Morgan Stanley predicts that these stocks will profit as the luxury market embraces travel this summer.

As Americans continue to navigate persistent inflation, a recent survey conducted by Morgan Stanley and AlphaWise revealed that many consumers are still planning summer travel despite concerns about rising prices. The survey of 2,000 U.S. consumers in May found that 60% of respondents are preparing to take a summer trip. Notably, higher-income consumers are leading the charge when it comes to travel plans, with 75% of those earning between $75,000 and $150,000 and 78% of those making over $150,000 indicating they have travel plans.

In terms of discretionary spending priorities, travel is a top choice for high-income consumers this summer according to the survey. Additionally, these consumers are willing to spend more on their vacations this year, with 21% of those in the $150,000-plus bracket planning to spend significantly more compared to last year. This positive outlook for high-end consumer spending is expected to benefit companies with exposure to this demographic, according to Morgan Stanley analysts led by Michelle Weaver.

When it comes to investment opportunities in the travel industry, Morgan Stanley analysts are favoring premium airlines like Delta Air Lines, which has seen strong demand and exceptional growth in premium cabin travel post-pandemic. Delta’s focus on the premium market is expected to drive revenue growth and performance in the coming months. Analysts also recommend Alaska Air and American Airlines as top picks in the airline sector due to their initiatives in premiumization and overall positive performance.

In the lodging sector, upper scale and luxury properties are outperforming midscale and economy properties, with Marriott and Hilton being highlighted as strong contenders in this space. Marriott’s strategic leverage and Hilton’s stable revenue per available room are attractive investment options, according to Morgan Stanley analyst Stephen Grambling. Grambling also sees potential in Wyndham, which despite having a lower-end skew compared to other lodging companies, could benefit from a re-acceleration in travel trends.

Although the cruise industry saw a significant rebound last year, Morgan Stanley analysts have a mixed outlook for cruise lines this summer. While higher-income consumers are more likely to favor cruise lines like Royal Caribbean and Norwegian Cruise Line over Carnival, the booking window for cruises is long, making revenue beats uncertain for the upcoming season. Royal Caribbean is up 14% year to date, while Carnival and Norwegian have experienced declines, prompting analysts to maintain an equal-weight rating on Royal Caribbean and underweight ratings on Carnival and Norwegian.

Overall, despite concerns about inflation, high-income consumers are driving summer travel trends, presenting opportunities for investment in premium airlines, luxury lodgings, and select cruise lines. As the travel industry continues to recover from the impacts of the pandemic, companies that cater to the high-end consumer market are expected to outperform those targeting lower-income demographics. Investors looking to capitalize on the resurgence of travel should consider these recommendations from Morgan Stanley analysts for a potentially profitable summer season.