19 than the general population. Below are some recent updates related to international travel in a post-pandemic world.
EUROPE – The European Union Aviation Safety Agency (EASA) and the European Center for Disease Prevention and Control (ECDC) lifted the mask for flight and airport passengers on 16 May.[7] “For passengers and aircrews, this is a big step forward in the normalization of air travel,” said EASA Executive Director Patrick Ky. This update takes into account the latest developments in the pandemic, including vaccination rates and levels of natural immunity, as well as easing restrictions in a growing number of European countries.
Norway became the first European country to completely eliminate all entry requirements related to covid-19 in February.[8] Ireland, Hungary, the United Kingdom, Sweden, Poland, Denmark, Latvia, Slovakia, and Greece followed suit in March and April.[9]
SOUTH AMERICA – Latin American governments have lifted restrictions on travel rules and masks that had been in place for two years due to declining coronavirus infection rates. Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru and Uruguay are open to all travelers regardless of vaccination status. Brazil and Colombia require vaccinations before entry.[10]
ASIA – In recent months, most Southeast Asian nations have slackened Covid’s entry requirements. Thailand has stated that it will no longer require pre-departure vaccinations for vaccinated travelers, while Vietnam has removed quarantine requirements and post-arrival tests.[11] Malaysia dropped its mandatory testing requirement for all travelers vaccinated in April as the nation moves into the “endemic phase” of its COVID-19 strategy.[12]
However, China’s zero COVID policy remains strong, prolonging the country’s isolation from the rest of the world. Only foreigners with the right residence permits and visas can enter the country, and only under very strict conditions.
Conclusion
The economic impact of COVID-19 has affected all travel sectors around the world, from airlines and hotels to leisure attractions and online travel agencies. Travelers are already looking for opportunities to visit their favorite destinations, planning to make up for lost travel time. Growing consumer desire means many opportunities for return for the travel industry to recover from pandemic losses. Reducing restrictions and repressed travel demand are driving the industry, while rising fares are largely ignored by those who want to get back on the road.
Capture the cumulative demand for global travel and tourism with AWAY, the first ETF to offer investors access to leading technology companies at the forefront of travel booking, advice, price comparisons and shared travel.
Carefully consider the fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the fund brochure, which can be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or visiting www.etfmg.com/AWAY. Read the brochure carefully before investing. These companies may or may not be current holdings of the fund and are subject to change without notice.
The investment involves a risk, including the loss of principal. The shares of any ETF are bought and sold at market price (not the NAV), can be traded at a discount or premium over the NAV and are not exchanged individually from the fund. Brokerage fees will reduce returns. Investments with a restricted approach tend to show higher volatility. Technology companies, including those in the computer, telecommunications, and electronics industries, face stiff competition, which can have an adverse effect on profit margins. Technology companies may have limited product lines, markets, financial resources, or staff. The products of technology companies may face obsolescence due to rapid technological developments and the frequent introduction of new products, and these companies may face unpredictable changes in growth rates, competition for the services of qualified personnel and competition from foreign competitors with lower production costs. Companies in the technology sector are heavily dependent on patents and intellectual property rights. Loss or impairment of these rights may adversely affect the profitability of such companies. The fund is a diversified and recently organized investment company with a limited operating history.
ETF Managers Group LLC is the fund’s investment advisor.
The fund is distributed by ETFMG Financial LLC. ETF Managers Group LLC and ETFMG Financial LLC are wholly owned subsidiaries of Exchange Traded Managers Group LLC (collectively, “ETFMG”). ETFMG is not affiliated with Prime Indexes.
The fund is intended to be available only to U.S. residents. Under no circumstances is any information provided on this website intended to be distributed or used by, or to be an offer to sell or request an offer to purchase the fund or any investment product or service from any person. or entity of any jurisdiction. or country, other than the United States, where such distribution, use, offer, or application would make the Fund or its subsidiaries subject to any registration requirements or would be illegal under the securities laws of that jurisdiction or country.
[1] 2022 Summer Travel Guide – Hopper
[2] Fuel prices send higher fares, but travelers seem willing to pay.
[3] Revenge trip and where Americans travel
[4] Outlook AirDNA Report
[5] Bounce of traveler’s confidence; AAA travel bookings are stronger than this time last year
[6] The CEO of Expedia predicts “the busiest travel season in history” this summer
[7] EASA / ECDC take first steps to relax COVID-19 air travel measures | EASA
[8] Norway eliminates all entry requirements for tourists as the country returns completely to normal
[9] Countries without any travel restrictions or entry requirements
[10] COVID-19 South America – Travel Status (June 2022)
[11] Travel Restrictions in Asia: What Popular Destinations Are Reopening?
[12] Malaysia removes Covid tests for travelers, outdoor mask mandate
Original publication
Editor’s note: The summary peaks in this article were chosen by the editors of Seeking Alpha.