Coronavirus hit Marriott International (MAR 0.27%) stock like a proverbial tons of bricks.
The pandemic hasn't been kind to the economy in general, of course, wiping out as many as 40 million jobs and sparking a 33% plunge in Q2 GDP. But Marriott, whose fortunes are tied to the travel industry, was particularly susceptible to a pandemic that locked many Americans inside their homes and dissuaded most from traveling (eliminating the need to book hotel rooms).
In Q1, when the virus first emerged in the U.S. (Marriott does 79% of its business within U.S. borders), the company's sales dropped 30%. In Q2, by which point the pandemic had tipped us into recession, revenues plunged 81%.
The revenue declines were bad enough -- but here's the really bad news: Hotels must maintain a certain level of occupancy just to break even and generate the cash they need to service their often heavy debt loads. (Marriott owes $12.8 billion). As investing maven John Mauldin pointed out in his latest "Thoughts from the Frontline" newsletter over the weekend, "half of hotel rooms in the US are empty as of six days ago. They need at least 80% occupancy to break even."
Investors are understandably nervous about how this will all play out. Marriott International stock that cost $151.50 a share at the beginning of this year closed just over $96 Friday. It's lost 36.6% of its value since the year began. If on January 1, 2020, you had invested $10,000 in Marriott stock, today, you'd have lost $3,660 of that investment.
And all you'd have left is $6,340.
Of course, with the S&P flirting with the record highs it hit in February, Marriott stock stands to benefit. But the road ahead will be a long one, as there's a strong chance most Americans won't want to travel out of an abundance of caution for many more months to come.