Kristin Myers, the editor-in-chief of the personal finance website TheBalance.com, joined Cheddar News to talk about how rising inflation headwinds will affect the travel industry even as demand grows and earnings come in hot. “We have in not too far a future here, we do see recession fears absolutely looming, and where are people going to start cutting some of their spending, it's going to be travel first and foremost," she said. " So how long can this pent-up demand really keep some of these travel companies really afloat? I do think that remains to be seen." Myers also noted that the stigma attached to cruise ships over the COVID-19 pandemic remains for consumers.


Opening Bell

Travel Demand Up Despite Rising Inflation but Recession Fears Loom Over Industry

here to discuss this. Kristin Myers Editor in chief at the balance. Kristin, thank you so much for joining us. Can. Let's reflect on this week that we've had. We had a ton of names kind of reporting in the travel space, Who were some of the biggest winners that we've seen? Yeah, we, we saw a lot of the earnings come in a little bit. Miss mixed. You did mention some of those winners, Marriott um booking holdings, definitely some of the winners when we look at their earnings definitely beats on the top and bottom lines. But we of course did have some weaker than expected earnings reports. For example, Delta, they did raise their guidance. Their Ceo Ed bastian of course saying that corporate travel is coming back but they did have a bit of a mixed earnings picture they missed on uh their earnings, but they did do a beat on their revenue american of course also had a nice beat on both top and bottom lines. United however also missed on their earnings. So it's a little bit of a mixed picture here. But I think one of the biggest takeaways that we've heard repeatedly from a lot of these Ceos Expedia bookings. Um, Delta, they've all said corporate travel is coming back, demand is going to be strong in the summer and we, what we have to see right now is if that traveler demand can actually over way some of these risks that are associated with the pandemic and these higher fuel costs and of course inflation, I think right there, you touched on kind of the biggest question that I have in this space? There is certainly the excitement, right? So many of us know people who are traveling this summer excited about plans ramping up, but the reality is even when we look at the earnings picture, there were a decent number of companies that have this mixed bag and listen, we talk every day about inflation about you know, consumers paying more on everything. How big of a concern is that that potential headwind to a sector that is expected to to kind of enjoy some tail winds right now and how critical is it that this sector actually gets those tail winds and for what length of time in order to truly rebound for what has been to really tough years? Yeah, I think right now that is absolutely the critical question right now, from what we've heard from a lot of the companies, a lot of them are actually shrugging off, I think some of these inflation concerns, but that's just in the short term, right? Because they do have a lot of that that pent up demand really serving as a tailwind for them. Right now, cruise lines, we have to put in a little bit of a separate category. They've really been been battered and slammed by some of these issues when it comes to the pandemic more so than the airlines and the hotel companies. However, what we have in not too far future here, we do see recession fears absolutely looming and where are people going to start cutting some of their spending, it's going to be travel first and foremost. So how long can this pent up demand really keep some of these travel companies, you know, really afloat. I do think that remains to be seen. Let's talk about cruises for a moment because you just brought that up and listen over the last week or so. I've heard a lot more people, even in my personal world talk about, hey, what about a cruise? You know, for next year, given that we haven't seen those for quite some time and really there was more of a stigma, especially over the last two years that there were more closely associated with cruises and Covid 19. Um, do you think there truly is the potential for some unrealized growth in this sector? Given that that demand is still so pent up and listen to some as personal travels a lot. There seems to be more value proposition. Sometimes even in the cruise space actually, you're, you're totally right. I was checking out some pE ratios a little bit earlier and at least when we look at some of the airlines, they are, they're pretty expensive. There is some, some areas for value. Alaska is one of them, but there's definitely more opportunities for value. At least when it comes to the cruise line, space, Norwegian and Carnival or two that I'm thinking about Royal doing very well, at least when we're when we're talking about some of the performance. But you're totally right here when we look at the travel sector very broadly, it is still underperforming the market. And so there's still obviously opportunities here for the upside, especially given the increased demand. But when it comes to the cruise lines specifically, they have really been underperforming the market. And as you just mentioned, the demand has been surging, particularly last month we were hearing reports in april the cruise line demand was really spiking. But the problem with those cruise lines as you kind of mentioned is that there is a stigma especially at this time when we're still in the midst of the pandemic that going on cruise lines is just not safe. And we are hearing of course whispers right of lockdowns over in the east in china. If that that starts making its way over here in the west. I I do imagine that a lot of these cruise line stocks will really start to take a beating, especially if we do see a resurgence or arise again in some of those covid cases. Yeah, it's that proposition higher risk, potentially high reward, but it is higher risk, so to speak here. I've got less than a minute with you, but I want to get your thoughts in terms of you look at this overall sector to your point a moment ago, you still think it was relatively kind of undervalued in this sector. Certainly it's underperforming at least, you know, against the broader market right now. But not all companies are, are created equal here. How do investors or how should investors kind of assess travel companies individually to see and maybe potentially pick some winners? Yeah, that's a really great question. Um, I think when you're looking at some of the airline companies, their load factors, so that's essentially looking at how many passengers are flying with them is really going to be critical, particularly after we get through the summer months when we're expected to see higher passenger loads. Thanks to the demand when it comes to the hotels. And some of those booking companies like booking holdings Expedia, you really want to look at some of their booking, same goes with those cruise line stocks and with cruise lines. I think that you really just cannot ignore the risks of the pandemic. If you start hearing about case counts starting to rise again because of covid you really are going to want to take a step back and I think take a little bit of a sharper, look at some of those cruise stocks, but again, a lot of upside here in this space, we've seen the whole industry underperforming again, it's really going to remain. Can the demand right now out shadow and and way out some of those risks that are coming with inflation with recession and even some of those higher interest rates, Kristen such great insight. They really appreciate your time, Kristin Myers, editor in chief of the balance.