Thanksgiving Travel To Be Busiest In 13 Years: Top 5 Gainers
Zacks Investment Research | Nov 21, 2018 06:51AM ET
Courtesy of an uptick in personal income and wages, traveling by car, train or plane is expected to be high this Thanksgiving. More Americans will hit the roads or take to the skies, a number that would surpass the levels of the past 13 years.
Given this near-term surge in travel demand, investing in travel and leisure companies will be judicious. As bulk of the travel is expected to be via road, rental car giants are surely poised to be among the biggest gainers. An uptick in travel during the holiday period will certainly boost airlines, while pre-tax profits of all major airlines are already on the rise. Another investment option is hotel and resort companies. More travel will lead to increase in hotel occupancy rate and in turn revenue per available room will scale higher.
Thanksgiving Travel to Hit 13-Year High
According to the American Automobile Association (AAA), about 54.3 million travelers are likely to travel 50 miles or more. This would be the highest since 2005. Thanksgiving Day weekend travel is anticipated to increase 4.8% from last year.
About 89.4% or 48.5 million travelers are expected to travel by car, indicating an increase of nearly 5% over last Thanksgiving. Modes of transport including cruises, trains and buses are expected to make up 2.8% of all travel this Thanksgiving, serving around 1.48 million.
However, the largest growth in holiday travel is by air. About 4.27 million travelers are expected to opt for flights, which is 5.4% higher than the year-ago level. Flights are expected to account for 7.8% of all travel this Thanksgiving.
(Source: American Automobile Association)
Airports to Be Busy, Pre-Tax Profits Up
Airlines for America (A4A), the trade group representing the interests of U.S. airlines, in fact, projected that 30.6 million passengers are expected to fly in the upcoming weekend, which is up from about 29 million passengers in the same period last year. The trade organization expects Nov 25 to see 3.06 million commuters on U.S. carriers. The next busiest day is expected to be the Wednesday before Thanksgiving — Nov 21.
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(Source: Airlines for America)
Collectively, all major airlines including Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United have already posted a healthy pre-tax profit of around $10.8 billion for the first nine months of this year. These publicly traded U.S. passenger carriers have recovered 68 cents in revenue for every dollar rise in operating cost during the said period.
Will Travel Get Costlier?
Gasoline prices during Thanksgiving are expected to reach $2.79 a gallon. Even though such gas prices are highest in four years, AAA gas price expert Jeanette Casselano said that “motorists have become accustomed to this year’s more expensive gas prices and won’t let higher fuel costs deter them from taking Thanksgiving road trips.”
At the same time, the average daily car rental rates are expected at $63, down 10% from last year, according to AAA’s Leisure Travel Index. This possibly explains the reason why so many Americans are willing to travel by road.
Travelers (NYSE:TRV), by the way, don’t necessarily expect sky-high airfares this holiday season due to a continuous drop in oil prices. Meanwhile, the average stay in a Three Diamond hotel is expected to decline 6% to $166 per night, while a Two Diamond Hotel will cost 6% higher this year at $124. The rise in prices, however, shouldn’t be a deterrent for travelers, thanks to an increase in wages and personal income.
What’s Boosting Travel This Thanksgiving?
Average hourly earnings increased to 3.1% in October from the same period last year, according to the U.S. Department of Labor. Thus, the increase in pay touched 3% for the first time since the end of the Great Recession in mid-2009.
Personal income increased 0.2% in September. Disposable personal income that measures the total amount of money available for use after payment of taxes also rose by 0.2%, according to the Bureau of Economic Analysis.
5 Stocks to Ride on Thanksgiving Rush
With the rise in income levels, people are willing to spend more on travel this holiday period. As travel volumes are expected to shoot up, investing in travel and leisure companies seems profitable. Increase in travel will surely lead to an uptick in demand for car rents, air tickets and hotel rooms. We have, thus, selected five such stocks that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Hertz Global Holdings, Inc. (NYSE:HTZ) operates car rental business. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for current year earnings soared 76% in the past 60 days. The company’s expected earnings growth rate for the next quarter is 10.8% compared with the Zacks Investment Research
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