Although infections have resurfaced in various regions of the globe, the tourism industry has been on the mend since the middle of last summer. As more and more individuals have been vaccinated, travel restrictions had begun to relax as a result until the latest Omicron variant was announced.
Speaking to CNBC news, Citi analyst James Ainley, the head of travel and leisure research, discussed those very same industries amid the effects of the latest Covid variant. Sounding constructive on the sector as a whole, Ainley was asked what are the best opportunities to which he responded:
“Well, I mean, I think if you look across the hotels and leisure sector, there are some strong some strongly improving trends. I mean, the cruise lines are is an area that we think is very interesting; it’s been left behind in the early stages of the recovery, but the data we track is starting to look much more positive.”
Will the travel sector be hit hard?
Besides, when asked whether the whole sector is going to get hit on the chin today very aggressively and whether this means there is an opportunity to buy or do we need to stand on the sidelines given the volatility in the travel and leisure sector.
The Citi analyst stated:
“What I would say is it’s been very clear pent-up demand. If you look back over the last summer when people had the ability to travel, they went out and traveled; you know the trends that we saw, particularly in domestic hotels, have been really really strong.”
Considering the most recent issues with the Omicron variant, the analyst noted that t’s undeniable that it will influence people’s sentiment, but added that we’ve been in this situation before, with the Delta variation, and overcome it.
Questioned whether, every time there is a partial closure in this sector, are some of the companies, who had believed they’d seen the worst, perhaps creaking under the weight of their financial fundamentals at the moment, producing further debt and stress.
“Well, I think you know a lot of that has been resolved. If you look back over the last year you’ve seen a lot of capital raises, and the companies we cover, I think, have largely patched up their balance sheets. There there are one or two exceptions, but largely a lot of that work is done now,” Ainley said.
Cruise lines prone to volatility
In general, the cruise line industry is a sector that is prone to extreme volatility. When compared to airlines, cruise companies are somewhat less adaptable and have higher levels of debt.
As a result, we recently added cruise lines as one of three crucial stock sectors to watch amid the Omicron variant setback and some of the stocks worth keeping an eye on in that particular industry.
Watch the video: Cruise lines looking much more positive for investors