Travel stocks jumped once again on Monday after the market took a more optimistic view of the COVID-19 pandemic. Georgia was the highest-profile state to begin opening its economy, and others are slowly making moves to bring businesses on line.
In early trading, shares of Marriott, Las Vegas Sands, Carnival, and Royal Caribbean all jumped over 5% as the S&P 500 traded up 1.5%.
|Company||Biggest Change||Change as of 12:30 p.m. EDT|
|Marriott (MAR -1.78%)||6.9%||6.8%|
|Las Vegas Sands (LVS -1.32%)||10.6%||8.1%|
|Carnival (CCL -3.15%)||9.7%||9.4%|
|Royal Caribbean (RCL -0.95%)||8.7%||8.2%|
Investors in the travel and hospitality industry are trying to figure out when any sort of business will start coming back. A few states are starting to loosen restrictions. Georgia and South Carolina have been two of the most aggressive at opening this week, but many other states are opening up nonessential businesses like manufacturing and some offices.
The other data point we got from the industry was Las Vegas Sands' earnings report last week, which pointed to a steady recovery in Asia. The company has operations in Macao and Singapore, and management thinks demand will start to return in early summer and steadily grow as the year goes on.
On top of seeing customers come back, Las Vegas Sands highlighted how it has 18 months of liquidity even if it has no revenue. Companies may have more ability to cut costs and survive long-term than investors had given them credit for, which would point to an eventual recovery in profits we once saw from these hospitality giants.
There are two questions being faced by the hospitality business today. One is about sheer survival, and that's why companies like Carnival have raised billions of dollars to try to just stay afloat during the COVID-19 pandemic and make it to the other side. The other question is when a recovery takes place and how quickly the business comes back. For today, investors are speculating that a recovery is in the works in some states as soon as the next few weeks.
Not every company will see the same recovery, depending on its business and geographies. Las Vegas Sands has the advantage of having a big presence in Asia, where the outbreak is more under control. But cruise lines may take a lot longer to recover, so investors will see very different results over the next few years in travel and hospitality. Stock buyers need to be aware of that fact.