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The Hardest Hit Companies of the COVID-19 Downturn: The ‘BEACH’ Stocks

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Beach stocks shrinking market cap

beach stocks market cap decline

BEACH Stocks: $332B in Value Washed Away

The market’s latest storm has plunged the global travel industry into uncharted territory.

Since the S&P 500 market high on February 19, 2020, market capitalizations across BEACH industries—booking, entertainment, airlines, cruises, and hotels—have tumbled. The global airline industry alone has seen $157B wiped off valuations across 116 publicly traded airlines.

Investor confidence in cruise lines has also dropped. Between Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings, over half of their market value has evaporated—equal to at least $42B in combined market capitalization.

Today’s infographic profiles the steep losses across BEACH companies. It looks at the ripple effects across individual companies and industries from the February 19 peak to date*.

*All numbers as of market close on March 24, 2020

Falling Off A Cliff

As the COVID-19 pandemic has spread to over 100 countries, many governments have implemented sweeping travel restrictions.

The impact across BEACH industries is far-reaching, with some valuations declining to nearly a quarter of their previous total.

CompanyTickerCategoryMarket Cap: 02/19/2020Market Cap: 03/24/2020% Change
Booking Holdings
BKNGBooking$80.8B$51B-37%
Expedia GroupEXPEBooking$17.1B$8.1B-53%
Allegiant TravelALGTBooking$2.7B$1.4B-47%
Live Nation LYVEntertainment & Live Events$16.3B$9.1B-44%
Six FlagsSIXEntertainment & Live Events$3.2B$1.1B-66%
Cedar FairFUNEntertainment & Live Events$3.1B$1.3B-58%
The Walt Disney CoDISEntertainment & Live Events$255.1B$177B-31%
Penn National GamingPENNEntertainment & Live Events$4.3B$1.6B-63%
Delta Air LinesDALAirlines$37.5B$17.8B-52%
United Airlines UALAirlines$19.7B$8.4B-57%
American Airlines AALAirlines$12.1B$6.1B-50%
Southwest AirlinesLUVAirlines$29.5B$19.7B-33%
Alaska Air GroupALKAirlines$8B$3.7B-54%
Air Canada (in USD)ACAirlines$8.3B$2.8B-67%
CarnivalCCLCruise & Casino$30.8B$10B-67%
Royal Caribbean CruisesRCLCruise & Casino$23.2B$7.5B-68%
Norwegian Cruise LinesNCLHCruise & Casino$11.1B$3.1B-72%
Las Vegas SandsLVSCruise & Casino$52.8B$35.1B-34%
MGM Resorts InternationalMGMCruise & Casino$16.2B$6.2B-68%
Wynn ResortsWYNNCruise & Casino$14.6B$7.2B-51%
Caesars EntertainmentCZRCruise & Casino$10B$4.2B-58%
Eldorado ResortsERICruise & Casino$5.4B$1.3B-76%
Marriott InternationalMARHotels & Resorts$48.3B$25.7B-48%
HiltonHLTHotels & Resorts$31.3B$19.4B-38%
Hyatt HotelsHHotels & Resorts$9.1B$4.9B-46%
Choice Hotels InternationalCHHHotels & Resorts$6B$3.2B-46%
Wyndham Hotels & ResortsWHHotels & Resorts$5.6B$2.9B-48%
Park HotelsPKHotels & Resorts$5.5B$1.9B-66%
Vail ResortsMTNHotels & Resorts$9.98B$5.8B-41%
Marriott Vacations WorldwideVACHotels & Resorts$5.3B$2.2B-59%

For instance, the consequences on various travel bookings brands have been severe. Booking Holdings, the parent company to Booking.com, Priceline, Kayak and OpenTable, witnessed share price declines of over 35% since the peak.

Empty Stadiums

Across the entertainment industry, ticket sales for concerts, movies, and other events are falling precipitously due to cancellations or postponements.

Upwards of $5B in global film industry losses could result from the COVID-19 pandemic.

Chilling footage of the Las Vegas strip, as well as other tourist epicenters around the world, shows deserted streets as visitors opt to stay home instead.

Bracing For Impact

Meanwhile, worldwide airline revenue is estimated to fall by as much as $113B in 2020.

In under two months, the share price of Delta Airlines has fallen over 50% as the company anticipates a capacity reduction of 40%, the largest in its history.

CompanyTickerFeb 19 2020 Share PriceMar 24 2020 Share Price
Delta Air LinesNYSE:DAL$58.5$26.9
United Airlines NASDAQ:UAL$79.4$33
American Airlines NASDAQ:AAL$28.3$13.9
Southwest AirlinesNYSE:LUV$56.89$37.7
Alaska Air GroupNYSE:ALK$65.2$28.9
Air Canada (in CAD)TSX:AC$45.3$15.1

The global airline industry—which employs over 10M people—supports $2.7T in global economic activity across an average of 12M passengers per day.

Aruba, Jamaica No More

As for the cruise line industry, global operations came to a 30-day standstill in mid-March. Over 800 COVID-19 cases and 10 deaths across three cruise ships have been discovered.

“COVID-19 on cruise ships poses a risk for rapid spread of disease, causing outbreaks in a vulnerable population, and aggressive efforts are required to contain spread.”

CDC

Carnival, a Miami-based company, has witnessed its share price fall to around one third of its February 19 value. Similarly, Royal Caribbean Cruises, which has seen its market cap plummet almost 70%, announced that it will suspend trips until mid-May.

Occupancy Dilemma

As the hotel industry is impacted by the global outbreak, share prices have also realized a significant slump. In the U.S., an estimated $1.4B in revenue is vanishing each week. If occupancy levels fall by just 30% this year, the U.S. hotel industry could see approximately 4 million jobs wiped out.

The Baird/STR Hotel Stock Index, which serves as a benchmark for the sector’s overall health, has declined over 47% year-to-date.

baird hotel stock index

Global Stimulus Response

A number of travel industries around the world are calling for stimulus packages.

On March 25, the U.S. Congress finalized a historic $2T deal, which includes $25B in grants for the airline industry. In the UK, officials are providing small businesses in hospitality and leisure grants that are worth up to $30,000 as part of its $400B bailout plan.

China, Germany, Italy, and Spain have outlined multibillion dollar proposals in response to COVID-19. Overall, at least eleven countries have announced stimulus plans along with the European Commission and the IMF.

When Will the Travel Wave Hit Again?

Amid the COVID-19 pandemic one thing is clear: the impact on the travel industry will have a marked effect on the broader economy.

Travel is closely linked with oil, as transportation accounts for over 60% of global demand. In Q2 2020, global oil consumption is projected to fall by 25M barrels per day.

Along with this, discretionary consumer spending makes up over one third of America’s GDP. The impact of the pandemic across this sector is expected to contribute to a 10% decline or more in U.S. GDP for the second quarter.

As conditions materially improve around the world—with China beginning to open up flights—positive signs are emerging from under the surface. Will BEACH industries quickly bounce back as infection rates drop, or will a slow and painful recovery unfold in the months ahead?

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Shapes of Recovery: When Will the Global Economy Bounce Back?

Economic recovery from COVID-19 could come in four shapes—L, U, W, and V. What do they mean, and what do global CEOs see as the most likely?

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The Shape of Economic Recovery, According to CEOs

Is the glass half full, or half empty?

Whenever the economy is put through the ringer, levels of optimism and pessimism about its potential recovery can vary greatly. The current state mid-pandemic is no exception.

This graphic first details the various shapes that economic recovery can take, and what they mean. We then dive into which of the four scenarios are perceived the most likely to occur, based on predictions made by CEOs from around the world.

The ABCs of Economic Recovery

Economic recovery comes in four distinct shapes—L, U, W, and V. Here’s what each of these are characterized by, and how long they typically last.

  • L-shape
    This scenario exhibits a sharp decline in the economy, followed by a slow recovery period. It’s often punctuated by persistent unemployment, taking several years to recoup back to previous levels.
  • U-shape
    Also referred to as the “Nike Swoosh” recovery, in this scenario the economy stagnates for a few quarters and up to two years, before experiencing a relatively healthy rise back to its previous peak.
  • W-shape
    This scenario offers a tempting promise of recovery, dips back into a sharp decline, and then finally enters the full recovery period of up to two years. This is also known as a “double-dip recession“, similar to what was seen in the early 1980s.
  • V-shape
    In this best-case scenario, the sharp decline in the economy is quickly and immediately followed by a rapid recovery back to its previous peak in less than a year, bolstered especially by economic measures and strong consumer spending.

Another scenario not covered here is the Z-shape, defined by a boom after pent-up demand. However, it doesn’t quite make the cut for the present pandemic situation, as it’s considered even more optimistic than a V-shaped recovery.

Depending on who you ask, the sentiments about a post-pandemic recovery differ greatly. So which of these potential scenarios are we really dealing with?

How CEOs Think The Economy Could Recover

The think tank The Conference Board surveyed over 600 CEOs worldwide, to uncover how they feel about the likelihood of each recovery shape playing out in the near future.

The average CEO felt that economic recovery will follow a U-shaped trajectory (42%), eventually exhibiting a slow recovery coming out of Q3 of 2020—a moderately optimistic view.

However, geography seems to play a part in these CEO estimates of how rapidly things might revert back to “normal”. Over half of European CEOs (55%) project a U-shaped recovery, which is significantly higher than the global average. This could be because recent COVID-19 hotspots have mostly shifted to other areas outside of the continent, such as the U.S., India, and Brazil.

Here’s how responses vary by region:

RegionL-shapeU-shapeW-shapeV-shape
Global (N=606)32%42%16%11%
U.S. (N=103)26%42%23%9%
Europe (N=110)29%55%12%4%
China (N=122)25%43%11%21%
Japan (N=95)49%26%23%1%
Gulf Region (N=16)57%26%17%-

In the U.S. and Japan, 23% of CEOs expect a second contraction to occur, meaning that economic activity could undergo a W-shape recovery. Both countries have experienced quite the hit, but there are stark differences in their resultant unemployment rates—15% at its peak in the U.S., but a mere 2.6% in Japan.

In China, 21% of CEOs—or one in five—anticipate a quick, V-shaped recovery. This is the most optimistic outlook of any region, and with good reason. Although economic growth contracted by 6.8% in the first quarter, China has bounced back to a 3.2% growth rate in the second quarter.

Finally, Gulf Region CEOs feel the most pessimistic about potential economic recovery. In the face of an oil shock, 57% predict the economy will see an L-shaped recovery that could result in depression-style stagnation in years to come.

The Economic Recovery, According to Risk Analysts

At the end of the day, CEO opinions are all over the map on the potential shape of the economic recovery—and this variance likely stems from geography, cultural biases, and of course the status of their own individual countries and industries.

Despite this, portions of all cohorts saw some possibility of an extended and drawn-out recovery. Earlier in the year, risk analysts surveyed by the World Economic Forum had similar thoughts, projecting a prolonged recession as the top risk of the post-COVID fallout.

It remains to be seen whether this will ultimately indeed be the trajectory we’re in store for.

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The $88 Trillion World Economy in One Chart

The world’s total GDP crested $88 trillion in 2019—but how are the current COVID-19 economic contractions affecting its future outlook?

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The $88 Trillion World Economy in One Chart

The global economy can seem like an abstract concept, yet it influences our everyday lives in both obvious and subtle ways. Nowhere is this clearer than in the current economic state amid the throes of the pandemic.

This voronoi-style visualization from HowMuch relies on gross domestic product (GDP) data from the World Bank to paint a picture of the global economy—which crested $87.8 trillion in 2019.

Editor’s note: Annual data on economic output is a lagging indicator, and is released the following year by organizations such as the World Bank. The figures in this diagram provide a snapshot of the global economy in 2019, but do not necessarily represent the impact of recent developments such as COVID-19.

Top 10 Countries by GDP (2019)

In the one-year period since the last release of official data in 2018, the global economy grew approximately $2 trillion in size—or about 2.3%.

The United States continues to have the top GDP, accounting for nearly one-quarter of the world economy. China also continued to grow its share of global GDP, going from 15.9% to 16.3%.

RankCountryGDP% of Global GDP
#1🇺🇸 U.S.$21.4T24.4%
#2🇨🇳 China$14.3T16.3%
#3🇯🇵 Japan$5.1T5.8%
#4🇩🇪 Germany$3.9T4.4%
#5🇮🇳 India$2.9T3.3%
#6🇬🇧 UK$2.8T3.2%
#7🇫🇷 France$2.7T3.1%
#8🇮🇹 Italy$2.0T2.3%
#9🇧🇷 Brazil$1.8T2.1%
#10🇨🇦 Canada$1.7T2.0%
Top 10 Countries$58.7 trillion66.9%

In recent years, the Indian economy has continued to have an upward trajectory—now pulling ahead of both the UK and France—to become one of the world’s top five economies.

In aggregate, these top 10 countries combine for over two-thirds of total global GDP.

2020 Economic Contractions

So far this year, multiple countries have experienced temporary economic contractions, including many of the top 10 countries listed above.

The following interactive chart from Our World in Data helps to give us some perspective on this turbulence, comparing Q2 economic figures against those from the same quarter last year.

One of the hardest hit economies has been Peru. The Latin American country, which is about the 50th largest in terms of GDP globally, saw its economy contract by 30.2% in Q2 despite efforts to curb the virus early.

Spain and the UK are also feeling the impact, posting quarterly GDP numbers that are 22.1% and 21.7% smaller respectively.

Meanwhile, Taiwan and South Korea are two countries that may have done the best at weathering the COVID-19 storm. Both saw minuscule contractions in a quarter where the global economy seemed to grind to a halt.

Projections Going Forward

According to the World Bank, the global economy could ultimately shrink 5.2% in 2020—the deepest cut since WWII.

See below for World Bank projections on GDP in 2020 for when the dust settles, as well as the subsequent potential for recovery in 2021.

Country/ Region / Economy Type2020 Growth Projection2021E Rebound Forecast
United States-6.1%4.0%
Euro Area-9.1%4.5%
Advanced economies-7.0%3.9%
Emerging economies-2.5%4.6%
East Asia and Pacific-0.5%6.6%
Europe and Central Asia-4.7%3.6%
Latin America and the Caribbean-7.2%2.8%
Middle East and North Africa-4.2%2.3%
South Asia-2.7%2.8%
Sub-Saharan Africa-2.8%3.1%
Global Growth-5.2%4.2%

Source: World Bank Global Economic Prospects, released June 2020

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