BKNG Stock – For Travel and Leisure Stocks, This Summer Has Been No Vacation. Here’s Why.
After surging late last fall on encouraging Covid vaccine news, many travel and leisure stocks in recent months have taken a trip to the land of negative returns.
Travel-related stocks from casino operators like
MGM Resorts International
(ticker: MGM), to hotel chains like
(MAR), to cruise operators like Caribbean Group (
) have all lagged behind the market since the end of February, with the latter two posting negative returns.
Avis Budget Group
(CAR) is down some 25% off its highs in mid-June, despite a shortage of rental cars.
On Thursday, these trends continued as the sector fell more than the broader market; the
Defiance Hotel Airline & Cruz ETF
(CRUZ), for instance, was down 1.35% Thursday versus a 0.9% decline in the S&P 500.
One concern weighing on these stocks: the fast-spreading Delta variant, another reminder that the battle against Covid isn’t over.
Still, “the fact that it’s been a very broad-based selloff from the highs tells me there are multiple factors,” says Chris Woronka, a leisure and hotel analyst at Deutsche Bank.
Woronka and others point to a host of potential factors, among them the notion that many of these stocks got ahead of themselves as recovery plays and became too pricey.
Royal Caribbean’s Celebrity Edge embarked from Fort Lauderdale, Fla., on June 26, the first departure from a U.S. port among the three big cruise operators since March 2020 due to the pandemic.
There were no reported Covid incidents during that cruise or several subsequent voyages for the company, but its stock is down about 10% since the day before the first Edge cruise departed.
“We are watching everything and we’re really being very careful,” Royal Caribbean CEO Richard Fain told Barron’s in an interview on June 29, three days after that maiden U.S. voyage’s departure. “While I understand nervousness on the part of Wall Street, that doesn’t seem to be news to the people booking cruises.” The company’s Florida sailings for July and August are sold out.
Another potential worry for travel and leisure stocks: There is “this realization that this is as good as it gets,” as Woronka puts it.
He adds: “My No. 1 question for next year is are people still going to be willing to pay $250 a day for a rental car and $500 a night for a hotel” in certain markets?
Meanwhile, hotel companies have had a nice rebound in their leisure business, but business travel remains well below prepandemic levels, weighing on their share prices.
Hilton Worldwide Holdings
’ (HLT) stock is flattish since the end of February and down about 4% over the past month.
“Investors are trying to assess the net impact of how severe business travel’s impact will be, combined with this remarkable strength in leisure travel,” says Michael Knott, head of U.S. REIT research at research firm Green Street.
However, the market also has been tough on travel companies that don’t have business customers, as evidenced by the recent pressure on cruise stocks. Another example is timeshare firms, which rely entirely on leisure customers, many of them domestic.
The shares of one of those companies,
Marriott Vacations Worldwide
(VAC), are about 13% lower over the past month.
It’s yet another example of the many crosscurrents roiling these sectors.
Write to Lawrence C. Strauss at [email protected]