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Key Points:
Han sees severe near-term headwinds for travel and leisure earnings Longer term, he expects travel demand to recover based on historical patterns Favourable on Flight Centre (ASX:FLT), Webjet (ASX:WEB) and Event (ASX:EVT) for stronger balance sheets Neutral on Qantas (ASX:QAN) and Virgin; very cautious on Corporate Travel (ASX:CTD) due to accounting issues
Brian Han from Morningstar outlines a cautious view on the travel and leisure sector, noting share price falls of 20–40% this year as markets price in prolonged headwinds from elevated oil prices, inflation, interest rates and weak consumer sentiment. Han sees near-term earnings updates as likely to disappoint, with both international and domestic travel demand under pressure as cost-of-living constraints bite.
Over a longer horizon, Han points to the sector’s historical resilience after shocks such as SARS, 9/11, the GFC and Covid. In his view, the key is to focus on operators with strong balance sheets and liquidity that can endure current conditions and benefit when travel activity eventually normalises, potentially aided by a stronger Australian dollar for outbound travel.
Han highlights Flight Centre (ASX:FLT) and Webjet (ASX:WEB) as preferred ideas, arguing they combine solid market positions, improved operating efficiency and technology-driven cost reductions. He expresses concern over Corporate Travel Management (ASX:CTD), assigning a 50/50 chance of relisting after accounting issues and seeing this as further damaging sector sentiment. For Qantas (ASX:QAN) and Virgin, he views current pricing as fair, while noting Event Hospitality & Entertainment (ASX:EVT) faces similar demand softness but is supported, in his view, by a strong balance sheet and asset sales.
