5 Best Travel ETFs to Buy in 2025 | The Motley Fool

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  Travel and Leisure on Tue, Sep 02nd, 2025 by The Motley Fool

Travel ETFs: A 2024 Guide to the Fast‑Gaining Travel‑Sector Investment Category

In the world of passive investing, travel‑related ETFs have surged in popularity over the last couple of years, and the Motley Fool’s latest piece on Travel ETFs highlights why this category is worth paying attention to. The article explains the fundamentals of travel ETFs, breaks down the key players in the market, and offers practical guidance on how to pick a fund that aligns with your risk tolerance and investment goals. Below is a concise summary of the article’s main take‑aways, organized into the themes it covers.

1. Why Travel ETFs Have Become a Hot Ticket

The article starts by noting that the travel sector has experienced a renaissance. With the gradual easing of global travel restrictions, consumer confidence has rebounded, and the travel industry’s performance is mirroring the broader economic recovery. As a result, ETFs that track travel and leisure companies have become attractive to both institutional and retail investors.

Key points: - High Growth Potential: Companies in this space—airlines, hotels, online travel agencies, and cruise lines—have historically posted double‑digit annual returns in strong growth periods. - Diversification Benefits: Investing in a basket of travel stocks reduces company‑specific risk compared to buying a single stock like Expedia or Marriott. - Liquidity and Low Cost: Many travel ETFs have thin trading costs and high average daily volume, making them easy to buy and sell.

2. The Core Travel ETFs in the Spotlight

The article highlights four to five ETFs that are the most frequently cited by analysts. Each fund offers a slightly different angle on the travel industry, and the piece explains what makes each one unique.

The article includes a quick snapshot of each ETF’s 3‑year, 5‑year, and 10‑year performance, which all beat the S&P 500’s returns during the past decade, but with higher volatility.

The iShares U.S. Travel & Leisure ETF (ITB) is the most heavily traded and has a large market cap, making it the go‑to for investors who want a pure U.S. exposure. First Trust Travelers ETF (TRVL) gives a broader, international perspective and leans more heavily on the airline and hotel sectors. XLY is a consumer‑discretionary fund that automatically gives you a small slice of travel stocks—great for investors who want a blended approach. Finally, the article mentions that a few newer niche ETFs—like a “cruise‑focused” ETF—are emerging, though they come with higher expense ratios and lower liquidity.

3. How to Evaluate a Travel ETF

A good portion of the article is devoted to a practical framework for picking an ETF. The authors suggest considering the following five dimensions:

1. Investment Objective – Does the fund track a broad index or a specialized sub‑sector?
2. Expense Ratio – Low costs are especially important when you’re building a long‑term portfolio.
3. Tracking Error – How closely does the ETF follow its underlying index?
4. Liquidity – Look at average daily volume and bid‑ask spreads.
5. Risk Metrics – Review beta, standard deviation, and Sharpe ratio relative to the sector.

The article even walks readers through a quick calculator: you can compare two ETFs side‑by‑side using a spreadsheet that incorporates the expense ratio, the fund’s 5‑year annualized return, and a volatility estimate. The authors note that, after adjusting for costs, ITB often delivers a superior risk‑adjusted return versus TRVL.

4. Risks to Keep in Mind

While travel ETFs can offer enticing upside, the article warns that they are also prone to volatility and “negative tail risk.” Some key risk factors include:

• Pandemic‑Related Shocks – Even a mild resurgence could slash the travel industry’s valuation.
• Fuel Price Volatility – Airlines are highly sensitive to jet‑fuel costs, which can cause earnings swings.
• Geopolitical Events – Travel restrictions and geopolitical tensions can hit global airlines hard.
• Interest Rate Risk – Rising rates can make borrowing more expensive for capital‑intensive companies like airlines and cruise lines.

The article stresses that investors should be comfortable with short‑term swings and keep an eye on macro‑economic data, such as airline fuel hedging reports and consumer travel surveys.

5. Building a Travel‑Focused Portfolio

Finally, the article suggests how to weave travel ETFs into a diversified portfolio. A common approach is a “core‑satellite” model:

• Core – A low‑cost, broad‑sector ETF such as XLY or VOO (S&P 500).
• Satellite – One or two specialized travel ETFs like ITB or TRVL that provide the targeted exposure.

The authors provide a sample allocation: 70% in core ETFs, 30% in travel satellites. This balance gives investors the upside potential of the travel sector while maintaining broad diversification.

Bottom Line

The Motley Fool’s Travel ETFs article argues that the travel sector is at a “sweet spot” of growth potential, liquidity, and diversification. Among the funds they highlight, the iShares U.S. Travel & Leisure ETF (ITB) and First Trust Travelers ETF (TRVL) are the front‑runners, especially for investors seeking a pure play. For those who prefer a blend with other consumer discretionary assets, XLY is a solid choice.

Ultimately, the article encourages investors to match the ETF’s focus, cost, and risk profile with their own investment horizon and appetite for volatility. By following the framework laid out, you can add a dynamic, high‑growth component to your portfolio while keeping overall risk in check.