A massive breakout in a travel-related industry group

Key points:

• Hotels, Resorts, and Cruise Lines closed at a new all-time high after consolidating for more than five years 
• Similar base breakouts led to further gains 100% of the time over the next one and two-year horizons 
• Marriott, Royal Caribbean Cruises, and Booking Holdings maintain perfect trend scores

Consumers want experiences over things

In the wake of COVID-19, two dominant themes materialized within consumer behavior. The aspiration for homeownership gained significant momentum, and consumers wanted to travel again. While housing momentum has slowed due to higher mortgage rates, the emphasis on prioritizing experiences over belongings remains prevalent among consumers. 

The Hotels, Resorts, and Cruise Lines sub-industry group broke out to a new all-time high, representing the first instance after a 5-year low. 

Typically, a long period of contraction leads to a prolonged period of expansion. 

Similar breakouts led to multi-year extensions above the previous high 

When the Hotels, Resorts, and Cruise Lines sub-industry broke out to a new all-time high for the first time after a 5-year low, the group was higher one and two years later every time. 

While the sample size is small, the signal avoided a max loss of greater than -10% in all prior instances.

Bottom-up stock perspective

Given that a single stock can dictate performance in market-cap-weighted indexes, it's always essential to drill down under the surface to see what's driving returns at the index level.

Within the Hotels, Resorts, and Cruise Lines sub-industry group, there are three clear leaders with perfect absolute and relative strength trend scores. 

Big-picture perspective

To illustrate the experiences-over-things phenomenon, the following chart contains a relative ratio comparing Hotels, Resorts, and Cruise lines to the Apparel, Accessories, and Luxury Goods sub-industry. While extended, the ratio has broken out to an all-time high.

What the research tells us...

Consumers are more confident about the outlook for the economy with lower inflation and a resilient job market. With big-ticket items like a home or a car on hold due to higher interest rates, consumers' desire for experiences over things looks compelling, especially since Hotels, Resorts, and Cruise Lines registered a new all-time high. After similar breakouts, the group was higher one and two years later every time.