What happened
Travel-industry stocks popped on the first day back from the Memorial Day holiday, with shares of Hong Kong-based casino operator Melco Resorts & Entertainment (MLCO 2.56%) rising 9.3%, Chinese online travel agency (OTA) Trip.com Group (TCOM 1.29%) closing 9.4% higher, and fellow OTA company Liberty TripAdvisor Holdings (LTRP.A -2.01%) performing best of all -- up 23.5%.
Surprisingly, there was no news relating to any of these three stocks in particular to be found on the newswires today.
Or perhaps not so surprisingly.
As you've probably heard by now, biotech Novavax announced today that it's begun enrolling participants in a phase 1/2 clinical trial of its new NVX-CoV2373 coronavirus vaccine. Although other drugmakers have other vaccines in the works -- more than 120 are in either preclinical or clinical trials, according to researcher Fundstrat -- this one is said by my colleague Keith Speights to have demonstrated signs of "significant immune system response and high levels of neutralizing antibodies." Novavax could have "preliminary immunogenicity and safety results" ready for review as early as July.
Image source: Getty Images.
So what
What does any of this biotech news have to do, though, with travel industry stocks? The thinking goes like this:
Currently, people are afraid to travel because they are afraid of contracting the novel coronavirus during travel, or at their destination. They're also largely unable to travel internationally, because so many nations around the world have halted flights into and out of their countries in an effort to slow the spread of COVID-19. And because consumers can't travel -- and perhaps don't even want to travel -- they're not searching for potential travel destinations, nor booking reservations online.
This is bad news for travel agencies, both offline and online. It's also not great news for a casino and resort operator like Melco, which saw its earnings estimates cut by analysts last week, and was assigned a "negative" outlook by Moody's Investors Service yesterday.
Now what
In order for resorts to begin flourishing again, and Melco's profits to bounce back, reservations must first pick up. And before reservations can pick up, searches for places where travelers might want to book rooms must pick up. For this to happen, people must feel safe enough to want to travel...and that won't happen until people feel confident they can travel without contracting the coronavirus.
A vaccine preventing COVID-19 would be just the thing to get this ball rolling, and get the entire travel-industry supply chain rolling forward again, instead of in reverse. Thus, everything hinges on the discovery of a vaccine. Whenever you see progress on that front, you can expect travel industry stocks to react positively -- just as we saw happen today.
