Stocks are hopping Monday, with shares of online travel agencies (OTA) holding company Booking Holdings (NASDAQ:BKNG) up a whopping 14% in noonday trading, and rival Expedia Group (NASDAQ:EXPE) doing even better -- up 16%. Sabre Corporation (NASDAQ:SABR), which operates a business-to-business...er, business...providing hotel, airline, and rental car inventory, pricing, and availability data to other OTA companies is performing best of all, up a staggering 19.5%!
Why all the optimism about travel in the midst of a pandemic -- and a pandemic-induced recession?
Investors are starting to look forward to the day when a cure for coronavirus will be found, this recession will be over, and business will eventually return to normal. Reinforcing that belief, biotech Moderna Inc. this morning released "interim Phase 1 data" on a vaccine it has under development -- "mRNA-1273" -- which suggests the vaccine "was generally safe and well tolerated" in the clinical trial, "elicits an immune response of the magnitude caused by natural infection" in humans, and "provided full protection against viral replication in the lungs in a mouse challenge model."
Simply put, mRNA-1273 appears to "work" as a vaccine against infection with COVID-19. The vaccine is now proceeding to Phase 2 clinical trials with the FDA, and with it, the chances that we'll be able to prevent future outbreaks of the disease increase markedly.
If and when that happens, investors seem to be thinking, people may decide that it's safe to travel again -- to reserve flights on airlines, to book hotels at vacation destinations, and to rent cars to drive around once they get there.
All of this makes sense logically. The question is whether consumers will respond logically to the discovery and dissemination of a vaccine, and how long it will take for things to get back to "normal" after they do so.
Right now, the situation for the travel industry, and the OTAs, looks pretty bleak. In Booking Holdings' Q1 earnings report earlier this month, sales dropped 19% year over year, and earnings fell even faster. Sabre reported an even more disconcerting number at about the same time -- a 113% decline in "industry air bookings" in March!
Next up, though, will be Expedia, which reports its quarterly numbers on Thursday. Reporting a couple of weeks after the others, it may provide the first glimmers of people starting to resume booking travel itineraries, in response to the economy starting to reopen.
Or not. While each successive earnings report offers the potential for news of a change in the trend of travelers-averse-to-traveling, just earlier today, it was reported that Booking Holdings is laying off 1,500 workers at its "Agoda" Asian travel subsidiary. That move follows reports of similar layoffs and Booking-owned Kayak and OpenTable. And while the earlier layoffs happened a month ago, in the middle of the coronavirus crisis, the fact that Booking Holdings is still laying off folks weeks later suggests that this OTA company, at least, is not expecting any quick rebound in travel reservations in the near future.
Investors betting on a V-shaped recovery in travel -- vaccine or no vaccine -- may want to rethink their assumptions.