Travel stocks have been one of the big losers during the global pandemic, with shifting restrictions and ongoing uncertainty making travel impossible or undesirable for both leisure and business travellers. In the US alone, travel spending dropped by 42% in a market where it would normally be expected to grow between 2% and 4% year on year.
As a result, shares in travel companies saw significant falls in their value.
2021: The Year Of Recovery
If 2020 saw the bottom fall out of the travel market, then much of 2021 saw travel companies in a bullish mood as the world slowly began to reopen. Artificially deflated values received a shot in the arm as the global vaccine roll-out opened up more of the world to travellers.
Just as confidence looked as if it was here to stay, the emergence of the Omicron variant sent travel stocks tumbling yet again.
As we head into 2022, the travel sector finds itself facing uncertainty. Are the current low share valuations across the sector artificial, or might there be even more trouble ahead?
Sector Volatility Creates Opportunities
The world’s escape from the pandemic is unlikely to be linear, with some sectors of the economy likely to see ongoing swings in confidence.
Travel is expected to see the most pronounced swings, with fear of the Omicron variant lessening but with much uncertainty still ahead.
This volatility will provide real opportunities for traders to make significant returns with well-timed interventions into the sector.
A Broad Market
While some travel companies hold significant assets, such as hotels, airports or planes, others are essentially tech companies.
The former are more likely to see significant shifts in value depending on how the pandemic and associated restrictions evolve.
As the northern hemisphere moves through winter into spring, confidence is likely to return as the sector opens up. The speed and scale of this opening-up process will impact share prices significantly.
One Eye On The Covid Data
As with the previous two years, well-informed traders will need to keep track of the Covid data as well as public health developments worldwide. Although vaccines should make 2022 a less volatile year, significant uncertainty still remains.