The economic reopening this year hinges on one thing: vaccines. The more people get vaccinated against Covid-19, the faster and broader the economic reopening will be as people resume normal routines and feel safe congregating in-person again.
The U.S. has been doing great on the vaccine front in recent months, managing to inoculate 41% of the adult population. However, recent reports that vaccination rates across the country are slowing (down as much as 11% in a week, by some estimates) is cause for concern as it could hamper the economic recovery. And no industry is more concerned about a vaccine slowdown than travel and leisure.
People being inoculated and able to gather together again is critical to airlines, hotels, theme parks and other companies operating in the tourism space — especially with the peak summer season fast approaching.
In this article, we look at seven travel stocks that are nervous about the vaccine slowdown.
- Six Flags Entertainment (NYSE:SIX)
- Hilton Worldwide Holdings (NYSE:HLT)
- American Airlines (NASDAQ:AAL)
- Airbnb (NASDAQ:ABNB)
- TripAdvisor (NASDAQ:TRIP)
- Royal Caribbean (NYSE:RCL)
- Century Casinos (NASDAQ:CNTY)
Travel Stocks: Six Flags Entertainment (SIX)
Is it safe enough to terrify ourselves by riding roller coasters again? Theme park operator Six Flags is hoping so with plans to reopen most of its 27 properties in the U.S., Canada and Mexico this summer.
Six Flags Entertainment owns more amusement parks and water parks than any other company in the world. In 2019, before the pandemic descended, 32.8 million people visited Six Flags parks. To say 2020 was an abysmal year is an understatement. Attendance at its parks last year fell short of 7 million people, down 26 million from 2019. Revenue last year plunged by $1.1 billion and the company posted a net loss for the year of $423 million.
SIX stock began recovering this year on hopes that the economic recovery will lead to increased business at Six Flags amusement and water parks. However, the share price has stalled since early March at right around $50 as investors take a more “wait-and-see” approach to the company and its stock.
Any slowdown in the roll out of vaccines could be problematic for Six Flags and its hopes to get its attendance levels up. The summer is particularly important to Six Flags as it is when the company earns the vast majority of its revenue from people visiting its parks.
Some analysts see this stock as a risky bet until the economic recovery is firmly underway.
Hilton Worldwide (HLT)
Travel is essential to hotels and Hilton has been affected more than most companies by the shutdown in domestic and international travel over the past year. After all, Hilton owns or operates more than 6,200 properties (including timeshares ) in 118 countries around the world. Empty hotel rooms spell doom for a company such as Hilton, which had an occupancy rate under 40% for most of last year.
Hilton Hotels reported a net loss for full year 2020 of $720 million, or $2.56 a share. Like most companies reliant on tourism, Hilton Hotels is looking for a lifeline from Covid-19 vaccines.
And, like other companies on this list, HLT stock started off this year strong, rising 20% in the first seven weeks. But since the last week of February, the share price has been stuck at $127. Investors might be waiting for Hilton to report first quarter results on May 5 to better gauge how the company is recovering before buying more shares, and could also be waiting to see how the broader U.S. economy performs in the coming weeks and months.
Like most cyclical stocks, Hilton Hotels moves in tandem with the U.S. economy’s performance, both in good times and bad.
American Airlines (AAL)
Airlines are among the most prominent travel stocks, and the major carriers are more reliant than ever before on tourism as business travel may be permanently replaced by video conference calls and meetings held over Skype. As the largest airline in the world, American Airlines needs to boost the number of flights being booked by travelers and increase capacity on those flights. And that will only happen if a majority of people get vaccinated against Covid-19.
Forh Worth, Texas-based American Airlines recently reported that it lost $1.25 billion in this year’s first quarter, it’s fifth-consecutive quarterly loss. Revenue in the first quarter was 53% lower than in the same quarter of 2020 at $4 billion.
While American and other airlines are reporting an uptick in leisure bookings heading into the all important summer travel season, the carrier is unlikely to fully recover until Covid-19 vaccinations accelerate all over the world. AAL stock peaked this year at $26.09 on March 15. Since then, the stock has fallen 19% to right around $21.
Speaking of bookings, few companies are as dependent on leisure travel and tourism bookings as Airbnb, the online marketplace for home stays and vacation rentals.
ABNB stock has struggled mightily since hitting an all-time high of $220 a share in mid-February, falling 21% since then to $175. The decline has been prompted by uncertainty concerning the company’s outlook this year, which is entirely dependent on a strong rebound in vacation travel.
Airbnb, which only went public last December, has never been a profitable company. But it reported an eye-popping net loss for 2020 of $4.6 billion. (Cue the stock selloff). Still, the company is trying to remain positive, pointing out whenever it can that it foresees an addressable global market of $3.4 trillion, and that it has a competitive advantage in the leisure and travel space.
Airbnb did pioneer the home vacation rental concept and should recover once people are again willing to leave their house and sleep in someone else’s.
TripAdvisor, the online company that enables people to compare prices and make reservations for hotels, restaurants and rental cars, needs for travel to recover for its business to start growing again.
TRIP stock has been recovering and is up 80% year-to-date at just under $50 a share. However, the company’s share price today is lower than it was in 2018 and about half the price it was at in 2014 when the stock was trading at $110 a share. In many respects, the global pandemic has exacerbated the problems that already existed at TripAdvisor.
TripAdvisor’s revenue fell 61% year-over-year in 2020 as online users of its website and advertising declined. The company reported a net loss of $289 million for the year compared to a profit of $126 million in 2019. However, even before the pandemic, TripAdvisor was seeing its hotel bookings decline.
In recent years, the company’s non-hotel business unit, known as “Experiences and Dining,” has driven revenue growth. Until travel and dining recover with the Covid-19 vaccine roll out and broader economy, it might be best to avoid TRIP stock.
Royal Caribbean (RCL)
The situation with the cruise line industry is getting so dire that the governor of Florida is suing the Centers for Disease Control and Prevention (CDC) for issuing onerous guidelines that companies such as Royal Caribbean must follow in order to take their massive ships out of dry dock and sail the high seas again.
While Royal Caribbean and others say they have their own protocols in place to protect people aboard their cruise ships, they may not be able to begin unencumbered operations again until Covid-19 vaccinations reach a critical mass.
The drama swirling around the entire cruise industry has hurt RCL stock, which has come down 11% since the end of February to $85.86 a share. Adhering to required local guidelines, Royal Caribbean has resumed operations in some parts of the world, but only in a very limited capacity.
So far, the Miami, Florida-based company has resumed operations in Singapore, Germany, Greece and the Canary Islands. However, to fully recover, Royal Caribbean will need to get its operations going again in the U.S., which is the world’s biggest market for cruising.
Century Casinos (CNTY)
It’s been a bad time to bet on casino stocks. Even among travel sector stocks, casinos, where people sit in close proximity to each other while breathing recycled air, have been hard hit. Case in point, Century Casinos, the gaming company headquartered in Colorado Springs that operates 11 casinos in the U.S., Canada and U.K. Not only have Century Casinos’ main properties been shuttered over the past year, but the company also operates casinos aboard cruise ships for several different cruise lines, including Diamond Cruise International, TUI Cruises and Windstar Cruises.
CNTY stock has been pulled higher this year, but at about $10.75 a share, it is currently at the same level it was at before the pandemic shut its operations.
As well, the company’s debt situation coming out of Covid-19 has raised some eye brows on Wall Street. The company had debt of just under $500 million at the end of 2020 and cash on hand of only $63.4 million. While the casinos have seen a boost in foot traffic in recent months, greater numbers will be needed to repair the company’s balance sheet.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.