The war between Russia and Ukraine disrupted the flow of air travel and tourism in Europe and Asia.
ETFs in the travel and leisure sector have entered emergency landing protocol as soaring oil and gas prices add more operational costs to airlines, hotels and cruise lines.
The war between Russia and Ukraine, largely responsible for rising energy costs, has also not helped industries after disrupting the flow of air travel and tourism in Europe and Asia. On the health front, China has again gone to war against the Covid-19 demon and quarantined more than 37 million people (CNN) after seeing an unusual spike in Covid-19 cases.
The strong headwind affecting companies in the travel and leisure sector has sent ETFs in this sector into the red zone, with average losses of -15% since the start of the year. Despite the crash, investors added $700 million to the ETF lineup – betting on a peaceful end to the ongoing war and a long-awaited final nail in the pandemic coffin.
Investors looking for a potential bargain in the travel and leisure ETF space can explore the US Global Jets ETF (JETS), Invesco Dynamic Leisure and Entertainment ETF (PEJ), and ETFMG Travel Tech ETF (AWAY ) – among others.
The JETS ETF seeks to track the US Global Jets Index and provides exposure to the global airline industry, including airline operators and manufacturers around the world. In terms of country exposure (as of December 31, 2021), US-based stocks dominate with 75%, followed distantly by Canada (4.85%), Japan (2.83%) and Brazil (2.22%). Airline securities represent 74% of the portfolio, transport infrastructure 12.86%, Internet 8.04% and the other 5%.
The main names as of March 15, 2022 are American Airlines group (10.53%), United Airlines Holdings (10.44%), Delta Airlines (10.29%), Southwest Airlines (9.85%) and JetBlue Airways (3.09%).
JETS has a total expense ratio of 0.60% and trades primarily on the New York Stock Exchange. JETS, PEJ, and AWAY attracted net inflows of $360, $98, and $28 million respectively in 2022.
Canadian investors can access the “air space” through the Harvest Travel & Leisure Index ETF (TRVL). The fund seeks to track the Solactive Travel & Leisure Index TR and invests in airlines, hotels, resorts, cruise lines, casinos and gaming, hotel and resort REITs and recreation facilities listed on a regulated stock exchange in North America. Major holdings include Marriott International (9.6%), Booking Holdings (9.3%), Airbnb (9.1%), Hilton Worldwide Holdings (8.4%), Expedia Group (5.6%) and Southwest Airlines (5.4%), to name a few.
TRVL has a total expense ratio of 0.40% and trades on the Toronto Stock Exchange.
European investors can invest in a basket of European travel and leisure companies through iShares STOXX Europe 600 Travel & Leisure UCITS ETF (EXV9), Lyxor STOXX Europe 600 Travel & Leisure UCITS ETF (TRV/TRVD) , and Invesco STOXX Europe 600 Optimized Travel & Leisure UCITS ETF (XTPS). EXV9 and TRV/TRVD seek to track the STOXX Europe 600 Travel & Leisure, providing exposure to Europe’s largest travel and leisure stocks. While EXV9 provides physical exposure, TRV/TRVD’s approach is synthetic. Invesco’s XTPS tracks a variation of the same index but offering a higher degree of liquidity for both long and short investments. Like TRV/TRVD, XTPS offers synthetic exposure.
Some of the companies included in these funds include Flutter Entertainment, Evolution Gaming, Accor, Entain, Intercontinental Hotels Group, Deutsche Lufthansa, Whitbread, Ryanair – just to name a few. EXV9, TRV/TRVD and XTPS trade on multiple European exchanges and have spend ratios of 0.46%, 0.2% and 0.3% respectively.
ETF provider HANetf also has two ETFs available in the European market: the HANetf Airlines, Hotels and Cruise Lines UCITS ETF (TRYP), and a European version of the US-based JETS ETF, the HANetf US Global Jets UCITS ETF (JETP). TRYP and JETP trade on several European exchanges and have expense ratios of 0.69% and 0.65% respectively.
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Investors are in favor of ETFs in the travel sector despite the headwind