Join        Login             Stock Quote

Best In Travel And Leisure For 2010's Second Half

 August 04, 2010 10:33 AM

(By Warren Miller) As we begin the second half of 2010, the outlook for the travel and leisure economy is a bit more tenuous, as most indicators have reached pre-recession levels but are no longer on a strong upward trajectory.

Where Are We Now?

Consumer confidence is one of the most important leading indicators for the travel industry, and we gauge it using the University of Michigan Consumer Sentiment Index. Although the index has shown consistent year-over-year growth since May of 2009, the rate of growth has been slowing ever since March of this year, indicating that most of the gains in consumer discretionary spending are behind us. Still, confidence has reached pre-recession levels.

When consumers become more confident, it shows up in two ways. First, they tend to spend more. It's no secret that feeling safer about one's job reduces one's willingness to save and increases the desire to consume. But an often overlooked behavior that gives a nice boost to travel and leisure companies in times of increasing confidence is that consumers plan their travel and leisure purchasing decisions further in advance. That is, it feels safer to book a Caribbean cruise six months in advance when your job is secure than when you may be laid off in a week. This effect boosts cash flow for travel and leisure companies even though they can't recognize the revenue until the travel and leisure services are complete. For any travel and leisure companies in precarious debt situations--and there are many--this can be a lifesaver. In addition, earlier bookings give travel and leisure companies greater visibility into future demand, allowing them to plan purchasing decisions and operational expenses with more information.

It's also important to note why people feel more confident so we can be sure that the rug won't be pulled out from under the positive sentiment with a dip of the financial markets. Household net worth increased 2% sequentially from the fourth quarter of 2009 to the first quarter of 2010, and grew 13% from the first quarter of 2009 to the first quarter of 2010. This was the fourth quarterly sequential gain in a row. In addition, while unemployment levels remain at very high levels, the employment situation seems to have improved over the last several months.

So how have these underlying economic improvements affected travel so far? First, vehicle miles driven has significantly improved. According to the Federal Highway Administration, vehicle miles driven had increased 6% by May 2010 since the low in May 2009 (a marked improvement compared to the near free-fall this series saw in 2008). In addition, the Bureau of Transportation Statistics cites a near 10% improvement in air passenger enplanements worldwide since the low in February 2009.

Next Page >>123


Comments Closed

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Related Articles:

Recent Articles by Morningstar
More Articles on: Consumer Disretionary

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.