The rise in leisure and travel stocks highlights a shift in consumer spending from goods to services as the pandemic winds down.
"We see signs of goods demand cooling, particularly in big ticket items, while services benefit from strong pent-up demand," Savita Subramanian wrote in a recent BofA Global Research note.
Case in point, airlines such as United (UAL) and American (AAL) predict reaching profitability amid strong demand. Luxury hotel operator Marriott International (MAR) has been touching new highs recently. The stock is up 13% year-to-date.
Fast food chain giant McDonalds (MCD), which will report its quarterly results next week, is up 15% since March 10, though year-to-date it's still down 4%.
Dave and Buster's (PLAY) is up 23% year-to-date, outperforming the broader markets. Jeffries analyst Andy Barish recently reiterated his Buy recommendation on the restaurant/entertainment company, setting a $60 price target.
On a local level, restaurants are serving more people, even as inflation hits multi-decade highs. Review platform Yelp (YELP) says users are mentioning higher prices but they continue to search for high-priced eateries as municipalities drop mask mandates.
"This pent up demand is also evident in the surge of new business openings in nightlife, beauty, and travel and hotels, which all increased from 2021 levels in Q1. Consumer behavior and business activity suggested favorable economic conditions for local businesses in the first quarter," said Pria Mudan, data science leader at Yelp.
The latest personal consumption expenditures (PCE) report from the U.S. Commerce department reflects a trend which economists had been predicting. The PCE print showed February’s $34.9 billion rise in spending was due to $93.8 billion for services, which was partly offset by a $58.9 billion decrease in spending for goods.
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