Despite the current economic climate and inflation concerns, a recent poll conducted by Morgan Stanley and AlphaWise revealed that a significant number of Americans are gearing up for summer travel. The survey showed that 60% of consumers are planning a summer getaway, with an even larger percentage of those earning between $75,000 and $150,000 (75%) and over $150,000 (78%) making travel plans. In fact, travel seems to be a top priority for higher-income individuals this summer, with many planning to increase their travel spending compared to the previous year.
According to Michelle Weaver, a team of analysts at Morgan Stanley, companies catering to wealthy consumers are likely to see significant benefits from this surge in summer travel. She points out that since the COVID-19 pandemic, there has been a noticeable shift in performance favoring businesses that target upscale clientele. This trend is expected to continue, with travel companies focusing on high-end consumers likely to outperform those targeting lower-income individuals.
One of the sectors poised to capitalize on the summer travel boom is the airline industry. Ed Bastian, CEO of Delta Air Lines, reported a strong demand for air travel, with record sales days recorded this year. Morgan Stanley analysts recommend premium airlines, citing the resilience and growth potential of the premium cabin segment. Delta Air Lines, in particular, is highlighted as a top pick due to its strategic focus on premium services.
In the lodging sector, luxury and upper-scale properties are experiencing higher revenue growth compared to midscale and economy accommodations. Companies like Marriott and Hilton, known for their upscale offerings, are expected to benefit from this trend. Marriott, in particular, has been leveraging its premium properties to drive revenue growth and is positioned to outperform competitors. Hilton’s stable revenue per available room and commitment to shareholder returns also make it an attractive investment.
While the cruise industry saw a resurgence in 2021, analysts are taking a more cautious approach to this year’s summer bookings. Cruise lines catering to higher-income passengers, such as Royal Caribbean and Norwegian Cruise Line, are expected to fare better than Carnival Corporation. The mixed performance of cruise stocks year to date reflects the uncertainty surrounding the industry’s recovery.
The summer travel landscape is shaping up to be driven by high-income consumers who are eager to explore new destinations and indulge in luxury experiences. Companies that cater to this affluent demographic, including premium airlines, luxury hotels, and upscale cruise lines, are well-positioned to capitalize on the increased demand for travel services. As the summer travel season unfolds, investors will be closely watching how these businesses perform and whether they can sustain their growth momentum in the months to come.