During the last two years, travel and leisure stocks, especially those involving outdoor activities, experienced a rough time due to the pandemic restrictions, which forbade the majority of traveling activities. Stepping into 2022, investors seemed optimistic about the broader sector’s recovery as most countries started lifting Covid-19 mandates, triggering expectations for a year of solid growth driven by a strong rebound in international travel demand. Nevertheless, the Russian invasion of Ukraine and its consequent impact on oil prices and flight routes has emerged as an unexpected headwind.

Travel and leisure stocks could shine in 2022

Obviously, travel-related stocks could get a significant boost this year as most people will probably try to compensate for the two years of confined holidays, while also being eager to spend more money and time on their leisure needs in an effort to unwind from the psychological stress induced by the pandemic.

Apart from that, even if the Fed really hits the brakes harder on the economy in the following months and growth stocks get hammered, the excessive pent-up demand for traveling could enable leisure stocks to post better-than-average growth. Moreover, their relatively cheap valuations due to the Covid-19 downfall and the broader retreat observed in the stock markets this year could make travel-related stocks a safe bet for growth investors.

Geopolitical tensions and Covid-19 resurgence could derail recovery

The war between Russia and Ukraine continues to pose a considerable threat to the recovery of the sector. Specifically, following the Russian invasion of Ukraine, both countries closed their airspace to commercial aircrafts, forcing flights to alter their routes, while oil prices surged due to increasing fears over supply disruptions. The combination of those factors has applied upside pressures on flight fares, discouraging people from traveling at least for now.

Additionally, China’s renewed wave of lockdowns indicates that the Covid-19 pandemic is not totally over yet. Thus, the outbreak of a new mutation could lead to a broader global wave of restrictions, which could dampen investors’ hopes for an imminent rebound in travel demand. That said, investors and markets seem to be on hold until the travel and leisure firms report their earnings later this month, where the annual guidance could provide insightful information regarding the companies’ views and projections over the current and near-future macro environment.

Expedia might prove an attractive play

Expedia is an online traveling company with an impressive portfolio of over 20 brands and more than 200 travel sites. Additionally, more and more hotel resort companies have been announcing that Expedia is the preferred redistributor of their properties’ wholesale rates. Hence, the firm can provide more accurate content and better rates to travelers, which could eventually lead to higher revenue. In the previous quarter, Expedia’s revenue surged 148% on an annual basis but it remained lower than its 2019 levels, indicating that there is still room for improvement regarding the firm’s growth figures.

From a technical perspective, Expedia’s stock price has been nudging higher in the past two years, despite the repercussions that Covid-19 mandates have caused in the broader travel industry. Although the firm has not reached its pre-pandemic financial performance, it recently posted a new-all time high.

Therefore, any positive surprises in the upcoming earnings announcement coupled with a ceasefire in the ongoing war could potentially trigger an upside breakout from the descending triangle pattern, fuelling a broader price rally.