Travel and tourism stocks may be set for an Indian summer, according to JP Morgan Cazenove, as its analysts found that tourists are getting ready to travel again.
A survey of travellers conducted by the US bank found that the next three to six months will still be challenging for the sector but suggests cause for optimism beyond that.
At the same time, research conducted by Perspectus Global claimed close to a quarter of Brits have gone against government advice and booked trips to ‘amber list’ countries. Some 40% of people polled said they need to get away for the sake of their mental health, and 27% said they were fully vaccinated and saw no reason not to travel.
In its own research, JPM Cazenove surveyed 1,071 individuals, 51% of which had received at least one vaccine dose, and some 20-26% of them plan to fly in the next three months (before the end of August).
Around 38% of those surveyed still have significant concerns about Covid whilst travelling, though JPM notes that this marks a reduction from 48% back in February. The requirement to quarantine was the number one concern (given by 52% of respondents).
Most people, however, said that their travel plans for 2022 will be similar to their behaviour back in 2019.
Moreover, the survey saw greater appetite for the resumption of business travel than the broker had anticipated and less enthusiasm for virtual meetings than in the February survey.
JPM gave its ‘top picks’ in the travel sector with IAG, WizzAir and Whitbread among the notable inclusions.
British Airways owner International Consolidated Airlines Group (LON:IAG) is marked with an ‘overweight’ rating as JP Morgan describes it as a “strong cost reduction story with a potential upside surprise”.
Wizz Air Holdings PLC (LON:WIZZ) is also seen as ‘overweight’ as JP Morgan says it has the strongest multi-year growth story, plus good liquidity in its shares.
Rival low-cost airlines easyJet Plc (LON:EZJ) and Ryanair are both rated ‘neutral’ as the former offers disappointing structural cost savings and it says the latter carries risk and onerous shareholder restrictions.
Airport and railway station food outlet firm SSP Plc (LON:SSP) is another stock tipped by JPM with an overweight rating, with the analysts saying that the company is well-positioned to face prolonged travel headwinds after its rights issue, despite its share price weakness, and the survey is the most supportive to SSP.
Premier Inn owner Whitbread PLC (LON:WTB) is meanwhile deemed to be more immune to travel uncertainty and a defensive business mix.