Is a travel recession unfurling before our eyes? And what does this mean for ASX travel stocks?
Nick Sundich, March 18, 2025
Travel stocks have been the most affected in the recent market correction, and it is all because of fears of a travel recession. High prices, low consumer confidence, economic uncertainty (particularly surrounding Trump tariffs) and household debt are taking their toll. Some travel companies have begun to admit this and share prices are declining whether or not companies are facing up to the prospect or denying it altogether.
Travel recession fears are legitimate
The jungle drums were beaten the heaviest by US airline stocks with legacy and low cost carriers alike cutting their guidance. Did you know that in 2024, United and Delta Airlines outperformed the Magnificent Seven? We’re not so sure that’ll happen again this year. Delta Airlines slashed its first-quarter profit estimates by half, while United said its earnings would come in at the lower end of its forecast due to a 50% drop in government-related travel bookings. Southwest cut its revenue too, citing less government travel. Notice a common theme here? With the new Trump administration keen to cut public sector spending, it appears travel is one of the first things to go.
The impact has also been felt in travel ETFs like U.S Global Jets ETF and Definance Hotel, Airline & Cruise ETF which are both down by over 13% in 2025. Hotel stocks are feeling the pinch too with the Baird Hotel Stock Index (which comprises 20 of the largest hotel brand companies and REITs publicly listed in the US) declined 2.3% in a month, ahead of the S&P500’s 1.4% decline in February. Hotel stocks have felt the pinch too – Hyatt for instance is down 20% in 2025 and Hilton is down 6%.
What about Australian stocks?
Turning to Australia and most stocks reported last month, so many have not commented on the development in the USA but are continuing to boast that they are better businesses post-COVID, having used the pandemic to ‘right size’. But one thing to note is that many consider the January to June period to be traditionally stronger, and have reiterated this as recently as last month.
Flight Centre (ASX:FLT) is targeting an underlying profit before tax of $365-405m, which would be 14-26.5% up on FY24. The bar’s been set high. The IATA has forecasted a 6.7% increase in passengers during 2025 globally, and there’s little doubt that even if FLT aren’t using this numbers, that they’re assuming growth. Webjet reported $70m underlying EBITDA and a $52.5m profit and guided to $117-122m EBITDA for the full year.
Corporate Travel (ASX:CTD) was a company where there were warning signs as revenue was down 6%, EBITDA was down 23% and profit was down 33% on an underlying basis and 42% on a statutory basis. The company blamed this on Europe noting underlying EBITDA ex Europe was up 38%. Like its peers, it expected higher weighting in the second half of the year and it would record 35% EBITDA growth, with North America the biggest contributor. Probably not if Elon Musk and DOGE continue to have something to say about spending on government travel.
Qantas (ASX:QAN) will be an interesting one to watch. It grew its underlying pre-tax profit by 11% and its statutory post-tax profit by 6%. Whilst it has not given guidance it,’ expects strong travel demand across the portfolio heading into the second half’. In February, Qantas also announced a devaluation of its points and we’ll be fascinated to see if members burn their points in an effort to use them before the devaluation and then what people’s engagement with the program will be after that.
We can hardly imagine Virgin Australia continuing with its IPO plans if travel demand is weak.
Conclusion
It is 2025, not 2021-22, and investors in travel stocks need to remember that. If the economy enters a recession, travel stocks could be impacted…and even worse than they have been with mere fears of a recession but with modest evidence at this point in time.
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