Travel & Leisure ETFs see the blows and the flows

Travel & Leisure ETFs have entered emergency landing protocol as soaring oil and gas prices add more operational costs to airlines, hotels, and cruise lines.

The Russia-Ukraine war, which is mostly to blame for rising energy costs, didn't help the industries either after disrupting air travel flow and tourism across Europe and Asia. On the healthcare front, China entered the war again with the Covid-19 demons and put over 37 million people in lockdown (CNN) after witnessing an unusual spike in Covid-19 cases.

The violent headwind affecting the travel & leisure businesses have sent Travel & Leisure ETFs deep into the red zone, with average losses of -15% year-to-date. Despite the crash, investors have added $700 million into the ETF line-up — betting on a peaceful ending to the ongoing war and a long-awaited final nail to the pandemic coffin.

US & Canada Investors: How to invest in Travel & Leisure ETFs

Investors looking for a potential bargain in the Travel & Leisure ETFs space can explore the U.S. Global Jets ETF (JETS), Invesco Dynamic Leisure and Entertainment ETF (PEJ), and ETFMG Travel Tech ETF (AWAY) – among others.

The JETS ETF seeks to track the U.S. Global Jets Index and provides exposure to the global airline industry, including airline operators and manufacturers from all over the world. In terms of country exposure (as of Dec.31, 2021), the U.S. based holdings dominate with 75%, followed distantly by Canada (4.85%), Japan (2.83%) and Brazil (2.22%). Airlines stocks represent 74% of the portfolio, transportation infrastructure 12.86%, internet 8.04%, and other 5%.

The top leading names as of March 15th, 2022, are American Airlines group (10.53%), United Airlines Holdings (10.44%), Delta Airlines (10.29%), Southwest Airlines (9.85%), and JetBlue Airways (3.09%).

JETS has a total expense ratio of 0.60% and trades primarily on the NYSE. JETS, PEJ and AWAY have attracted $360, $98, and $28 million of net inflows respectively in 2022.

Canadian investors can access the "air space" through the Harvest Travel & Leisure Index ETF (TRVL). The fund seeks to track the Solactive Travel & Leisure Index TR and invests in airlines, hotels, resorts, cruise lines, casinos & gaming, hotel & resort REITs, and leisure facilities listed in a regulated stock exchange in North America. Some of the big holdings include Marriott International (9.6%), Booking Holdings (9.3%), Airbnb (9.1%), Hilton Worldwide Holdings (8.4%), Expedia Group (5.6%), and Southwest Airlines (5.4%) — to name a few.

TRVL has a total expense ratio of 0.40% and trades on the Toronto Stock Exchange.

European Investors: How to invest in Travel & Leisure ETFs

European investors can invest in a basket of European travel & leisure companies through iShares STOXX Europe 600 Travel & Leisure UCITS ETF (EXV9), Lyxor STOXX Europe 600 Travel & Leisure UCITS ETF (TRV/TRVD), and Invesco STOXX Europe 600 Optimised Travel & Leisure UCITS ETF (XTPS). EXV9 and TRV/TRVD seeks to track STOXX Europe 600 Travel & Leisure, providing exposure to the largest stocks of the travel & leisure industry in Europe. While EXV9 provides physical exposure, TRV/TRVD's approach is synthetic. Invesco's XTPS tracks a variation of the same index but gives a higher degree of liquidity for long and short investments. Like TRV/TRVD, XTPS provides synthetic exposure.

Some companies included in these funds are Flutter Entertainment, Evolution Gaming, Accor, Entain, Intercontinental Hotels Group, Deutsche Lufthansa, Whitbread, Ryanair — to mention a few. EXV9, TRV/TRVD and XTPS trade on multiple European exchanges and have expense ratios of 0.46%, 0.2%, and 0.3% respectively.

ETF provider HANetf has also two ETFs available in the European market: the HANetf Airlines, Hotels and Cruise Lines UCITS ETF (TRYP), and a European version of the US-based JETS ETF, the HANetf U.S. Global Jets UCITS ETF (JETP). TRYP and JETP trade on multiple European exchanges and have expense ratios of 0.69% and 0.65% respectively.

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