The market’s latest storm has plunged the global travel industry into uncharted territory with Beach stocks-booking, entertainment, airlines, cruises, and hotels-having US$332 billion in value washed away
Since the S&P 500 market high on February 19, 2020, market capitalisations across Beach industries have tumbled. The global airline industry alone has seen $157 billion wiped off valuations across 116 publicly traded airlines.
Investor confidence in cruise lines has also dropped. Between Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings, over half of their market value has evaporated — equal to at least $42 billion in combined market capitalisation.
Today’s info-graphic profiles the steep losses across Beach companies. It looks at the ripple effects across individual companies and industries from the February 19 peak to date.
Falling off a cliff
As the Covid-19 pandemic has spread to over 100 countries, many governments have implemented sweeping travel restrictions.
The impact across Beach industries is far-reaching, with some valuations declining to nearly a quarter of their previous total.
For instance, the consequences on various travel bookings brands have been severe. Booking Holdings, the parent company to Booking.com, Priceline, Kayak and OpenTable, witnessed share price declines of over 35 percent since the peak.
Across the entertainment industry, ticket sales for concerts, movies, and other events are falling precipitously due to cancellations or postponements.
Upwards of $5 billion in global film industry losses could result from the Covid-19 pandemic. Chilling footage of the Las Vegas strip, as well as other tourist epicentres around the world, shows deserted streets as visitors opt to stay home instead.
Bracing For Impact
Meanwhile, worldwide airline revenue is estimated to fall by as much as $113 billion in 2020. In under two months, the share price of Delta Airlines has fallen over 50 percent as the company anticipates a capacity reduction of 40 percent, the largest in its history.
Aruba, Jamaica no more
As for the cruise line industry, global operations came to a 30-day standstill in mid-March. Over 800 Covid-19 cases and 10 deaths across three cruise ships have been discovered.
“Covid-19 on cruise ships poses a risk for rapid spread of disease, causing outbreaks in a vulnerable population, and aggressive efforts are required to contain spread.”
Carnival, a Miami-based company, has witnessed its share price fall to around one third of its February 19 value. Similarly, Royal Caribbean Cruises, which has seen its market cap plummet almost 70 percent, announced that it will suspend trips until mid-May.
As the hotel industry is impacted by the global outbreak, share prices have also realised a significant slump. In the US an estimated $1,4 billion in revenue is vanishing each week. If occupancy levels fall by just 30 percent this year, the US hotel industry could see approximately 4 million jobs wiped out.
The Baird/STR Hotel Stock Index, which serves as a benchmark for the sector’s overall health, has declined over 47 percent year-to-date.
A number of travel industries around the world are calling for stimulus packages.
On March 25, the US Congress finalised a historic US$2 trillion deal, which includes US$25 billion in grants for the airline industry. In the UK, officials are providing small businesses in hospitality and leisure grants that are worth up to US$30 000 as part of its $400 billion bailout plan.
China, Germany, Italy, and Spain have outlined multi-billion dollar proposals in response to Covid-19. Overall, at least eleven countries have announced stimulus plans along with the European Commission and the IMF.
When will the travel wave hit again?
Amid the Covid-19 pandemic one thing is clear: the impact on the travel industry will have a marked effect on the broader economy.
Travel is closely linked with oil, as transportation accounts for over 60 percent of global demand. In Quarter 2, 2020, global oil consumption is projected to fall by 25 million barrels per day.
Along with this, discretionary consumer spending makes up over one third of America’s GDP. The impact of the pandemic across this sector is expected to contribute to a 10 percent decline or more in US GDP for the second quarter.
As conditions materially improve around the world — with China beginning to open up flights — positive signs are emerging from under the surface. Will Beach industries quickly bounce back as infection rates drop, or will a slow and painful recovery unfold in the months ahead?
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