Please ensure Javascript is enabled for purposes of website accessibility

Why Travel Stocks Jumped Last Month

By Jeremy Bowman - Jul 9, 2019 at 12:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Expedia, Booking Holdings, and Marriott were all moving higher thanks to economic tailwinds.

What happened

Shares of travel stocks including Expedia (EXPE -6.02%)Booking Holdings (BKNG -2.66%), and Marriott International (MAR -2.45%) were moving higher last month as macroeconomic tailwinds boosted the sector. According to data from S&P Global Market Intelligence, all three stocks rose by double digits -- Expedia climbed 16%, Booking increased 13%, and Marriott gained 12%. 

The sector benefited from a softening stance from the Federal Reserve, which could encourage more consumer discretionary spending, and a thawing in trade tensions with China and Mexico, which should help boost the overall global economy.

A woman stands next to a window in an airport as a plane takes off.

Image source: Getty Images.

As the chart below shows, the stocks mostly rose in tandem throughout the month, gaining alongside the S&P 500, which added 6.9%.

EXPE Chart

EXPE data by YCharts.

So what

The biggest day in June for the group of stocks came on June 4 when Expedia gained 3.4%, Booking rose 5.8%, and Marriott tacked on 3.1%. The S&P 500 jumped 2% that day on words from China's Commerce Ministry encouraging negotiations, and comments from Fed Chair Jerome Powell, who said that he would be amenable to lowering benchmark interest rates if the trade tensions spilled over to affect the greater economy. 

Travel stocks tend to be more sensitive to economic signals because they are dependent on business growth and consumer discretionary spending, especially heading into summer, the peak travel time of the year.

Additionally, Booking surged on June 4 after getting an endorsement from a pair of investment banks. Goldman Sachs listed Booking among a dozen stocks that it saw as being well suited to outperform in an environment of uncertainty and trade tensions. Guggenheim, meanwhile, said that Bookings' listings have been growing, a sign that the company could top its own conservative guidance for the year.

Expedia did not receive any such upgrade last month, but the U.S.-focused online travel agency may be the biggest winner from changes in the macro outlook. The company is focused on expanding its campuses in Seattle and Austin, showing its commitment to attracting top talent. 

Marriott, the world's biggest hotel company, has caught the attention of investors as it's transitioned to an asset-light model through franchising, and focused on home-sharing and experiences in order to fend off competition from Airbnb.

Now what 

While Expedia, Booking, and Marriott are all affected by similar macroeconomic forces, the three companies are facing different challenges. Investors in Booking, whose biggest market is Europe, should keep an eye on Brexit-related turmoil as a hard Brexit, which has been delayed until at least October, could roil the British economy and that of greater Europe. 

Expedia, meanwhile, needs to show that it still has ample growth remaining in its VRBO home-sharing business, which also includes Homeaway, after gross bookings growth in the segment slowed to just 5% in the first quarter. Expedia has been focused on a rebranding of that segment under VRBO, which could help accelerate growth.

Finally, Marriott is seeking to stave off competition from home-sharing sites, and could also make another blockbuster acquisition, following its successful takeover of Starwood Hotels & Resorts. 

Through July 9, all three stocks have traded flat this month, underperforming the S&P 500, a sign that investors shouldn't read too much into last month's gains. Trade tensions and macroeconomic growth should continue to dictate the stocks' movements until we hear quarterly updates from each company in another month.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marriott International, Inc. Stock Quote
Marriott International, Inc.
MAR
$162.33 (-2.45%) $-4.07
Expedia, Inc. Stock Quote
Expedia, Inc.
EXPE
$123.85 (-6.02%) $-7.93
Booking Holdings Stock Quote
Booking Holdings
BKNG
$2,046.01 (-2.66%) $-55.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.