Sector Bird’s Eye View: Travel & Leisure

 

What is it?

The travel & leisure sector is populated by companies involved in travel, tourism, hospitality, including restaurants and leisure services. Types of companies covered include travel agents, guided tour companies, online agencies along with entertainment, sports, and recreational activity providers.

Why is it important?

Travel and leisure represents an important component of any country’s economy, especially in emerging markets that focus on development through tourism. This sector comprises some of the largest and most recognisable companies in the fast food, recreation and travel category, making it a very popular sector with retail investors. 

Popular Participants

  • Restaurants: McDonalds, Chipotle
  • Hotels: Hilton, Marriott
  • Travel: Trip Advisor, Tui Group
  • Airlines: American Airlines, SouthWest, Delta

Popular ETFs

  • iShares STOXX Europe 600 Travel & Leisure
  • Powershares Dynamic Leisure & Entertainment 

When does it do well/badly?

This industry is fuelled by consumers’ disposable income, which means it is very sensitive to interest rates and foreign exchange. Lower interest rates means consumers will have more money to travel and spend on lavish hotel rooms and recreational activities. Moreover, a weaker domestic currency is also an enticing factor for countries that depend on foreigners for a large portion of their revenue. 

Why should I invest? 

The travel and leisure sector can often make up a valuable portion of your portfolio’s foreign risk component and provide some solid returns over time in growing emerging nations. Many of the brands, such as McDonalds, are highly recognizable and familiar to retail traders, which makes them a good choice to invest in as people tend to have a solid understanding of their product line and how they might perform going forward. 

 

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