Posted on 02/09/2016
One would expect that the low price of oil would benefit the travel industry, yet a number of factors appear to be affecting tourism in a negative way particularly south of the border. Last week stocks linked to tourism fell, with those in the hotel, resort and cruise sectors suffering a greater loss than the broader market.
Some analysts blame the fears from the Zika virus, but investors seem to be losing confidence in the overall economy. The Wall Street Journal reported that in December consumers were increasing their savings and cutting back on spending in anticipation of a weak economy. Fears of an economic slowdown can result in consumers cutting back on leisure travel and embracing staycations. To a large degree Canadian cities are benefitting from the stronger American dollar and its higher buying power this side of the border. Fears of the Zika virus have also been significant. "Cruise line stocks have underperformed the market by quite a bit — and so have travel group stocks in general because of concerns about Zika," Wells Fargo Securities analyst Tim Conder recently stated. With the low price of oil no longer impacting consumer spending, Brian Fenske, head of sales trading at NY brokerage firm ITG said “It’s almost our one-year anniversary of oil being $50 or lower,” he said. “It’s cheap, but people get used to it.”