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The Experiences Megatrend Insync Fund Managers August 2023
Despite Covid's interruption it has continued to gain momentum. Its recovery is proving remarkable, as experiences remain a potent megatrend with substantial growth potential ahead, even amidst short-term economic woes. Despite the headlines throughout the pandemic and general market commentator's gloomy predictions, our research at Insync told us otherwise. For players that had strong capital bases, tight reins on expenses, and prudent investment allocation strategies, they could endure the worst the pandemic could throw at them. These businesses emerged stronger, such as the prime stock in our portfolio did. Many of its peers however weren't as strong, with some folding or forcibly downsized. Additionally, entire sectors of travel/experiences almost collapsed (e.g. cruise lines). For those left standing, their hold on the market and thus their margins became bigger and stronger. An increase in interest rates and inflation had minimal impact on their performance in the post pandemic recovery.
These businesses emerged stronger, such as the prime stock in our portfolio did. Many of its peers however weren't as strong, with some folding or forcibly downsized. Additionally, entire sectors of travel/experiences almost collapsed (e.g. cruise lines). For those left standing, their hold on the market and thus their margins became bigger and stronger. An increase in interest rates and inflation had minimal impact on their performance in the post pandemic recovery. What and who is driving this megatrend? Over the past decade, the desire of consumers has shifted towards experience-based offerings and is influencing people's spending priorities. This shift spearheaded initially by millennials has spread across all age groups. Ironically it gained further traction from covid's travel restrictions. A proof point can be found in air travel; that whilst business trips are relatively flat compared to pre-covid, overall commercial flights hit a global record in June this year. A significant majority of 74% of Americans, as a further example, now prioritize experiences over material possessions according to a third-party research study. This is no different to us here in Australia and New Zealand or in Europe. Notably, millennials and Gen Zers are leading this trend as travel becomes an increasingly regular and a vital priority for these age groups . With 44% of travellers aged 18 to 34 asserting that travel is more important post-pandemic, it's evident that this generational shift is taking hold.
The fast approaching impact of AI on this megatrend. With AI developing quickly it is vital to understand its impact on business models of all companies that we invest in. Our research shows that online travel agencies(OTAs) are extremely well placed, contrary to many investors placing them in the AI loser's basket.
This is because the OTAs operate far downstream of where AI will have its heaviest and nearest impacts. Consider this single aspect; OTAs employ tens of thousands of staff in local markets around the world to source then continue to manage the fragmented accommodation supply to make it homogenously, digitally bookable globally. Importantly, our prime holding is already investing heavily in utilising AI. This is a critical piece of OTA infrastructure that the likes of Google or ChatGPT will both struggle to execute and match the capabilities of dominant OTAs. Indeed Google recently tried and failed to gain a foothold in this sector after significant investment and effort. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
