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Travel demand set to take flight

Lex Hall  |  26 Mar 2021Text size  Decrease  Increase  |  
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The permission to shed our covid masks from Monday coincides with the deluge of ads exhorting us to travel again. “Come to Adelaide!” “Fly to Perth for $159.” It’s a far cry from the situation a year ago when the idea of travel was reduced to a brisk walk around the block. Sadly, that’s still the case in parts of Europe but there are more positive signs elsewhere. 

Two voices of optimism this week are Morningstar’s Dan Wasiolek and that plain-speaking Englishman Marcus Padley. Both expect that the travel market will fully rebound from the global pandemic demand shock.

“After demand shocks like 9/11 and the great financial crisis, travel demand made a full return to prior levels in three to four years,” notes Wasiolek. “While COVID-19 is different from past events because of its global reach, we think travel-related companies could still recover at a similar pace.” Bon voyage, indeed.

But while Wasiolek sees expansion ahead for the big operators such as Airbnb, Booking.com, TripAdvisor and Expedia, he sees a threat from, you guessed it, the tech titans: Google, Amazon and Facebook. TripAdvisor, in particular, faces higher competitive challenges as Google’s metasearch platform competes more directly with around 60 per cent of TripAdvisor’s business.

Wasiolek foresees Amazon entering the global travel market via a metasearch product, which creates a similar competitive risk as Google’s platform. Amazon has had several goes at a travel-related pilot but has withdrawn without saying why. They haven’t given up, however. “Although a more complete Amazon travel platform might be a few years away as the company focuses on building out its apparel, grocery, home furnishings, and pharma presence, we think it’s a matter of when, not if, it occurs,” Wasiolek says.

And don’t forget Facebook, that receptacle of holiday snaps for 2.7 billion-odd people. The social network has the potential to moonlight as an indirect marketing channel for Booking, Airbnb, and Expedia and a competitor to TripAdvisor’s hotel metasearch offering, according to Wasiolek.

As for local names, travel could benefit from a “tidal wave” of demand, says Padley, who this week nominated the sector as an investment theme to watch in the next few years.  “The chances are that companies like Qantas will one day look back at the pandemic and thank their lucky stars,” Padley told Firstlinks this week. “It obliterated the competition and ingrained their market dominance. The share prices of companies like Flight Centre (ASX: FLT), Webjet (ASX: WEB) and Qantas (ASX: QAN), will, one day, recover and improve. But it will take years. That’s why nobody buys them, and that’s why you should.”

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Speaking of Firstlinks, it published its 400th edition this week, and it’s one you don’t want to miss. Hamish Douglass, Jun Bei Liu, Phil Ruthven, and more than 40 others, reveal where they see opportunities. Hand also hears from demographer Bernard Salt on the ramifications of the baby boom population transitioning from working age to retirement.

Elsewhere, we welcome new reporter Lewis Jackson, who begins by speaking to Morningstar analyst Angus Hewitt on the Crown takeover offer. The bid by US private equity firm Blackstone is low, and the company must prove it can operate the licence for the narrow-moat gaming giant, says Hewitt.

A few years ago, financial experts said cryptocurrency was nonsense, but flash-forward to now and some of them are saying you should have 1 per cent to 2 per cent of cryptocurrency in your portfolio. Kristoffer Inton explains the how, what, and why of crypto.

You’re going to be hearing more about inflation, deflation, disinflation, and stagflation. Carole Hodorowicz explains what they mean.

Morningstar’s Ali Masarwah divulges five things you never dared ask about the US "tech champions index”, the Nasdaq 100.

An absolute return fund aims to seek returns in all weather. Kristiaan Rehder from Bennelong Kardinia Capital explains how.

Trading app Robinhood is about to go public. Margaret Giles outlines what you need to know about how the trading app makes money, its competition, and its growth potential.

Emma Rapaport talks to Morningstar's Matthew Wilkinson and Christine Benz about rising bond yields and their effect on your portfolio. Amid a fall in high-growth names and a mooted return to normal, now is a time to check your asset class mix.

Small caps set to shine as Australia emerges from recession and earnings expectations are now back to near pre-COVID levels, writes Nicki Bourlioufas.

We talk to SG Hiscock’s Grant Berry, who singles out three big dividend-paying contributors to the SG Hiscock Property Income Fund.

And in Your Money Weekly, Peter Warnes explains why the massive stimulus in the past 12 years has been the root cause of deflationary pressure. The key to unlocking inflation, he argues, is the velocity of money. “The seemingly immovable central bank cabal has dug a channel in the sand and is convinced any post-pandemic inflation will not morph into something more persistent and that bond yields will roll back.”

Morningstar's Global Best Ideas list is out now. Morningstar Premium subscribers can view the list here.

See also Morningstar Guide to International Investing.

is senior editor for Morningstar Australia

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