Harvest Portfolios Group

Post-pandemic travel recovery accelerates

August 25, 2021

Post pandemic travel recovery seems firmly underway as global vaccination rates rise and fear of travel eases.

Canada reopened its land border with the US on Aug. 11, which means fully vaccinated Americans can enter Canada and skip the 14-day quarantine. The American land border is expected to reopen for Canadians entering the US soon.

In another sign of easing restrictions, American’s visiting the UK with proof of vaccination in the US have been able to avoid quarantine since mid-August. That’s a huge boost for  UK tourism which in 2019 saw 4.5 million visits from the US according to figures from VisitBritain.

Heathrow Airport, considered the world’s busiest airport, reported it best monthly traffic in July since the pandemic began.  More than 1.5 million passengers went through Heathrow, up 74% from a year ago. That’s consistent with a report by the U.S. Transportation Security Administration (TSA). The TSA said on Sunday Aug. 1, 2.2 million passengers went through security at U.S. airports, the highest one-day total since the pandemic began in March, 2020

Even so, global air traffic is  well below pre-pandemic levels which suggests the recovery is in its early stages. Flightradar24 a global flight tracking service reports that in the first six months of 2021, 13.4 million commercial flights took off globally. While that’s 11% above 2020 levels, it is still a third lower than 2019.

Casinos and resorts were among the early areas to recover as they were able to move some of their gaming business online. They were also less dependent on international travel with many people able to drive to them. A recent article in the New York Daily News reports that the Atlantic City gambling waterfront has added new dining and  entertainment options to tap into the consumer rebound.

The cruise industry is also rebounding. Industry publications notes that dry dock activity has dramatically increased as cruise lines recommission their vessels in anticipation of  broad reopening.

Paul MacDonald, Chief Investment Officer at Harvest Portfolios Group Inc., said in a recent interview that travel has been one of the hardest hit sectors by the pandemic, but it also sets the stage for a strong rebound. A global vaccination drive provides the path to resume the industry’s long-term growth. High savings rates are acting as another tailwind.

Travel industry trends in place before pandemic remain intact, he says. Baby boomers are retiring and travelling. Millennials are looking for experience-related travel. They are comfortable using online booking sites which make travel more accessible and affordable for them. So, beyond recovery, the foundations for the sector are in place.

The potential plays to the strength of the Harvest Travel & Leisure Index ETF (TRVL:TSX), Canada’s first fully diversified global travel ETF which was launched in January 2021. The ETF is designed as a low cost effective way to capture rising demand for travel in the developing world and increasing leisure in the developed world.

The ETF has $181 million CAD in Assets Under Management[1] (AUM) is passively managed and follows the Solactive Travel & Leisure Index which tracks the 30 largest global travel-related companies by market capitalization.

The companies are listed on North American exchanges. As at the end of July, 2021, the principal sub-sectors of the portfolio consist of the following: Hotels, resorts and lodgings, make up the largest component at approximately 32%, followed by airlines (24%) – which includes Air Canada, casinos and gaming (21%), booking sites (14%) and cruise lines (9%).

The index is adjusted twice a year, with no one company at more than 10 per cent. The ETF’s management fee is 0.40 per cent.

For more on Harvest ETFs click here.

[1] As of Aug. 24, 2021

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