Between 2012 and 2022 the U.S. elderly dependency ratio is expected to increase by 32%. This is one of the ramifications of the exodus of the Baby Boomers from the workforce and into the realm of retirement. This shift that is currently in motion will have large implications for investors.
One of the primary goals retirees have is to travel. According to Merill Lynch research, Baby Boomers have a combined annual travel budget of $120 billion. With a stronger economy and more retirees, companies suited to provide travel solutions will be positioned to thrive. Where do you invest?
Carnival (CCL) and Royal Caribbean (RCL): Lower energy prices should favor cruise line operators. Also, the industry has high barriers to entry (think the cost of a single ship). Therefore, when the industry experiences growth, the increase will be felt amongst players that are known within the industry, not a smattering of off the wall newbies.
Marriott International (MAR): Hotel inventories have not expanded as they did in the last decade, primarily because of recessionary pressures. In our current state of economic expansion, new inventories of hotel rooms will come online, but not over night. As supply works to catch up with demand, hotel room rates will rise and thus the profit margins of hotel operators. Marriott is a best in class hotel operator. It serves two main markets; business travelers and mid-high level luxury traveler. Their properties are very well positioned to reap the benefits to growth in travel amongst Boomers and the general population.