These Are Europe’s Travel Stocks to Watch Amid Coronavirus Chaos

(Bloomberg) --

European travel and tourism stocks are being crushed by the coronavirus outbreak as investors bet trips for business and pleasure will be scaled back.

A benchmark tracking the sector is having its worst week since the 2008 financial crisis. And it’s only Wednesday.

Travel & leisure shares are turning out to be Europe’s biggest losers in the rout that’s ripping through equity markets as the virus spreads outside China to countries including Italy, Iran and South Korea. The sector gauge accelerated losses on Wednesday, down 3%.

“The longer this goes on the more inevitable it is likely to become that people postpone holidays and summer bookings,” Michael Hewson, chief market analyst at CMC Markets U.K. said by email. “Recent declines in these sectors show investors are worried about a significant impact on bookings and revenues.”

Travel shares have tumbled in the aftermath of cases being reported on the Spanish holiday island of Tenerife, and in Catalonia, Austria, Croatia and Switzerland, while incidents are on the rise in northern Italy, the focal point of the European outbreak. Latin America had its first case too and the U.S. is warning of the potential for infections at home.

The Stoxx 600 Travel & Leisure Index is down almost 12% since a Feb. 19 peak for the broader benchmark, which has fallen about 8% in the period.

CMC’s Hewson said he was planning on going to the U.S. in April “and I’m already thinking about whether I should delay it, until the outlook becomes clearer.”

Here’s a summary of some of the sub-sectors and stocks to watch.

Airlines

The first affected by the virus outbreak were flagship carriers exposed to travel to and from China, such as Air France-KLM and Deutsche Lufthansa AG, and British Airways parent IAG Group SA, as some long-haul routes to the country were halted. But short haul and discount carriers are also in the spotlight now that the virus is spreading in Europe.

Other airlines to watch include Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc, along with Turkish Airlines, which flies to 322 destinations, and Aegean Airlines in Greece could also be in focus.

“The current marking down of the airline sector is unlikely to reverse in the near-term as the virus spreads around the world and investors try to assess the impact for travel,” Goodbody said in a note on Wednesday.

Airport Operators

In terms of airports themselves, operators like France’s Aeroports de Paris, Germany’s Fraport AG and Austria’s Flughafen Wien AG have all seen their share prices fall by double-digit percentages this month.

Closely-held Heathrow Airport in London said Wednesday it’s “concerned about the global impact” but doesn’t expect a “material negative impact” on its financial results.

Travel Retail

SSP Group, which owns the Upper Crust chain of baguette stands at airports, dropped as much as 7% Wednesday after saying it will take a revenue and earnings hit from the outbreak. Shore Capital analyst Greg Johnson cut his profit forecast for the firm, on the assumption the trends SSP has seen in Febuary will continue into March.

WH Smith, which also runs a large number of outlets in airports and train stations, was down as much as 9% before paring the decline.

AmRest Holdings SE, which operates convenience restaurants in eastern Europe, France and Spain, slid 5.7%, extending losses into a third day.

Package Holidays

Tuesday’s news of the first infections in the Canaries will be of particular concern for the likes of TUI AG and On the Beach Group Plc, as the Spanish islands off the coast of Africa are among the most popular choices for holidaymakers seeking winter sun. On the Beach slumped 16% in two sessions as a hotel in Tenerife was quarantined.

Spanish booking technology firm Amadeus IT Group SA is also one to watch. U.S.-listed reservations giant Booking Holdings Inc. has slumped more than 10% this week.

Hotels

Accor SA, InterContinental Hotels Group Plc, NH Hotel Group SA and Melia Hotels International SA are among European hotel chains that may be affected by the epidemic, along with U.S. peers Hilton Worldwide Holdings Inc. and Marriott International Inc.

Accor and IHG earnings estimates were reduced by analysts at UBS given the uncertain outlook due to the coronavirus, according to a Feb. 24 research note.

Cruises

Cruise operators have been roiled by the virus outbreak as a number of ships full of holidaymakers have been quarantined.

The illness will probably reduce cruise demand more than other forms of travel, Morgan Stanley said in a note today, warning that booking volumes have plunged by double-digit percentages in U.S. and Europe in recent weeks, with companies offering discounts amid higher cancellations.

Long booking windows and strict cancellation policies mean revenue yield weakness can be most pronounced six months after incidents occur, analysts including Jamie Rollo wrote in a note.

Stocks to watch include Carnival Corp., which has lost more than a quarter of its value year-to-date, along with Norwegian Cruise Line Holdings Ltd. and Royal Caribbean Cruises Ltd. Also in focus is Saga Plc, the over-fifties-focused cruise firm whose shares dropped almost 10% Wednesday.

Greek-listed Piraeus Port Authority SA could see a decline in the number of cruise ships using its ports, while Cyprus’s Louis Plc may be vulnerable as it has hotel and cruise operations in Greece, Cyprus and the East Mediterranean.

Events

The desertion of Venice’s Carnival this week could be a worrying sign of things to come for events companies.

Shares of German promoter CTS Eventim AG & Co. KGaA and London’s Informa Plc have both tumbled. DZ Bank analyst Thomas Maul warned in a note Monday that authorities could start to withdraw licenses for events.

The sporting world has also been hit, including Italy’s top soccer division, which will play five matches behind closed doors this weekend, including Juventus Football Club SpA’s game with Inter Milan. Shares of Cristiano Ronaldo’s Juventus have dropped 13% this week.

The epidemic is also stoking concern about the Summer Olympics set to be held in Japan later this year, with the country pushingfor major sporting and cultural events to be called off, postponed or scaled down over the next two weeks.

--With assistance from Namitha Jagadeesh, Paul Tugwell, Sam Unsted, Lisa Pham, Tugce Ozsoy and David Verbeek.

To contact the reporters on this story: Joe Easton in London at jeaston7@bloomberg.net;Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Namitha Jagadeesh, Jon Menon

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