Travel stocks have taken off again this morning, in the wake of PM Scott Morrison yesterday putting a date to the uncorking of Australia’s international borders – the 21st of February.
“I know the tourism industry will be looking forward to that, and over the next two weeks they’ll get the opportunity both for visitors to be coming and for them to be gearing up to welcome international visitors back to Australia,” PM Morrison told reporters in Canberra.
On the local bourse, Flight Centre (ASX:FLT) is up about 7%, Qantas 3.5%
Plane sensible
FLT boss James Kavanagh says it’s been a long time coming, but the news is an “absolute game changer”.
“The critical part is once we open to the world, we stay open, and that will naturally inject real confidence into people wanting to travel.
“There is no doubt visas, exemptions and quarantine have all been a big hindrance to the corporate world – and although we expect some meetings and events to still exist in a virtual of hybrid manner – now is the time to get on planes to see colleagues, clients, and potential new customers,” Kavanaugh said.
Senior analyst at Forager Funds Management, Alex Shevelev, says listed tourism operators, large and small, will now have more confidence to begin prepping for international arrivals.
“The industry will be hoping that the initial trickle of tourists will be followed by a torrent of arrivals. Importantly, many operators have lowered their cost bases and will be more profitable when arrivals approach pre-COVID levels.”
Shevelev says small caps like skydive and Great Barrier Reef tour operator Experience Co (ASX:EXP) and recreational vehicle owners Tourism Holdings (NZX:THL) have struggled through the COVID travel decimation for two years while working to improve their businesses.
“When tourists return they’ll be well positioned to finally benefit.”
Nine million reasons
Experience Co MD John O’Sullivan also welcomes the Federal Government’s announcement, telling Stockhead “this is overwhelmingly positive for our industry and our company”.
He reckons in many ways Australia’s reputation as a destination to visit has only improved.
“We’ve always enjoyed a reputation as being safe and the government’s management of the pandemic will only strengthen this.
“Whilst we won’t return to 9m visitors in the short term, I’m confident you will see international visitation build strongly over the course of this year.”
Are you experienced?
According to Experience Co, the market’s key drivers will be the quick return of aviation capacity, consumer confidence to travel in key source markets, and the adequate funding and resourcing of Tourism Australia.
“Yeah, we’re really well positioned to take advantage of this return to international ‘normality’.
“The fact is our Skydiving, Wild Bush Luxury and Great Barrier Reef Experiences business units all continue to trade strongly with domestic leisure consumers across Treetops Adventure.”
Eddy Would Go
Stockhead’s own adrenaline adventurer, Eddy Sunarto, shares his take on the nascent Aussie adventure tourism sector:
Experience Co also offers adventure experiences such as tandem skydiving, deep ocean diving and rainforest tours at the Great Barrier Reef.
From humble origins, the company now manages 12 outdoor skydiving drop zones across Australia and three in New Zealand.
EXP also recently acquired Trees Adventure, an Australian operator of aerial adventure experiences with locations across the country, in a deal worth $46.9m. It offers visitors a range of ‘alternative experiences, including the world’s longest rollercoaster zip line, vertical challenges, net parks, and party rooms’.
Party rooms?
That’s right. But EXP’s had a tough run too – a recent operational loss of $4.8m off the back of a brave full year revenue of $44m.
And yet, the share price is up 65% over the last 12 months, showing investors’ confidence in the long-term prospects of the business.
Unreal Freak
The other play here could be XReality Group (ASX:XRG), where the stock price has surged by 6x in the last six months.
The adventure biz formerly known as Indoor Skydive Australia (IDZ), XRG operates indoor skydiving facilities across Australia, including iFLY Tunnel Systems. It’s a bit of a pioneer in vertical wind tunnel tech, as horrifically seen below.
Since rebranding to XRG, the company has turned its focus on virtual reality (VR) and metaverse experiences, acquiring Red Cartel, owner of a technology platform uncomfortably called Freak.
This is a game where up to four players walk around an open arena with absolute freedom of movement while exploring a parallel universe, solving challenges or fighting for survival. So, a bit like high school.
Initially opened in the Gold Coast, XRG opened its fourth FREAK venue in Sydney’s Macquarie Centre in November 2021.