The Transportation Security Administration is expecting this year to be a busy spring break season. That opens potential plays in vacation-focused stocks and ETFs.
As reported by CBS News, TSA is expecting travel to increase by 5% from last year. From an airline-specific perspective, United Airlines is expecting this year’s spring break numbers to be record-breaking.
The forecast comes amid broad market uncertainty with inflation still relatively high, while geopolitical forces like tariffs are also adding to investor worry. Heading into the new year, uncertainty surrounding a new presidential administration could have been a potential roadblock for discretionary demand like vacation and travel spending. Nonetheless, the overall air travel volume appears to be picking up. The TSA also reported that 2024’s holiday season was the busiest on record.
“Demand for discretionary services came off the boil last month, perhaps reflecting rising anxiety among households about the new administration’s policies,” according to Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Another potential catalyst for an uptick in vacation and travel stocks is heavier business travel, which has been picking up after the pandemic. It appears more business transactions and meetings are starting to take place face-to-face as opposed to online. As reported by Marketplace, airlines also saw heavy business travel last year, which could spill over into this year.
“What we’ve seen is just a slow, "steady uptick in corporate travel activity,":https://www.marketplace.org/2024/10/11/corporate-business-travel-spending-is-set-to-exceed-pre-pandemic-levels/ which is to say, bookings through recognized corporate travel agencies,” said airline industry analyst Robert Mann.
A Potential Travel Play
If the holiday travel trend translates into increased revenue and profits for vacation/travel stocks, this could be a potential setup for the Direxion Daily Travel & Vacation Bull 2X Shares (OOTO ). The fund focuses on returning 200% of the BlueStar Travel and Vacation Index.
The index exposes traders to global commercial airlines, hotels, resorts, resort casinos, travel agencies, online travel booking sites, hotel REITs, cruise lines, theme parks, and ski resorts. Given this, its top three holdings include names like Walt Disney, Marriott, and Hilton (as of 12/31/24), which could see increased business activity during spring break.
With the fund’s use of double leverage, traders can look to amplify their returns with OOTO, especially if the fund maintains its recent upward trajectory. However, that amplification also applies to losses, so only seasoned investors should use these tactical strategies.
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