Today, investors in hotel stocks are breathing a sigh of relief. Hospitality names like Marriott (NASDAQ:MAR), Hyatt (NYSE:H) and Hilton (NYSE:HLT) are up after facing declines earlier this week. The same goes for Wyndham Hotels (NYSE:WH), Choice Hotels (NYSE:CHH) and InterContinental Hotels (NYSE:IHG). The culprit behind these declines? The omicron Covid-19 variant.
With the threat of a new variant looming, potential guests may want to (or have to) cancel their reservations, directly affecting the hotel industry. While the severity of the omicron variant is not yet fully known, there have also been reports that it is possibly more transmissible yet less severe in terms of symptoms.
Here’s what you should know about the omicron variant and how Covid-19 news could move hotel stocks going forward.
What’s Going on with Hotel Stocks?
Investors in hotel stocks received a reassuring message yesterday. The message came from Biontech (NASDAQ:BNTX) co-founder Ugur Sahin:
“Don’t freak out, the plan remains the same: Speed up the administration of a third booster shot.”
However, this message was in contrast to what Moderna (NASDAQ:MRNA) CEO Stéphane Bancel said. The Moderna CEO spooked investors when he noted that current vaccines may be less effective against the omicron variant. Bancel added that, if necessary, a new vaccine for the variant should be available by early 2022.
That may sound like it could have an adverse effect on hotel stocks. However, on the bright side, it seems like the U.S. won’t experience another lockdown. Recently, President Joe Biden reiterated his message: “If people are vaccinated and wear their mask, there’s no need for lockdown.”
Whether U.S. citizens follow this message or not will be more clear in the coming months. As of now, though, 59.5% of the U.S. population is fully vaccinated, while 70% of the population has received at least one dose of the vaccine. The Biden administration has set their goal at 80% of the population being fully vaccinated.
In general, hospitality stocks have not been having a good year. The AdvisorShares Hotel ETF (NYSEARCA:BEDZ) has declined 1.6% year-to-date (YTD). The BEDZ exchange-traded fund focuses on the hotel industry, as well as cruise lines and other hospitality-related sectors. In hindsight, investors would have been much better off putting their money in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), as it has returned around 23% YTD.
The Bottom Line on Hotel Stocks
Investors will want to stay up to date on news related to the omicron variant and how it may affect hotel stocks as well as the larger travel and leisure industry.
Lockdowns after the initial Covid-19 pandemic in early 2020 absolutely wrecked hotels. Customers cancelled their reservations en masse. Another lockdown would likely have a similar effect. However, it seems like we won’t experience another mass shutdown yet.
Still, hospitality investors should stay tuned for any updates.
On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
