Americans are sick of "staycations": this summer they're leaving the home and willing to spend for proper vacations. And travel stocks — hotels, cruise lines, and airlines — are reaping the benefits. July was a stellar month for the sector, which outperformed the broader market. The S&P 500 hotel index is up 15 percent for the month and the Amex Airline index is up some 12.5% for the month.
Bottom line: people are willing to plan ahead and invest in vacations. This is a contrast to last summer, when consumers were wary of spending and anxious to commit to anything too far in advance. Consumers are still watching their dollars, so they're searching for deals and good values. Another factor: gas prices rose slowly, so we don't have any sticker shock that keeps families from hitting the road.
Cruises are certainly profiting from hunt for value: AAA reports a 20 percent jump in its cruise bookings this summer from last year. A number of new mega-ships have hit the water, increasing capacity. And the cruise lines are offering just enough discounts to fill their new berths. Royal Caribbean shares are up 27 percent in July, bolstered by better-than expected earnings last week. Carnival stock is fifteen percent higher.
Hotels are benefiting from a return of both leisure and business travelers. Total hotel occupancy, a key indicator of travel industry health, grew 6.2 percent in the second quarter and continued to improve over the course of July, according to Smith Travel Research. Business travel recovered at an even faster pace. Corporate travel, as measured by mid-week daily occupancy, was up between 7.5 percent and 9 percent over the second quarter last year.
A number of hotel stocks soared this month: Wyndam stock is up over 25 percent, Starwood is up about 18 percent, and Marriott up some 12.5 percent.
Airlines have cut back capacity over the past few years, but this summer seats are packed. Travelocity says its summer airfares are up over 20 percent from last year, a sure sign of higher demand.
One area in the vacation space that's still suffering is vacation ownership clubs. JMP Securities reports that the vacation ownership business is currently running at about 50 percent of peak revenues. Starwood says it doesn't expect those trends to improve in the second half of the year.
Consumers may be spending again, but they're spending carefully, and buying a time share may be too big an investment for this cautious market.
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