Travel sector: ‘Staffing shortages have had a ripple effect,’ ETF expert says

Stephen Gardner, ETF Managers Group Director of ETF Sales, sits down with Yahoo Finance Live to discuss how travel and travel tech companies are faring through travel demand shocks in the company's travel ETF, as well as the demographic trends in who is trying to travel right now.

Video transcript

RACHELLE AKUFFO: Global tourism expected to contribute nearly $2 trillion to economies. For a look at investing in tech focused travel and tourism companies, let's bring in Stephen Gardner, ETF Managers Group director. This ETF report sponsored by Invesco QQQ. So thank you for joining us, Stephen. First, I want to get-- start off by talking about this tech travel ETF, AWAY, and the types of companies that are the best fit for it strategy wise.

STEPHEN GARDNER: Yeah, so AWAY is an ETF that holds 33 different companies in the portfolio, 75 basis points. And it's really focused around just that, the technology-related companies that facilitate the global tourism and travel ecosystem.

DAVE BRIGGS: And so many people think travel, they're looking for airline stocks. They're looking for cruise stocks, none of those. And the NASDAQ, meanwhile, is down about 30% year to date. How do you reassure fears that it's just like an ordinary tech stock?

STEPHEN GARDNER: Well, I mean, when you look at the overall market, I mean, there's been nothing but drawdowns and destruction when it comes to equity asset prices. And I think it's no different in tech, and then, in this case, travel-related tech. So we look at the fundamentals when it comes to tourism numbers. You know, TSA numbers just recently hit pre-pandemic levels equal to February of 2020.

And on top of that, you also see a little bit of hiccup, more than a hiccup, big disruptions from staffing shortages that you alluded into a prior segment from the airline side. So we look at it, from the tech side of things, very much less capital intensive companies than airlines and cruise ships, for example, as a leaner way to play a longer term recovery in the travel ecosystem and the industry itself.

SEANA SMITH: Stephen, how are you looking at the travel disruptions? Every day, we're talking about hundreds to thousands of flights being canceled. Certainly, that will have an impact on some of your top holdings. So how are you looking at that?

STEPHEN GARDNER: Yeah, so there's no doubt there's never as anecdotal evidence of being in airports and having headaches and disruptions and cancelations. And this past month in June, there was 3% cancelations this month, 1% more than this time in 2020, which is roughly 2,100 flights. It's no small fact that staffing shortages have had a ripple effect within the industry.

But when it comes down to it, I think flying is one thing, but a lot of the companies within this portfolio offer a wide range of optionality, whether it comes to booking locally or different hotels, traveling via car, and offering certain recommendations like OpenTable, other areas that don't solely rely on travel via airplane. So I think the optionality and the vastness of diversification within a lot of these businesses creates a little bit of a floor for some of these companies, although tech-related tech companies have gotten hit pretty substantially this year.

RACHELLE AKUFFO: And given that millennials make up the largest generation now, how are some of these tech travel companies adapting to that so they can really capitalize on the growth there?

STEPHEN GARDNER: Yeah, that's certainly a big, big aspect of this. And even after the pandemic, what we're seeing is a lot of younger and higher income millennial travelers being the ones that are leading the way in this travel rebound post-pandemic. So, you know, Trivago is a company that's really looking at optimizing the user experience. Millennials really focus on experience over all else.

So user experience within their platforms and the ease of use from, again, traveling via airline, booking hotels, using the platform to look for destinations, restaurants, and sightseeing things, and things of that nature. So they really have looked at focusing on the entire experience, rather than just a cruiseline or flying, getting from point A to point B. And I think that's a real big value out there. And then on top of that, a lot of them have looked at subscription models to try to keep customers within their platform and then cross-sell.

SEANA SMITH: Stephen Gardner, thanks so much for joining us.