Why travel shares are getting slammed…and it is not for the reasons you may think

Just when ASX travel shares were out of the COVID-19 doldrums (in that some surpassed their pre-COVID highs), 2025 looks to be a difficult year for them. And while some of the havoc can be put down to the market battering due to Trump’s tariffs, many of these travel shares have problems of their own which may magnify any impact.

Why travel shares are getting slammed

You cannot consider where travel shares are now without remembering what the last 5 years were like. Many had their markets wiped out overnight, particularly ASX-listed companies in this space that saw their markets wiped out. The Morrison government banned its own citizens from travelling overseas, and state governments closed their borders.

Many travel companies knew demand would come back and used the chance to make themselves more leaner companies. So companies like Flight Centre (ASX:FLT) and Webjet (ASX:WEB) shut down unprofitable brick and mortar stores. Qantas (ASX:QAN) outsourced baggage handling, retired the 747 and 2 A380s and it cut the commissions it handed to travel agents.

As the world emerged from pandemic hibernation, it was a different one. The conventional business traveller was not travelling as much because businesses realised they could do so much over Zoom. There was a surge in revenge travel as people took trips they couldn’t take due to the pandemic, and there were some teething issues as airlines ramped up again. The issues plaguing Qantas ultimately claimed the scalp of Alan Joyce.

Then as inflation surged, we saw a cutback in travel amongst the lower and middle classes whilst travel amongst premium travellers remained solid. Just look at how badly US low-cost carriers like Spirit and Frontier fared relative to premium legacy airlines Delta and United. Perhaps it is better to make more money from less people than less money from more people.

Why Trump’s tariffs will hurt travel shares

Beyond the general impact the uncertainty is causing on listed stocks generally, travel shares will be impacted. Anecdotal reports suggest travel demand between the US and Canada is down 70%. In defence of Canadians, it is hard to want to travel to a country that wants to annex yours.

But beyond any disdain for the Trump administration, prices going up will put more pressure on households leaving less money for travel, both lower to middle income earners and even higher income earners. A reduction in trade and globalisation will mean less international business travel.

OK, we will admit we are talking theory here rather than pointing to any results of listed companies or official industry data. Although one travel stock to have responded is Tourism Holdings (ASX:THL) – the largest commercial RV rental operator in the world, with businesses in North America.

Last week, THL told investors there was a decline in sentiment and slowdown in international bookings, although it was not specific about the extent of the slowdown. It did state that around 50% of RV rentals are from domestic bookings, which have a shorter lead time compared to international bookings. It therefore said it was too early to determine if the current slowdown would have a lasting impact. Investors were told that the company would have more certainty during the fourth quarter of FY25, at which point they would receive earnings guidance.

Will we hear from more travel shares soon? We likely will if the impact is significant. Travel shares that have provided official guidance will need to update it if it seems it will not be met under ASX disclosure rules. For Qantas, the US has been an important market and it has high ambitions for there with non-stop flights from the East Coast to New York planned in 2027, and even talk of Jetstar operating non-stop flights to Las Vegas.

We’d imagine there’d be delays if there was a slowdown in demand. Qantas is in a pivotal time as it renews its fleet, something that will cost it somewhere in the tens of billions of dollars. Any slowdown in travel will mean trouble. At least when the COVID-19 pandemic hit, it had a far smaller order book than it does not.

Conclusion

Are we doomed for another COVID-style slowdown in travel? Maybe not that extreme. But it may be a significant slowdown (and there’ll be a hit to travel stocks) if anecdotal evidence of declining sentiment and forward bookings begin to be reflected in companies’ results. Or perhaps the Trump administration backtracks, something that appears unlikely.

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