By Danilo Masoni
MILAN (Reuters) — European travel stocks stumbled into some profit-taking as earnings season kicked off and extreme weather hit in July, but many investors are betting relatively attractive valuations and solid demand will keep supporting the sector.
An index of European travel and leisure stocks has risen 33% over the last year, beating even market favourites like luxury and defence and racing over 23 percentage points ahead of the broader market.
The index has fallen slightly from its May peaks, but is still one of the best performers this year, thanks to sharper price increases in items like airline tickets and hotel rates as COVID-19 curbs were phased out ahead of the summer holidays.
«For many people, the pandemic is now over, and this is time now for travelling far from home,» said Corinne Martin, fund manager at Ofi Invest in Paris.
Airlines, cruise operators and hotel owners have been key beneficiaries, but so have aircraft and engine-makers. The recovery in long-haul flying helped Rolls-Royce (OTC:RYCEY) lift its full-year forecasts, sending its shares up over 20% on Wednesday.
The number of restriction-free countries has risen three-fold in one year to above 180 and international tourist arrivals are closing in on pre-panademic levels, according to data from the World Tourism Organization. Europe is among the regions with most progress.
The point at which China announced the end of health restrictions in 2022 was probably the best moment to jump into travel stocks. The STOXX travel index gained 20% in the first quarter of the year, the most since the roll-out of COVID vaccines in the final quarter of 2020, when it rose 29%.
Traders still see more opportunities ahead, even as markets face
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