Macro Intelligence: travel sector faces headwinds from US policy changes

Deep dive into travel sector

In this week’s edition of IG Macro Intelligence, we take a deep dive into the travel sector.

Turbulence ahead?

Policy changes under the Trump Administration have led to a notable decline in international travel to the United States. President Trump's Executive Order 14161 has seen enhanced vetting at US borders, resulting in cases of tourists being denied entry.

Decline in international visitation to the US in 2025

Tourism Economics, part of Oxford Economics, is projecting a 9.4% decline in international visitation to the US in 2025, a stark revision from its earlier forecast of an 8.8% increase. The downgrade could potentially result in $9 billion in lost revenue according to the economists.

Meanwhile, the International Trade Association estimates that every 40 international visits to the US supports one American job.

Flight Centre has seen US travel bookings fall by 12-15% in early 2025, with expectations of a continued downward trend. Meanwhile, Intrepid Travel reported a 13% drop in US sales among Australian and New Zealand customers, with April alone showing a steep 44% year-on-year decline.

The downtrend is sparking analyst downgrades in the travel sector.

Stuart Roberts from Stocks Down Under:

"I've been quite bullish on travel for the last few years. That bullishness ended the day I started hearing stories about people being stopped at the borders in the US, and then turned around. Regular tourists who had a long conversation with the border guards and then were denied entry to the United States. That's got to impact inbound tourism in the United States. And then a knock on effect through travel elsewhere in the world."

Staying airborne?

Flight Centre

Shares in Flight Centre are down 22% year-to-date and more than 34% over the past 12 months.

Flight Centre daily chart

At the recent Macquarie Investor Conference, Flight Centre indicated heightened uncertainty is likely to continue throughout 2025, and it is not expecting stabilisation until 2026.

Flight Centre has revised its 2025 financial year profit guidance from $365-$405 million to $300-$335 million, claiming "US policy changes are impacting business and consumer confidence globally."

Flight Centre historical trends and price targets

Following its recent trading update, UBS cut its FY25 and FY26 EPS forecasts for Flight Centre by 14% and 15% respectively. However the broker maintains a 'Buy' recommendation on the stock, with a $15 price target.

 Flight Center buy/sell indicators and analyst projections

The average price target on FLT is $16.50, according to Refinitiv, with most brokers suggesting you buy the stock.

Despite a recent rally that pushed shares into overbought territory, ASX Tradewatch data show the stock remains in a broader downtrend, with its price still below the 50-day moving average and the 200-day moving average continuing to decline.

Corporate Travel Management 

Corporate Travel Management (CTM) recently forecast revenue to drop by 4% below its previous forecast, citing economic uncertainty and tariff uncertainty.

CTD says it's witnessing a slowdown in client activity in what is traditionally the busiest period of the year.

Corporate Travel Management daily chart

Corporate Travel Management buy/sell indicators and analyst projections

Shares have also been under pressure over the past 12 months.

Macquarie has cut its target price by 25% to $13.07 in the wake of CTD's update, while Morgan Stanley cut its PT by 23% to $11.80.

Corporate Travel Management historical trends and price targets

Multiple indicators show investors see limited upside in holding the stock now, with ASX Tradewatch data showing weak long-term demand and short-term price action also pointing downwards.

Andrew Dale from ECP Asset Management told ausbiz, the recent warnings from travel companies could be just the tip of the iceberg:

"What we see here with travel companies is real, they're very leveraged to volume. So when you see any weakness coming through it falls through the bottom line. So typically these companies are sort of canaries in the coal mine. They're predicting what's going on in sentiment, what people are doing, businesses pulling their horns in, not willing to spend the CapEx cycle starting to crimp. We would normally see this flow through into broader economic aspects."

Travel tailwinds

Qantas 

When it comes to the "Flying Kangaroo", Jefferies analysts believe falling oil prices and a lower US dollar as a result of Trump's tariffs, have improved the outlook for Qantas.

Qantas daily chart

The analysts have retained their 'Buy" rating on the airline, and increased their target price to $11.97 from $11.42, adding that demand for Qantas and its budget unit Jetstar have remained solid in the domestic travel market.

Macquarie analysts add the airline is yet to see any impact on US in & outbound demand and yields are still strong. The average target price on Qantas is $10.38, according to Refinitiv, suggesting the stock can rally a further 5% from current levels.

Qantas historical price trends and analyst projections

Similarly, technical indicators point to a strong bullish trend in the stock, with the 5-day moving average sitting above both the 20-day and 50-day average and the 200-day moving average also trending upward.

Still analysts advise overall caution in the sector amid the political uncertainty.

Stuart Roberts from Stocks Down Under:

“That blunts what has been a pretty good 3 or 4 years for the travel sector post-Covid. It might be temporary once the bureaucracy stops being scared about how to manage these flows. (But) I'd stay away from that sector for the next year or so.”