According to AAA, 4th of July travel this year absolutely crushed last year’s strong numbers, setting a new all-time record. It’s shaping up to be another hot summer for travel, which is ultimately good news for travel stocks. But you’ll want to be careful. Right now, the travel boom is largely focused on higher-end trips, while budget brands are struggling. Let’s delve into what all this means for investors.

A Tumultuous Half Decade for the Industry

Travel has been all over the place over the past several years. The global pandemic brought the world to a screeching halt in 2020, thanks to lockdowns and stay-at-home orders. But as cities started to reopen, consumers newly flush with stimulus cash started engaging in what was often dubbed “revenge travel.” As those funds ran out and interest rates rose sharply, though, travel spending dipped. Now a strong economy is driving higher-income Americans to travel more than ever, while the rising cost of living is leading those in lower and moderate-income brackets to pull back.

How Can Investors Profit?

Flight prices are dropping overall, which may affect airlines’ bottom line. But overall, the number of flyers is rising. Both domestic and international pleasure trips are on the rise, and business travel has finally bounced back after a sharp and extended pullback in the wake of the pandemic. Since this year’s travel surge is being driven primarily by wealthier Americans, it stands to reason that legacy airlines may be a better investment right now than budget lines.

Nothing is guaranteed, especially in a sector that has been highly volatile in recent years. But most analysts agree that the 4th of July kicked off a strong travel season for 2024. If you’ve been waiting to buy into the airline industry, now might be the right time to do so.