Travel companies have seen bookings plummet and huge numbers wiped off
their share value.
With no guarantees of when restrictions might be lifted, uncertainly is
the new normal and there are many discussions now about what a recovery might look
Seeking Alpha asked some of its marketplace authors to comment on the outlook
for travel stocks, the likelihood of travel returning to pre-coronavirus levels and the
segments that might come through the crisis better than others.
Bets on Booking
Booking Holdings is one of the companies referenced by most
investors as being able to “survive and thrive.”
The thinking is that if investors can look beyond the next 12 months, during which volatility will likely continue, then the gains will come.
One of the group, known as Canadian Dividend Growth Investor, says: “As long as these travelling stocks, like Booking.com, have staying power, buyers over the course of 2020 should come out with extraordinary long-term returns. Just make sure you have an investment horizon of at least three years."
Financial experts also believe online travel agencies will
emerge stronger than individual brands because they are
Ticketing services and airports are also seen as surviving the current
Ian Berek, who last week advised airline stocks should be avoided, makes the point that while brands are replaceable, other services such as ticketing
(think Amadeus and Sabre), OTAs and airports can be seen as essential and where one brand fails, they can bring in new partners
The question of V-shaped, U-shaped or other recovery types is being
discussed across the industry.
Most do not foresee a swift return to pre-COVID-19 levels but, instead, a
slower recovery will take place.
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Investors are no different and see demand for local and regional travel
in the near term as confidence grows.
They also highlight that many travel consumers are losing their jobs, so any notion
of people wanting to “make up for lost time” is unlikely to come in play immediately.
Broadly speaking, however, financial investors are positive about a return to normal
travel spending at some point.
They also believe business travel will come back strong despite some commentators arguing that employees and their companies will get used to working from home and corporate travel will be reconfigured to take new practices into consideration.
The question of how long it will be before the world's markets and travel as an industry begins to recover
is also a inevitable hot topic.
Investors views vary, from believing there is further fallout to come in
terms of stock value to that it will take six to nine months.
Canadian Dividend Growth Investor says: "I expect earnings to fall off a cliff for all travel stocks. Depending on the industry, I expect earnings to fall as much as 30% to 200%. However, I expect a quick recovery after the pandemic is over."
And Berek adds that investors need to plan for "massively lower demand" and not expect anything before the Thanksgiving holiday in the U.S. at the end of November.
A significant amount of hope is also being pinned on the development of a vaccine by
early 2021, so that a recovery can push through the rest of next year
and into 2022.
The panel was also asked about which industries would receive bailouts
and, if so, by how much?
Like much of the industry, investors have seen the debates around whether airlines should get aid, Booking.com's partner landlords and their mortgages, and the remaining travel-related elements such distribution, both online and offline.
One investor points out that it could actually be more costly to let a
company die than give it some aid because of the knock-on impact to other brands in the ecosystem.
This issue has also been highlighted by IATA in the past week.
Others question whether the market needs the volume of airlines in the sector, with airline chiefs themselves having previously said that weak airlines should not get aid and that the fallout of the virus will likely accelerate consolidation.