The Memorial Day frenzy is spreading! A record number of Americans are ready to hit the roads and skies to celebrate the weekend. And that means the summer vacation is going to be a crowded one.
Increased consumer spending, boosted by solid job and income growth, is prompting more number of people to plan a holiday that weekend. By the way, travelers will also get a lot of relief when paying for car rentals, airfares and hotels. This calls for investing in the travel space for attractive returns.
Memorial Day Travel Forecast
According to the American Automobile Association (AAA), a total of nearly 43 million travelers are expected to take a trip this Memorial Day weekend, marking the unofficial start to summer season. The Memorial Day weekend gateway will see the second-highest travel volume ever since AAA started tracking in 2000.
Nearly 37.6 million travelers, are expected to drive to their Memorial Day destinations, suggesting an increase of 3.5% over last year’s numbers. Higher gas prices, by the way, aren’t expected to deter travelers, with automobile travel expected to be the highest on record for the holiday period.
Gas prices have increased more than 30 cents compared to the last two months, and now the national average gas price is near the $3 per gallon mark. But, let’s admit such prices are still on par with last year’s level.
Americans are also choosing to fly this summer. Around 3.25 million (about 7.5%) are set to travel by air, which suggests an increase of 4.8% from last year. This will also be the second-highest air travel volume during the Memorial Day holiday period.
In fact, this summer, the industry trade organization, Airlines for America (A4A), announced that a record 257.4 million passengers are anticipated to take to the skies, up 3.4% from 248.8 million commuters last summer, which was a record high.
What’s more, on average, a solid 2.8 million Americans will be flying per day, especially from Jun 1 to Aug 31. And that is almost 93,000 more per day, compared to the same time last year. By the way, at the peak of travel period, between Jul 20 and Aug 10, it’s expected that nearly 3 million people will be flying on a daily basis. This will also mark the 10th successive year of an increase in passenger count during summer.
Other modes of transport during the weekend, including cruises, trains and buses, will increase 3.8% to 1.9 million passengers, respectively.
What’s Driving Travel This Memorial Day?
Paula Twidale, vice president, AAA Travel mentioned that Americans are willing to travel this Memorial Day on a rise in consumer spending, thanks to solid job and income growth.
Consumers increased spending in February and March, a sign that households were feeling confident about their well-being. Per the Commerce Department, personal consumption expenditure went up a seasonally adjusted 0.1% in February and 0.9% in March over the prior periods.
Spending is poised to improve further, given that payrolls jumped a solid 263,000 in April, per the Labor Department, and exceeded all expectations. Unemployment rate fell to 3.6%, a 49-year low, and average hourly earnings growth was unchanged at a healthy 3.2%.
Will it Cost Less to Travel?
While income is on the rise, costs are expected to reduce considerably this holiday weekend. Car rentals during this period will average $55, which is 7% lower than last year.
During this Memorial Day holiday period, airfares for the top 40 domestic flight routes are holding steady compared to last year, at an average price of $171 per roundtrip, according to AAA’s Leisure Travel Index. Travelers will also not have to pay higher lodging costs this year. The average stay in a Two and Three Diamond hotels will be 2% and 3% less than last year at $146 and $183 per night, respectively.
5 Top Travel Picks
Needless to say, rise in travel will benefit the travel and tourism industry, which calls for focus on travel and leisure stocks. We have selected five stocks from such areas with a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SkyWest, Inc. SKYW operates a regional airline in the United States. The company has a Zacks Rank #1. In the last 60 days, four earnings estimates moved north, with no movement in the opposite direction for the current year. The Zacks Consensus Estimate for earnings has moved 5.4% up in the same time frame. The stock’s expected earnings growth rate for the current quarter and year is a solid 11.2% and 14.9%, respectively.
Red Lion Hotels Corporation RLH operates as a hospitality and leisure company the United States. The company has a Zacks Rank #2. In the last 60 days, one earnings estimate moved north, with no movement in the opposite direction for the current year. The Zacks Consensus Estimate for earnings has moved more than 100% up in the same time frame. The stock’s expected earnings growth rate for the current and next quarters is a whopping 130% and 145.8%, respectively.
Wyndham Destinations, Inc. WYND operates as a vacation ownership and exchange company in the United States. The company has a Zacks Rank #2. In the last 60 days, five earnings estimates moved up, with no movement in the opposite direction for the current year. The Zacks Consensus Estimate for earnings has moved 1.3% up in the same time frame. The stock’s expected earnings growth rate for the current quarter and year is a promising 8.8% and 14.9%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Marcus Corporation MCS owns and operates movie theatres, hotels and resorts in the United States. The company has a Zacks Rank #1. In the last 30 days, two earnings estimates moved north, with no movement in the opposite direction for the current year. The Zacks Consensus Estimate for earnings has moved 5.7% up in the same time frame. The stock’s expected earnings growth rate for the current quarter is a steady 3.1%.
SeaWorld Entertainment, Inc. SEAS operates as a theme park and entertainment company in the United States. The company operates SeaWorld theme parks in Orlando, FL; San Antonio, TX; and San Diego. The company has a Zacks Rank #2. In the last 60 days, seven earnings estimates moved up, with one moving down for the current year. The Zacks Consensus Estimate for earnings has climbed 14.8% in the same time frame. The stock’s expected earnings growth rate for the current quarter and year is a superb 55.9% and 169.2%, respectively.
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