If there is one sector that is booming at the moment, it’s travel. After years of disruption, hotel companies, airlines, and other travel-related businesses are now enjoying very strong booking numbers.
However, tourism figures are still below pre-pandemic levels in many popular destinations.
The scrapping of COVID-19 restrictions is playing a key role in the resurgence of the travel industry. Recently, China opened its borders, unleashing a powerful source of demand. The return of Chinese tourists is set to boost the economies of many Asian countries. Thailand for example, is a favourite destination of Chinese tourists, accounting for 25% of total visitors in 2019.
Macao, which is often called the “Las Vegas of Asia,” is another major destination for Chinese tourists. Here, the local government recently revealed an ambitious target of 40 million visitors for 2023 as it seeks to rebound from the pandemic. This would be higher than the 39.4 million arrivals the city recorded in 2019. To encourage tourists to visit the region, Macao is planning to distribute 120,000 free air tickets this year in partnership with airlines.
China’s reopening should provide a further boost for Europe’s tourism industry, which is already quite buoyant. According to a new report by the World Travel & Tourism Council, the five most travelled Western European capitals — London, Paris, Berlin, Rome and Madrid — generated tourism revenues of $71 billion in 2022, just 15% below the figure for 2019. Areas of the European economy that should benefit as Chinese travel picks up include luxury goods and fashion. Chinese travellers could also provide a boost for African countries. In Africa, some countries have already surpassed pre-Covid arrival numbers and revenue levels.
It is worth noting that research firm Euromonitor International expects to see a “slow burn” in Chinese outbound tourism in the first quarter of 2023.
The expectation is that outbound tourism will gather speed from Q2 onwards, leading to growth in spending of over 400% year-on-year for 2023.
This significant increase in spending should provide a real shot in the arm for a lot of popular travel destinations.
The momentum across the travel industry can be seen in the recent results of travel companies. Airbnb, for example, just reported Q4 2022 earnings per share (EPS) of $0.48, nearly double analysts’ expectations of $0.25. Revenue was up 24% year-over-year. Tripadvisor also delivered better-than-expected results for Q4, reporting EPS of $0.16 versus the consensus forecast of $0.02. Marriott is another company that delivered strong quarterly results, posting Q4 EPS of $1.96 versus the consensus forecast of $1.83. It noted that it expects a 30% rise in 2023 revenue from China.
Those interested in gaining portfolio exposure to the travel sector may want to check out eToro’s TravelKit Smart Portfolio. This portfolio provides access to a range of different businesses across the industry. Other Smart Portfolios that provide exposure to the travel industry and may be worth a look include the LuxuryBrands and FashionPortfolio portfolios.
The capital markets in Europe play a significant role in the global economy. And recently, there have been a lot of concerns that a deep recession in Europe — caused by high energy costs — could have damaging economic effects worldwide.
However, there is one factor that could potentially help Europe to avoid a recession. That is the unusually warm weather during this winter.
The ongoing conflict between Russia and Ukraine has had major implications for Europe's economy, particularly in the energy sector. Russia is a key supplier of natural gas to Europe, and much of this gas flows through pipelines that cross Ukraine. Throughout the conflict, supply has been reduced. This has led to higher gas prices, which have threatened to derail the European economy. A cold winter (where a lot of gas would have been needed for heating) could have had a disastrous impact on consumer spending.
Luckily though, Europe has not had a cold winter. In December and January, the weather across the continent was generally very warm. On New Year’s Day, for example, Bilbao in Spain hit 25.1 degrees celsius while Warsaw in Poland hit 18.9 degrees. The high temperatures were caused by warm air coming in from Northwest Africa, according to the World Meteorological Organization (WMO).
Given the warm weather, gas consumption across Europe has been relatively low in recent months. According to the European Commission, in October and November 2022, it was 25% below the 2017–21 average. An increased focus on renewable energy has helped to keep gas consumption low. Recently, wind and solar energy (combined) overtook natural gas in electricity generation across Europe for the first time.
Thanks to the lower level of demand for gas, prices of the commodity have come down significantly, with the European gas benchmark, the Dutch TTF, trading at €50 a megawatt hour in February – below its pre-Russia-Ukraine war level. This, in turn, has brought inflation down. In January, inflation in the eurozone came in at 8.6%, down from 10.6% in October.
As a result of the warmer-than-expected weather, and lower gas prices, the EU is now predicted to narrowly avoid a recession. Currently, the European Commission is forecasting economic growth of 0.8% this year for the 27 EU countries, compared with a 0.3% projection last autumn when fears of winter power outages and a cost-of-living crisis were running high. “The EU economy entered 2023 on a healthier footing than expected and looks set to escape recession,” Paolo Gentiloni, the European Commissioner for Economy said recently.
Of course, it is still too early to know the full impact of the warm winter and the Russia-Ukraine conflict on Europe's economy and the capital markets. However, there are definitely some positive signs. And this is reflected in European stocks, which are doing well right now. This year, Europe’s Stoxx 600 Index has been one of the best-performing stock market indexes.
Those interested in gaining portfolio exposure to European stocks may want to check out eToro’s EuropeEconomy Smart Portfolio. This portfolio provides access to a range of leading European companies. Another Smart Portfolio that could be worth a look is NordicEconomy.