Holiday bookings ‘explode’ but the stock market isn’t convinced
Holiday companies say bookings have ‘exploded’ as travel restrictions ease, but the stock market seems less than enthusiastic.
From 6 July, blanket restrictions on non-essential overseas travel will be relaxed in the UK, and holidaymakers will be allowed to travel to certain European countries without having to spend 14 days in quarantine upon their return.
Tour operator TUI (TUI) saw bookings increase by 50% last week compared to the week before, and Lastminute.com saw an 80% increase in holiday sales compared to the week before, largely attributed to the announcement of Spain lifting the quarantine for Brits.
However, the positive headlines did little to change market sentiment with shares in companies across the travel and hotel sectors relatively flat over the past week.
Perhaps explaining the lack of share price reaction, broker Jefferies said that although easing of restrictions is helpful for companies’ short-term cash flow – due to the pause on working capital outflow from refunds and the restart of working capital inflow from new bookings – it doesn’t think the easing of restrictions is unexpected, given previous government commentary and media reports.
On The Beach (OTB) chief executive Simon Cooper told Shares that his company’s bookings have increased by a ‘few hundred percentage points’ in the past week, but added that this was coming off a very low base with bookings in the week before at ‘almost nil’.
He said, ‘It’s fair to say that throughout the last three months, almost no-one was booking for departure for July and August.’
It comes as the company took a big hit to revenue and profit as a result of the pandemic, with revenue in the six months to 31 March down 66% to £21.4m and adjusted pre-tax profit down 85% to £2.3m. On a reported basis the firm swung to a £34.1m pre-tax loss.
Despite recent enthusiasm, the consensus among analysts is that the road to recovery for the travel sector will be long, with low demand for international travel in summer 2020 and 2021, and revenue only returning to summer 2019 levels by 2023.
Jefferies highlighted three trends from web traffic and search data, which showed that UK domestic holiday demand is high, suggesting holidaymakers are planning a staycation rather than going abroad for summer 2020.
It also found accommodation searches from the UK have picked up, but still lag the recovery seen in European counterparts, and that package operator searches are lagging ‘do-it-yourself’ bookings.