The hospitality sector is anticipating a strong rebound in 2025, which could present compelling opportunities for investors. As global travel restrictions caused by disease and geopolitical tension continue to ease and pent-up demand for leisure and business travel surges, the sector is anticipating healthy growth. For investors seeking to capitalize on this trend, exchange-traded funds (ETFs) offer a diversified and efficient investment vehicle. These funds provide exposure to a broad spectrum of businesses within the hospitality sector, including airlines, hotels, cruise lines, online travel agencies, and entertainment venues. By investing in hospitality ETFs, investors can potentially capture the upside of the anticipated travel rebound while mitigating risks through diversification.
Understanding Hospitality ETFs
Exchange-traded funds are baskets of securities that trade like individual stocks on an exchange. They offer investors a way to invest in a diversified portfolio of assets with a single transaction. ETFs are known for their liquidity, transparency, and relatively low expense ratios compared to actively managed mutual funds.
Hospitality ETFs focus on companies in the travel and leisure industry. These funds provide investors with targeted exposure to the sector's performance, allowing them to benefit from the industry's overall growth. They achieve this by tracking an underlying index and using a passive management approach.
A Tech-Centric Approach to Travel
The Amplify ETFMG Travel Tech ETF (NYSEARCA: AWAY) offers a unique approach to investing in the hospitality sector by focusing on the intersection of travel and technology. Launched on February 12, 2020, and managed by Amplify Investments LLC, with Toroso Investments, LLC as the sub-adviser, AWAY tracks the Prime Travel Technology Index NTR. This index comprises global companies involved in travel bookings, ride-sharing, price comparison, and travel advice. The fund's investment strategy emphasizes technology's role in enhancing the travel experience, making it an attractive option for investors who believe in the transformative power of technology within the hospitality industry.
The fund's holdings are diverse, ranging from established online booking platforms to innovative ride-hailing services. This diversity speaks to the fund's strategy of investing in companies that are leveraging technology to enhance the travel experience and are also poised to benefit from the overall growth of the travel industry. The fund has an expense ratio of 0.75% and, as of January 1, 2025, had $60.31 million in assets under management (AUM). AWAY's performance reflects the inherent volatility and the significant growth potential of the travel tech sector.
Core Hospitality Exposure
The Defiance Hotel, Airline, and Cruise ETF (NYSEARCA: CRUZ) offers investors a more traditional route into the hospitality sector, concentrating on its core components: airlines, hotels, and cruise lines. Launched on June 3, 2021, and managed by Defiance ETFs, LLC, with Penserra Capital Management LLC as the sub-adviser, CRUZ tracks the BlueStar Global Hotels, Airlines, and Cruises Index. This index is comprised of companies that derive at least 50% of their revenues from these essential travel segments. CRUZ's strategy caters to investors seeking exposure to established players, providing a blend of growth and stability through holdings in industry giants.
With an expense ratio of 0.45%, CRUZ is a cost-effective option for investors. As of January 1, 2025, the fund had $28.39 million in AUM. The fund's 2023 annual return of 35.30% underscores its ability to deliver strong results, while its one-year performance for 2024, stood at about +25%. These figures suggest that CRUZ is effectively capturing the resurgence in travel demand. The fund holds an aggregate rating of "Moderate Buy," with a consensus price target of $26.36, indicating that analysts see some potential for further growth.
AWAY vs. CRUZ: Two Paths to the Rebound
AWAY and CRUZ present investors with two distinct paths toward capitalizing on the anticipated rebound in hospitality, each carrying its own set of potential risks and rewards. AWAY's focus on travel technology represents a bet on the transformative power of innovation in reshaping the travel landscape. Its portfolio, concentrated in companies at the forefront of digital bookings, ride-sharing, and other tech-driven travel solutions, offers exposure to potentially high growth but also inherent volatility. The rapid pace of technological change means that companies in this space can experience significant upswings as new technologies gain traction. Still, they also face the risk of disruption from newer, more advanced solutions or shifting consumer preferences.
CRUZ, in contrast, provides a more grounded approach anchored in the established bedrock of the hospitality industry: airlines, hotels, and cruise lines. This strategy offers a degree of stability, as these companies typically possess established brands, loyal customer bases, and proven business models. While their growth trajectory might be more gradual than that of their tech-focused counterparts, they are well-positioned to benefit from a broad resurgence in travel demand.
Weighing the Options in a Resurgent Market
The anticipated resurgence of the hospitality sector in 2025 offers investors a compelling opportunity, and ETFs provide a versatile instrument for capitalizing on this potential growth. AWAY and CRUZ, with their distinct strategies, offer unique entry points into this dynamic market. AWAY provides access to the cutting edge of travel technology, appealing to those who believe in the sector's continued innovation. In contrast, CRUZ offers a steadier course anchored in the time-tested foundations of airlines, hotels, and cruise lines.
As the travel landscape continues to evolve, investors must weigh the potential risks and rewards associated with each ETF. While past performance offers valuable insights, it is not a guarantee of future results. Factors such as technological advancements, changing consumer preferences, and global economic conditions will undoubtedly shape the trajectory of these funds. The travel sector's journey in 2025 promises to be interesting, and these ETFs offer a front-row seat to the unfolding narrative.
