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Tourism sector expects a strong 2024
Market commentary by eToro analyst for Romania, Bogdan Maioreanu
International tourism is expected to fully recover pre-pandemic levels in 2024, with initial estimates pointing to 2% growth above 2019 levels. But this forecast remains subject to the pace of recovery in Asia and to the evolution of existing economic and geopolitical downside risks according to the Tourism Barometer by United Nations Tourism (UNWTO). While for tourists it might mean higher prices and that they will see crowded airlines and packed popular destinations and beaches, for investors this is excellent news.
We created two equal-weight 15-stock BEACH baskets to see how these performed in the past 12 months compared with the global stocks. BEACH is an acronym of Booking sites (like Booking, Expedia, Airbnb), Entertainment (Disney, Live Nation Entertainment, Las Vegas Sands), Airlines (Delta Airlines, Ryanair, American Airlines), Cruise Lines (Carnival Cruises, Royal Caribbean, Norwegian Cruise Line), and Hotels (Marriott, Hilton, Intercontinental) stocks. One basket was for US-focused global players, the ones described above and another for more European focused stocks (from Amadeus IT to Accor). The exact composition is in the graph below. Both have outperformed global equities this year (+25%), the global BEACH basket gaining almost 56% and the European one 50%, even outpacing the high-flying NASDAQ-100 that rose almost 39% in the past 12 months.
The success of the BEACH stocks is related to the continuous recovery of tourism following the end of the pandemic. 2023 was a strong recovery year, International tourism receipts reached USD 1.4 trillion according to preliminary estimates, about 93% of the USD 1.5 trillion earned by destinations in 2019.
The trend of revenge vacationing after the claustrophobic lockdown marked 2020 and travel restricted 2021 is fading but continues to be active, according to a Deloitte study. In 2021, nearly half of summer travelers said the need for an “escape after lockdowns” motivated them to take trips.
But the revenge effect has declined steadily, and by the 2023 holiday season, just 11% said they were making up for missed trips. Most likely this decreasing trend will continue in 2024 but the Tourism professionals forecast a good year according to the latest UNWTO Tourism Confidence Index survey. 67% of tourism professionals indicated better or much better prospects for 2024 compared to 2023 with some 28% expecting similar performance.
Europe is expected to drive results again in 2024 with Paris hosting the 2024 Summer Olympics, shows the UNWTO barometer. Romania and Bulgaria joining the Schengen area of free movement with their airports and ports can boost the number of tourists arriving in our country.
For Romanian individual investors the good growth prospects of the sector are important as 36% of them declared that they are owning stocks in the Consumer Discretionary where tourism related companies are located, according to the latest eToro Retail Investor Beat survey. Also 5% of the investors are preparing to allocate more money to the sector during this year.
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Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
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