Another day, another big drop in stock price for the biggest hotel and cruise line operators. This is becoming a theme and if the COVID-19 pandemic gets worse, we may see stocks fall even further. Hotel company Marriott International Inc (MAR 4.76%) fell as much as 35.6% in trading Wednesday, Hyatt Hotels Corporation (H 7.16%) dropped 46.8% at the max, and Hilton Worldwide (HLT 5.60%) plunged up to 31.7%.
The stocks closed the day with decreases of 15.2% for MAR, 12.6% for HLT, 19% for H, 26.8% for CCL, and 19.3% for RCL.
The market is down nearly 10% as of this writing, so there's no doubt that's weighing on hotel and cruise line stocks. But the other big news is that Congress is starting to consider subsidies or bailouts to industries affected by the novel coronavirus. The hotel industry has asked for a total of $150 billion to pay workers, rent, and suppliers, but there's no guarantee that money will come. And with hotel occupancy below 20% in some highly affected cities and hotel staff being laid off across the country, a bailout may be the only way out.
However, cruise line companies may not be as lucky as other companies hoping for government support. They've been looking for a bailout but haven't been mentioned in most official statements from the White House and there's been pushback from members of Congress when bailouts are brought up. One factor is that cruise industry companies are incorporated in countries like Panama, where taxes are much lower. So they don't pay much in taxes in the U.S., but are looking for a U.S. bailout. It's understandable why that doesn't sit well with members of Congress.
There's probably some relief package coming, but no guarantee hotels or cruise lines will get it and that's why their stocks are sinking today.
We're a long way from this crisis being over and that's what's concerning for investors. Hotels and cruises may be close to empty or shut down altogether for months as consumers cut down on discretionary purchases and practice social distancing, and that'll be tough to survive for even the most prepared company. I wouldn't be buying shares today, and with all of the uncertainty around bailouts, I wouldn't count on the government to save the day for these two industries.