REPORT FROM U.S.—The swine flu might have been falsely presumed to create a drop in stocks on Monday, according to an industry analyst.
News reports Monday indicated that hotel stocks around the world were dropping in response to the swine flu scare and its potential impact on travel and tourism businesses.
While there is no doubt that flu fears are top of mind at hotel companies, there is no evidence yet that they will have a profound impact on performance, and, therefore, investors have not yet reacted. (Read “History says avoid virus hysteria,” from Forbes.)
David Loeb, senior research analyst, Lodging, at R.W. Baird, said U.S. hotel stocks had a rally on Friday, 24 April, which could more likely be the cause for a drop on Monday, 27 April.
“The reality here is that stocks were ready to give some back,” he said. “There were some nice moves at the end of last week after Host (Hotels and Resorts’) stock offering.”
U.S. hotel stocks closed at about a one-month high on Friday.
It would be prudent in the next week to watch how many actual cases of the flu are reported and how the media handles the situation, according to Loeb. “At the end of the week, we might have more information about this particular virus and whether there are reasons for people to stay home.”
The World Health Organization on Monday raised the influenza pandemic to phase four, which indicates a sustained level of human-to-human transmission able to cause “community-level outbreaks,” but is not considered a full-blown pandemic nor is a pandemic inevitable. The director general recommended not to close borders and not to restrict international travel.
“It is very early days,” Loeb said. “The evidence is clearly conflicting, whether there will be restrictions rather than cautions.”
As a matter of fact, by taking a week-long view of stock performance, many companies are still showing positive growth, according to data on WSJ.com.
The top three performers in a one-week analysis, at press time: Interstate Hotels and Resorts (up 47.06 percent); Spanish company NH Hoteles (up 31.13 percent); and Sonesta International Hotels Corporation (up 20.83 percent), according to WSJ.com. Among the worst performers in the same time period are Orient Express Hotels Ltd. (down 16.90 percent) and Lodgian (down 6.82 percent).
Yet a residual effect of this flu scare might be investor hesitance.
“This concern about a flu pandemic raises investor concern that maybe it’s too early to jump back into stocks,” Loeb said.
At Monday's closing bell, one-day price change for select hotel companies:
|
Company
|
One-day change |
Listed on: |
| Choice Hotels International |
-3.22 % |
NYSE |
| DiamondRock Hospitality Company |
-17.92 % |
NYSE |
| InterContinental Hotels Group |
-5.56 %, -28.50 % |
NYSE, LSE |
| Marriott International |
-5.07 % |
NYSE |
| Rezidor Hotel Group |
-1.9 % |
STKM |
| Starwood Hotels & Resorts Worldwide |
-10.90 % |
NYSE |
| Whitbread |
-21.50 % |
LSE |
| Wyndham Worldwide Corporation |
-11.37 % |
NYSE |
