What happened
Shares of TripAdvisor (TRIP +4.63%) were sliding today after the travel recommendation site got swept up in the broader sell-off over coronavirus fears. Not surprisingly, travel stocks are generally one of the first sectors to get hammered by concerns over a health epidemic. Today we're seeing just that: Hotel, airline, cruise, and online travel stocks are all tumbling in response to news that the outbreak is expanding beyond China.
TripAdvisor shares were down 4.5% as of 12:21 p.m. EST after falling as much as 5.9%.
Image source: Getty Images.
So what
Over the weekend, a number of outbreaks around the world made it clear that the disease, known officially as COVID-19, is a threat not just to China, as the market seemed to believe earlier, but globally.
In Italy, the number of people infected jumped from 10 to more than 200 in just three days, prompting the cancellation of events like soccer games and the ongoing Venice Carnival. In South Korea, meanwhile, the number of cases have skyrocketed to 763 from just 28 on Feb. 14, and in the Iranian city of Qom 50 people were reported dead from the disease this month.
For a travel company like TripAdvisor, such news has a direct effect on its business as people are likely to cancel trips to places where the outbreak is active and stay home or travel closer to home instead. Already, companies and tourists have been avoiding travel to China.
TripAdvisor makes its money by selling travel-related ads for things like hotels and by handling online bookings. If the virus continues to spread, it's likely to have a significant impact on its business and the broader travel industry.
Now what
Travel stocks were already facing pressure this year without the threat of the coronavirus as Alphabet's Google has moved aggressively into the industry and online bookings appear to be reaching maturity after two decades of growth. TripAdvisor, meanwhile, has struggled to overcome the challenges in its hotel advertising business as the company has looked to areas like experiences and bookings instead.
Today's news sent the stock down to an eight-year low, showing the headwinds the company is facing. Considering the risk from the coronavirus, the industry challenges, and TripAdvisor's own problems, it seems that avoiding this stock would be the better path now.
