Shares of travel stocks, including Eldorado Resorts (NASDAQ:ERI), OneSpaWorld Holdings (NASDAQ:OSW), Tripadvisor (NASDAQ:TRIP), and Expedia (NASDAQ:EXPE), were falling today as the sector got swept up in the broader market sell-off.
Though there was no specific news out on these stocks today, markets were rattled as Amazon.com and Apple, two of the most valuable and powerful companies in the world, indicated in their earnings reports last night that the impact of the coronavirus may be greater than anticipated. Amazon said it expected to have just break-even profit in the second quarter as it plans to invest $4 billion in coronavirus-related costs in the period. Apple, meanwhile, declined to provide guidance for the first time since 2003, citing "a lack of visibility and certainty in the near term."
Meanwhile, President Donald Trump also threatened to slap a new round of tariffs on China as retaliation for the coronavirus, which could further destabilize the global economy at a vulnerable time.
The travel industry has been one of the most directly impacted by the coronavirus pandemic, and sector stocks have adopted a "risk-on/risk-off" behavior in recent weeks, swinging higher on good news and lower on bad news. Today, investors ran from the sector again.
As of 12:01 p.m. EDT, Eldorado was down 12.9%, OneSpaWorld shares were off 11.4%, Tripadvisor had given up 7.9%, and Expedia had slipped 5.3%. At the same time, the S&P 500 was down 2.9%.
Reno-based casino operator Eldorado Resorts has been clobbered by the coronavirus-related shutdowns, much like the rest of the gambling industry as the stock has fallen more than 70% since the sell-off began in February. Eldorado may be particularly vulnerable to the disruption as it is in the middle of a $17.3 billion merger with Caesars Entertainment, which is looking increasingly strained with casinos shut down and the effects of the pandemic lasting longer than many had hoped. Last night, VICI Properties, another stakeholder in the deal, said in its earnings release that Eldorado continues to move forward to get regulatory approval for the deal. Shareholders, on the other hand, may be getting cold feet.
It's hard think of a company that's worse-positioned for the coronavirus pandemic than OneSpaWorld Holdings. The company operates health and wellness centers on cruise ships, meaning it's not only exposed to the risk in the cruise industry, but also the risk of personal contact in activities like massage, hair care, and personal fitness. Even if the cruise industry sets sail again, customers may be reluctant to use its services. Yesterday, the stock surged as the company got a $75 million investment from Steiner Leisure, its biggest shareholder. While that infusion solves its liquidity problems for now, the future still looks bleak for the company.
Tripadvisor shares have been volatile in recent days as the company said earlier in the week that it would lay off a quarter of its staff as CEO Steve Kaufer said that the business had been severely impacted by the pandemic. The travel-recommendation site depends on advertisers and with much of the travel industry shut down, hotels and tourism companies aren't buying ads. The company was already struggling to grow before COVID-19 hit, and the pandemic will only make its turnaround plans more difficult.
Finally, Expedia, one of the two biggest online travel agencies in the world along with Booking Holdings, slid along with the macro news. Last week, Expedia raised $3.2 billion in private equity investments and offered another $2 billion in debt, giving it sufficient cash to stay afloat during the crisis, but CEO Barry Diller has been blunt about the pandemic, saying that the company's revenue has gone to virtually zero in recent weeks and that its goal was to conserve cash and survive.
Today, President Trump's stay-at-home guidelines expire, and a number of states, including Texas, took steps to reopen their economies, allowing non-essential businesses to open their doors. That would appear to be a step in the right direction for the travel industry, but the threat of the virus isn't going away anytime soon, and the economic impact of the pandemic is likely to weigh on travel even when it does. Leaders from companies like Delta and Boeing in the airline industry expect it to take two to three years for air travel to recover, meaning losses for travel operators are likely in the interim.
A number of these companies will report earnings next week, giving investors their first look at the impact of the coronavirus. The numbers are likely to be eye-opening.