In what has been a tumultuous year for everyone, no industry has been hit harder than the travel industry. As the pandemic caused border closures and stay at home orders across the globe, the demand for travel plummeted and took travel stocks down with it.
But we know it won’t be like this forever. Survey after survey continues to prove that travel isn’t going away. In fact, a year spent at home seems to have created a pent-up demand for travel. People are eager to get back out there and travel responsibly. So how will this demand affect travel stocks in 2021?
Sometimes it pays (no pun intended) to think ahead. That’s why we partnered with M1 Finance, the all-in-one finance super app that Investopedia deemed the best for both low costs and sophisticated investors, to take a look at whether you should invest in travel stocks in 2021.
Reasons for optimism
After a tough year, the last few weeks have brought the travel industry a dose of some much-needed optimism.
First, news surrounds the long-awaited COVID-19 vaccines has been largely positive. After reporting that several of the major vaccines showed over 90% efficacy, manufacturers began requesting that governments approve them on an emergency use basis. So far, the UK and the US have both approved and began administering the Pfizer-BioNTech vaccine to select citizens this past week. To date, the UK has already vaccinated more than 130,000 people.
The market has clearly become more optimistic now that vaccines are being delivered. As a result of the vaccine rollout, Wall Street opened higher the following Monday as the travel industry, from airlines to cruise ship operators, saw their stocks surge. That rise in stocks definitely seems to be shared by consumers, as the vaccine news has also already led to a massive spike in travel bookings for 2021.
After taking several hits throughout the year, airline stocks seem to have risen after every piece of positive news about the vaccines, recently jumping as high as 16%. Of course, these stocks have all since come back down to earth but there seems to be a lot of confidence in the airline industry’s upside.
On the Monday following news of the vaccine approval and rollouts, stocks of major US airlines rose between 1.5% to 3%, with American Airlines leading the pack. Based on the current low stock price and the reasonable upside of such a high-quality company, some experts believe now is a good time to invest in American Airlines at a bargain price.
As for other airlines, domestic darling Southwest has also caught the eye of investors. Thanks to its focus on domestic flights and leisure over business travel, expert Larry Light believes that Southwest is the airline stock to own in a post-pandemic world.
Much of this confidence seems to have extended across the Atlantic and into Europe, as well. IAG, owner of British Airways recently climbed as high as 5.7% after news that the UK would reduce its quarantine restrictions for incoming travelers. Deutsche Lufthansa and Air France-KLM have seen surges of 6.1% and 12.2%, respectively, following the news.
Cruise line stocks
Despite a tough year, plenty of travelers seem to be eager to get back onto cruise ships in 2021 and beyond. Hundreds of thousands of people have already volunteered to be passengers on Royal Caribbean’s upcoming trial cruises. Meanwhile, Singapore citizens have been taking cruises to nowhere. Both of these seem to indicate that there’s still a great interest in cruises.
But is the market as confident about the future of cruises? It would appear so. This past week, major cruise ship operators Carnival and Royal Caribbean each saw rises in premarket trade to the tune of 4.7% and 3.1%, respectively. Similar to airlines, cruises have seen plenty of jumps since positive vaccine news began.
How to invest in travel stocks in 2021
Some experts say that it's time to buy low on travel stocks before they shoot back up to pre-pandemic levels. Others are taking more of a “wait and see” approach as the industry continues to bounce back. Whatever you decide, what really matters is that you’re using the right tools for investing. For this, we recommend the leading finance app M1 Finance.
M1 Finance is a free, all-in-one investing app that lets you do everything in one place. You can invest, borrow, and spend right from your phone. And you can get started completely free.
Best of all, Dollar Flight Club members receive $10 to invest when you sign up for M1 using this link. Join more than 500,000 investors already building their wealth through M1 and get started today for free!
M1 Terms and Conditions apply. Disclosures.
BY: ZACH ANDERSON, CONTENT MARKETING & FLIGHT EXPERT
Zach is a digital marketer, copywriter, and flight deal expert at Dollar Flight Club where he helps 1 million people travel more. As a digital nomad, he is deeply passionate about location independence, Thai food, and helping others see the world affordably.