Airlines are hoping for a stronger 2026 after uncertainty from tariffs slowed travel this year.Graham Hughes/The Canadian Press
Global travel and tourism stocks rebounded sharply from their slump during the COVID-19 pandemic, but their performance has been mixed this year thus far.
U.S. tariffs, which sparked geopolitical tensions and economic uncertainty, have hurt some names, but investment experts see a better outlook next year and compelling stock opportunities today.
“There is going to be improvement as you look into 2026 with anticipated certainty in areas such as U.S. trade policy,” says Dan Wasiolek, senior equity analyst at Morningstar Research Services LLC in Chicago.
Tariff deals, such as the truce announced between the U.S. and China, mean U.S. firms can try to move forward with business plans, which also involve travel, Mr. Wasiolek says.
After the steep U.S. “Liberation Day” tariffs were announced on most countries on April 2, many travellers paused hotel and other bookings because of the uncertainty. The U.S. government shutdown since Oct. 1 also hasn’t helped, he adds.
Demand at the upper end, such as luxury hotels and premium airline seats, has been strong, but it’s been weaker for mid-scale and economy hotels as well as for airline economy seats, he says.
However, the U.S. Federal Reserve Board’s interest rate cut last month – and potentially more to come – could bolster the industry, Mr. Wasiolek says.
The U.S. hosting the 2026 FIFA World Cup (with Canada and Mexico as auxiliary hosts) should also be a catalyst for travel, he adds, along with big conventions returning to Las Vegas next year.
In the lodging sector, he sees a compelling buy in shares of vacation rental company Airbnb Inc. ABNB-Q, which trades at a discount to his fair value estimate of US$154 a share.
Airbnb, which rebounded faster than competitors from COVID-19, has seen its stock trade sideways as “revenue growth decelerated a little,” Mr. Wasiolek says. “It’s kind of a victim of its own success.”
It will benefit from new offerings through experiences, such as tours and classes, and expansion into new markets, including Brazil and Japan, he adds. “We think growth is going to re-accelerate next year.”
Norwegian Cruise Line Holdings Ltd. NCLH-N, whose brands include Regent Seven Seas Cruises and Oceania Cruises, is also attractive because its shares trade at a discount to a fair value estimate of US$31.50 a share, he adds.
ETF options
For investors who don’t want to bet on travel stocks, there are travel-focused exchange-traded funds (ETFs). In Canada, Harvest Travel & Leisure Index ETF TRVL-T tracks the largest airlines, cruise lines, hotels and online booking services. Harvest Travel & Leisure Income ETF TRVI-T uses a covered-call strategy on part of its portfolio to increase monthly income.
In the U.S., Invesco Leisure and Entertainment ETF PEJ-N holds hotels, restaurant and leisure stocks. Amplify Travel Tech ETF AWAY-A invests in travel technology businesses, while AdvisorShares Hotel ETF BEDZ-A focuses on lodging and cruise lines.
Meanwhile, U.S. Global Jets ETF JETS-A holds airlines, airports and aircraft makers. Canadian-listed Air Canada AC-T and Bombardier Inc. BBD-B-T are among its holdings.
Fancy flights
Frank Holmes, chief executive officer and chief investment officer of U.S. Global Investors Inc. in San Antonio, Tex., says he expects 2026 to shape up to be stronger for airlines than this year.
Airlines offering a premium economy class – with perks such as wider seats and more leg room – and loyalty programs involving selling points or miles to credit card issuers, are gaining traction, says Mr. Holmes, whose firm runs U.S. Global Jets ETF.
“I think we’ll see this translate into steadier earnings in 2026,” he says. “The premium traveller has proven resilient through tariffs and inflation. Airlines have invested billions upgrading cabins, lounges and WiFi.”
United Airlines Holdings Inc. UAL-Q, a top holding in the ETF, saw its premium seat revenue grow by 6 per cent in the third quarter, while loyalty income was up by 9 per cent, he says. And Delta Air Lines Inc. DAL-N now “earns more than half its revenue outside the main cabin and plans to fly a record number of higher-yield seats in 2026.”
Airlines have “pricing power” to keep fares high, and that gives them long-term growth, he says. They’re also benefiting from falling oil prices, new demand from digital nomads who can work anywhere, a shortage of pilots and a lack of new airports.
Artificial intelligence is being used in “dynamic pricing” to adjust ticket prices based on demand and competition, and in cancelling flights with fewer passengers to force everyone onto one plane, he adds.
Airlines also typically show seasonal strength in the fourth quarter, he notes, with Thanksgiving and Christmas being the biggest travel periods in the U.S. During the past 20 years, the NYSE Arca Global Airlines Index, on average, has gained more than 3 per cent in October, 4.8 per cent in November and 3 per cent in December.
Cruising for value
Dan Ahrens, chief operating officer and portfolio manager at AdvisorShares Investors LLC in Dallas, is more bullish on cruise lines now because it’s been a tough year for big hotel chains.
Travellers may see value in cruise holidays compared with paying for flights and hotels, says Mr. Ahrens, who oversees AdvisorShares Hotel ETF.
He favours cruise lines such as Carnival Corp. CCL-N, Norwegian Cruise Line Holdings and Royal Caribbean Group RCL-N.
Chinese online travel agency Trip.com Group Ltd. TCOM-Q and Travel + Leisure Co. TNL-N, a U.S. timeshare company, are also among his top holdings.
However, he’s underweight on hotel chains such as Marriott International Inc. MAR-Q and Hyatt Hotels Corp. H-N.
“We’re not finding great value in the biggest and well-known names,” he says, adding that Hilton Worldwide Holdings Inc. HLT-N is looking a bit better.
Large hotel chains have faced headwinds from growing unemployment and travel budget cutbacks at some big corporations, while economic uncertainty is affecting leisure travel negatively, he says.
Although people were “very fearful” and overreacted to tariffs from the U.S., they’ve “learned that they are really a negotiation tool,” Mr. Ahrens says, adding he expects “a little bit better performance” over the next year.