New CDC Guidance a Big Boost for Travel


An all-clear for vaccinated travel from the CDC will open the floodgates for the 2021 travel season. Americans are already ramping up their planning in response. 

Americans’ travel ambitions continue to swell as the weather improves and more people get vaccinated. The pace of vaccination accelerated last week, reaching 4 million shots per day. Travel search activity has been building for several weeks but the latest updates to CDC guidance for vaccinated travelers will deliver a big boost. Many rule-following Americans waiting for clearer signs that it is safe to fly will take this cue. 

Travel-related Google search activity is now rising well above our three-month forecasts for hotels, tourist destinations, theme parks, and even air travel. The activity kept up with an expected jump related to spring vacations. TSA throughput data shows hoards of travelers making their way back. Now we see the potential for travel searches to soar well above forecasts as waves of newly vaccinated consumers seize their moment. 

The chart shows four-week averages of travel-related search activity in the US relative to three-month forecasts. 

The typical seasonal pattern is for search activity tied to air travel and theme parks, two of the more ambitious common vacations, to make an interim peak for spring vacation and then surge again in early summer. Capacity constraints and pricing may smooth out some potential peaks related to holidays. But the combined tailwinds of stimulus, savings, improving weather and a year of pent-up demand should produce sustained strength in leisure travel demand through the summer. 

Airlines’ long march back to normal operations has been a stand-out story in the investment grade credit space. The Bloomberg Barclays investment grade airlines index turned in on of the best performances of any industry in Q1, delivering excess returns over Treasuries in excess of 4%. 

Sustained spread outperformance has seen airlines extend positive total return performance even as most of the rest of the investment grade landscape saw returns slide. Airlines have even outperformed other high-flying travel industries including lodging and gaming. Airlines spread outperformance is beginning to moderate just as investment grade spreads are recovering. We continue to believe further spread compression is possible in a scenario where spending on travel builds throughout the next quarter or more. See this week’s US Credit Update for more on the IG landscape. 

The outperformance hasn’t been as remarkable but airlines and aircraft manufacturers are delivering in the equity space also. The Global Jets ETF is enjoying its longest stretch of risk-adjusted outperformance against the broad S&P 500 since February 2019. 

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