Hotel industry suffers with vacant earnings
City Lodge’s well-documented pains are not unique. Covid-19 has smashed the tourism industry globally, with airlines and hotels the worst hit of all. These are costly businesses to run and losing practically all revenue for months on end was never in the disaster plan.
It’s a global problem
Hilton reported an earnings decrease of 77.3% to $564m, significantly worse than analysts estimated. Although 96% of the group’s hotels are now open, bookings for one night in Paris just aren’t happening. Perhaps a family member needs to draw attention to herself again to give revenue a boost?
Moving along from the rather colourful history of the family behind the name, Hilton is cutting 22% of its workforce to try and get through this mess.
Marriott reported similar results, as revenue plunged 72.4% to $1.46bn. 91% of Marriott’s hotels are open and Chinese occupancy is reported to be 60%, so things are slowly starting to pick up in specific countries.
In both cases, management noted that a recovery to pre-Covid levels will take a few years.
Surprisingly, Hilton’s share price is only down 23% year to date. Marriott’s share price is down 37%, which feels like a somewhat fairer reflection of the realities than Hilton, but still feels light. Marriott is the larger of the two companies, with market cap of $31bn vs. $23bn for Hilton.
Touching on a few other listed companies in the travel industry, we see Trip Advisor down 30% for the year, Royal Caribbean Cruises down 57% and Carnival Cruises down a staggering 70%.
What about the hotel company that doesn’t own hotels?
You may be wondering how Airbnb has fared in all of this. Airbnb isn’t a listed company but was on the verge of coming to market in an IPO before the Covid-19 crisis hit. Since then, the company has had to cut staff by 25% and has focused on repairing relationships with hosts after it allowed non-refundable bookings to be cancelled.
Airbnb was once valued at $31bn, similar to the current valuation of Marriott. Airbnb doesn’t have expensive hotels to run and will be able to adapt its business model to a new world far faster than the hotel groups will be able to, but its valuation would’ve still taken a knock.
Airbnb’s chief executive Brian Chesky commented in July that the IPO plans were back on track, so it will be fascinating to see how investors will react when the world’s most interesting tourism business finally comes to market. In the meantime, the hotel companies will need to fight for survival.