Colorful returns: Fall, leisure travel, and climate change

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The above image is the current banner on the Delta website. Fall drives leisure travel, and leisure travel is becoming increasingly big business and crucial to the bottom line of investors. Take Delta’s own earnings call this week — the airline company pointed to structural demand changes in premium offerings (their most profitable option). Increasingly, a greater share of their earnings is being driven by leisure flyers seeking a more comfortable experience. As Zoom supplants physical business travel, leisure is compelling people to go see the sites — but they want to enjoy the ride. The trend is having an increasing impact on bottom lines and thus, investor returns.

Therefore, investors should be keenly aware of what ‘moves people’ [pun intended] such as fall tourism, and how these seasonal movers are being influenced by climate change so they know where their bottom lines are headed and how they can, in turn, get ahead of these influencers.

Case study in fall colors:

This time of year in most of the U.S., bright and colorful foliage brings droves of tourists to come and admire them in the annual tradition known as “leaf peeping.” But as climate change impacts weather and seasonality, the vibrant trees in the fall could look different in the coming years — and the multi-billion-dollar tourism and hospitality industry in these locations will have to adapt.

A spectacular leaf-peeping season depends on a delicate balance of conditions: warm days and low temperatures (above freezing) at night boost the production of the red pigments in leaves, marking an exciting season that usually lasts from late September to early November. But threats include early frosts, which weaken the colors; heat waves, which lead to leaves dropping before they even turn; droughts, which dry out and wither the foliage; invasive pests, which eat leaves or kill the trees; and extreme events like hurricanes that strip trees of their leaves altogether.

Many areas that typically would feature beautiful reds, oranges and yellows are still green so far this year. In northern Maine, where peak conditions typically arrive in late September, forest rangers had reported less than 70% color change and moderate leaf drop as of the beginning of October, according to local news.

The tourism and hospitality sector, the outdoor recreation industry, and the airline industry that depend on these seasonal changes are at risk, and investment in the sector could see lower returns. According to the US Forest Service, fall tourism brings $8 billion in revenue to New England alone each year. In Vermont, for example, fall tourism dollars make up 25% of the state’s annual tourism profit.

Leisure travel, and by extension, the tourism, hospitality, recreation, and airline industries, are particularly vulnerable to new shocks: people don’t want to travel to places that will be too hot, too stormy, or too dangerous. In the past year already, it’s been hit hard by COVID-19 and travel restrictions.

A changing climate, with more extreme weather, sea-level rise, and natural disasters, threatens the fundamental concept of traveling: the idea of having a new, enjoyable “experience.” It will change where people travel to, how they travel, and what they do. Investors need to understand how the climate is going to shift and how to get ahead of the coming impacts to protect their investments.

Summary: Fall has always been a driver of tourism (e.g. “leaf peeping”) and thus a driver of returns for investors e.g. fall tourism brings $8 billion in revenue to New England alone each year. Climate change is altering the mechanics of how the seasons change, putting this revenue at high-risk and increasingly impacting bottom lines and investor returns.

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