Travel Stocks Are Crashing. What It Says About the Economy

Investing

Published: March 12, 2025 4:08 pm

The travel and tourism sector is one part of the U.S. economy that’s been on relative fire since the pandemic began.

Indeed, the strength of the U.S. consumer has been on full display, following a period of time in which millions of jobs were lost and pandemic shutdowns and regulations limited which businesses could be open (with many shutting down altogether).

Since the pandemic, which many of us would be happy to forget, revenge spending on key travel stocks has provided a welcome boon for investors. However, despite the rise seen in Delta Airlines (NYSE:DAL) and Expedia (NASDAQ:EXPE) over the course of the past five years, it’s been quite a different story of late. 

Let’s dive into the selloff across many travel stocks right now, and what’s driving this move across the board. 

Key Points About This Article:

• Travel and tourism stocks have rocketed higher since the pandemic began, but this rally has certainly hit a wall recently.
• Let’s dive into what’s causing investor concern in Delta Airlines and Expedia in particular, and what investors may want to make of these recent declines. 
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Delta Airlines Making Big Moves

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Delta Air Lines’ stock has taken a sharp hit following a significant reduction in its profit forecast for the first quarter of 2025. The company slashed its earnings per share (EPS) projection from a previous range of 70 cents to $1 down to just 30 cents to 50 cents, attributing the decline to weaker consumer and corporate travel demand. 

CEO Ed Bastian cited “increased macro uncertainty” as a major factor affecting consumer confidence, leading to a slowdown in domestic travel as businesses cut back on travel expenditures. The market reacted swiftly, with Delta’s shares plunging 14%, dragging down stocks of other major airlines like United and American Airlines. 

Additionally, Delta reduced its revenue growth expectations from a projected 7% to 9% down to 3% to 4%, underscoring the impact of slowing demand. The broader airline industry is also feeling the strain, as the S&P 500 passenger airline index continues its downward trend. 

There’s a reason why analysts and investors in Delta are selling on this news. The worry is that a variety of factors, from Trump’s incoming tariffs to weaker global growth due to reduced government spending in the U.S. and increased job losses, could lead to sharply declining spending on travel over time. If that’s the case, then the valuations Delta and its peers are trading at don’t make sense.

We’ll have to see if this outlook ultimately materializes, or if the company is sandbagging its results. But for now, the outlook doesn’t look strong for this sector overall. 

Expedia Stock Sinking on Weak Airline Outlook

Expedia is one of those companies that’s a direct beneficiary of border travel trends. If more folks are booking airline tickets, they’ll need a place to stay when they reach their destination. And in addition to booking their tickets, hotel, rental car and other amenities via the Expedia platform, the company garners significant income from associated activities on its platform as well.

The lower the expected future demand for travel, the worse the outlook gets for Expedia. Thus, the broader concerns about the airline industry’s outlook are clearly weighing very heavily on investor sentiment.

Expedia and its peers all saw stark drops yesterday on this bearish demand outlook from Delta and other airlines. Market-wide caution is beginning to take hold in this sector, and I certainly can’t blame investors for taking such a view. 

Expedia’s previous rise has generally kept up with earnings growth, and at a valuation of around 18-times earnings, this is a stock that doesn’t look overly expensive here. Thus, we’ll have to see if this recent plunge is one that will be short-lived for this particular name. 

What Does This Mean for the U.S. Economy? 

I think the broader question investors are trying to answer, in assessing the individual prospects of companies like Delta and Expedia, is what these downbeat forecasts for the travel industry ultimately portend for the consumer. 

Recent economic data have signaled a slowdown, with Federal Reserve indicators suggesting potential contraction. Market uncertainty grew over Trump’s tariffs on imports, and it does appear that Delta’s downgraded outlook is just the latest in a rift of data investors are looking at as reasons to sell right now.

Thus, bulls could certainly make the argument that perhaps now is the time to be buying. Generally, when so many investors gather onto the same side of the boat, some may find it compelling to see what the view is from the other side. 

Again, these sorts of shifts in sentiment can be wide-ranging and long-lasting. We’ll have to see if sentiment can, and will, shift back to a more bullish state moving forward.

But with a relative lack of catalysts at the moment, these are the sorts of outlooks investors are likely to take as reasons to sell. That’s the environment we’re in right now, unfortunately.