Strong dollar to boost travel abroad, Marriott

Published Mon, Jan 5 20155:30 AM EST

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

Bolstered by an improving U.S. economy, the dollar is once again growing strong enough to make a trip overseas attractive for Americans. "I don't think there's any doubt that a strong U.S. dollar coupled with lower fuel costs encourages more travel, both domestically and abroad," said John Caruso, senior market strategist at RJO Futures. "In recent past years this has been a major deterrent to U.S. travel abroad." Low oil prices have already encouraged more Americans to hit the road, benefiting Marriott and Wynn Resorts. Read More When gas prices drop, America goes on vacation Those and other travel-related firms outperformed the market in a historical analysis of stock performance when the U.S. dollar index rose more than 4 percent in a quarter, according to Kensho, a quantitative analytics tool. The dollar rose 5 percent in the last calendar quarter, extending a 7.7 percent gain in the third quarter of last year. On at least six occasions since 1980, Marriott International had a median return of 10.6 percent during the strong dollar quarter and the three months following, while its luxury real estate investment trust had a median return of 12.5 percent. Casino and high end hotel operator Wynn Resorts had a median return of 21 percent during strong dollar periods. Wyndham also benefited, with a median return of 6 percent. Read More 2015 travel hotspots: Cuba and…Russia? Airfare and hotel booking website Expedia had a median gain of 13 percent. U.S. residents traveling abroad tend to stay within familiar brands, meaning that a company such as Marriott that has locations in both Chicago and Paris would likely benefit, JMP Securities' Robert LaFleur said. However, he said that since international travel requires a certain income level, a 25 to 35 percent rise in the dollar would be a greater impetus for increased travel overseas. To be sure, a stronger U.S. dollar also has the reverse effect of making travel into the United States more expensive for foreign visitors. A strong dollar alone is not reason enough to buy the stocks, but a relatively stronger U.S. economy and a boost to consumers from low gas prices all solidify the investment thesis, analysts said. The U.S. dollar has risen more than 10 percent in the last year to a nine-year high and will likely rise further given the strength of the U.S. economy relative to global weakness. The international decline has also lowered accommodation and travel fees abroad, said IHS U.S. economist Chris Christopher. He pointed out that weakening economies in traditionally popular destinations such as Spain, Italy and Greece have resulted in travel deals for U.S. tourists already benefiting from a better exchange rate. Read More What's good for the dollar is good for US tourists "The momentum is on the U.S. side for travel aboard," Christopher said, highlighting Latin America and Asia as other growing destinations for American tourists. CNBC's parent NBCUniversal is a minority investor in Kensho.

A pedestrian walks past the Marriott New York Marquis hotel, Feb. 11, 2009.

Daniel Acker | Bloomberg News | Getty Images

Bolstered by an improving U.S. economy, the dollar is once again growing strong enough to make a trip overseas attractive for Americans.

"I don't think there's any doubt that a strong U.S. dollar coupled with lower fuel costs encourages more travel, both domestically and abroad," said John Caruso, senior market strategist at RJO Futures. "In recent past years this has been a major deterrent to U.S. travel abroad."