Travel stocks continue to suffer, despite signs of industry recovery

Holiday booking companies On The Beach and TUI are among the worst performing travel stocks this year.

Saxo Markets’ equity-themed travel basket is the investment platform’s worst performing basket over the past five years, losing almost 8% since 2017.

This themed basket consists of 40 equities, or stocks, which contribute to the travel industry through different means.

In this example, Saxo Markets hold shares in both airline Ryanair and Tripadvisor, the online booking platform. As a result, this basket should mimic the movement of the travel industry, with all changes recorded by Bloomberg and the Saxo Group.

Even though the travel sector is showing signs of recovery from the COVID-19 pandemic, much of its underperformance is due to the pandemic, according to Anaam Raza, Head of Investment Platforms at Saxo Markets.

“[Travel Companies] now face a different challenge in managing rising costs, with the potential of a recession at the end of the year set to have an impact on holiday bookings for 2023 as consumers begin to hold back on non-essential spending,” she said.

Of the equities in this themed basket, On The Beach and TUI were two of the worst performing holiday booking companies, losing 62% and 73% of their respective values over the past five years.

Over the same period, American airlines Delta and Southwest shared similar losses, close to 40%, and it could get worse for other budget air travel providers.

“An increase in fuel prices and environmental charges will likely hit budget airlines, such as EasyJet and Ryanair, harder than others with prices for ‘cheap holidays’ likely to increase to help balance costs and lower demand,” Raza explained.

Over the past five years, Saxo Markets’ equity-themed commodities basket delivered one of the most consistent returns.

During this period it returned just over 120% of its value, and in the year to date it is the most profitable of Saxo Markets’ baskets, delivering just over a 15% return.

Much of this dominating performance this year is due to the war in Ukraine, which has created a demand for commodities.

“The Ukraine crisis has extended the bull-run in commodities dominated by oil and gas as the European Union aims to become independent of Russian energy. The unfortunate rising risk of a global food crisis means that food commodities have also increased in price recently,” Søren Otto Simonsen, Senior Investment Editor at Saxo Markets, explained in April.

In addition to commodities, defence-based stocks are also on the rise due to the Ukraine crisis. Last week the FTSE 100, Britain’s stock exchange, was briefly bolstered after investors expected greater demand for defence-based stocks.

“The expectation is that spending on defence will take a much larger slice of government budgets going forward. With commitments to rapidly increase the number of troops on alert, military hardware requirements will be higher and that’s helping lift the share price of defence contractors,” explained Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown.

By contrast, Saxo Markets’ equity-themed crypto and blockchain basket plummeted over the year to date, losing almost 69% of its value.

While it did briefly outperform other baskets last year, it has also lost 30% of its value in the month to date.

Crypto brokers, mining and exchange providers are just some of the companies included in this basket. 

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