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.
|Company||Ticker||Category||Market Cap: 02/19/2020||Market Cap: 03/24/2020||% Change|
|Live Nation||LYV||Entertainment & Live Events||$16.3B||$9.1B||-44%|
|Six Flags||SIX||Entertainment & Live Events||$3.2B||$1.1B||-66%|
|Cedar Fair||FUN||Entertainment & Live Events||$3.1B||$1.3B||-58%|
|The Walt Disney Co||DIS||Entertainment & Live Events||$255.1B||$177B||-31%|
|Penn National Gaming||PENN||Entertainment & Live Events||$4.3B||$1.6B||-63%|
|Delta Air Lines||DAL||Airlines||$37.5B||$17.8B||-52%|
|Alaska Air Group||ALK||Airlines||$8B||$3.7B||-54%|
|Air Canada (in USD)||AC||Airlines||$8.3B||$2.8B||-67%|
|Carnival||CCL||Cruise & Casino||$30.8B||$10B||-67%|
|Royal Caribbean Cruises||RCL||Cruise & Casino||$23.2B||$7.5B||-68%|
|Norwegian Cruise Lines||NCLH||Cruise & Casino||$11.1B||$3.1B||-72%|
|Las Vegas Sands||LVS||Cruise & Casino||$52.8B||$35.1B||-34%|
|MGM Resorts International||MGM||Cruise & Casino||$16.2B||$6.2B||-68%|
|Wynn Resorts||WYNN||Cruise & Casino||$14.6B||$7.2B||-51%|
|Caesars Entertainment||CZR||Cruise & Casino||$10B||$4.2B||-58%|
|Eldorado Resorts||ERI||Cruise & Casino||$5.4B||$1.3B||-76%|
|Marriott International||MAR||Hotels & Resorts||$48.3B||$25.7B||-48%|
|Hilton||HLT||Hotels & Resorts||$31.3B||$19.4B||-38%|
|Hyatt Hotels||H||Hotels & Resorts||$9.1B||$4.9B||-46%|
|Choice Hotels International||CHH||Hotels & Resorts||$6B||$3.2B||-46%|
|Wyndham Hotels & Resorts||WH||Hotels & Resorts||$5.6B||$2.9B||-48%|
|Park Hotels||PK||Hotels & Resorts||$5.5B||$1.9B||-66%|
|Vail Resorts||MTN||Hotels & Resorts||$9.98B||$5.8B||-41%|
|Marriott Vacations Worldwide||VAC||Hotels & 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.
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.
|Company||Ticker||Feb 19 2020 Share Price||Mar 24 2020 Share Price|
|Delta Air Lines||NYSE:DAL||$58.5||$26.9|
|Alaska Air Group||NYSE: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.”
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.
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.
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?
How Total Spend by U.S. Advertisers Has Changed, Over 20 Years
This graphic visualizes the fluctuations in advertising spend in the U.S., along with its brutal decline of 13% as a result of COVID-19.
Total Spend by U.S. Advertisers, Over 20 Years
With an advertising economy worth $239 billion in 2019, it’s safe to say that the U.S. is home to some of the biggest advertising spenders on the planet.
However, the COVID-19 pandemic has resulted in the major upheaval of advertising spend, and it is unlikely to recover for some time.
The graphic above uses data from Ad Age’s Leading National Advertisers 2020 which measures U.S. advertising spend each year, and ranks 100 national advertisers by their total spend in 2019.
Let’s take a look at the brands with the biggest budgets.
2019’s Biggest Advertising Spenders
Much of the top 10 biggest advertising spenders are in the telecommunications industry, but it is retail giant Amazon that tops the list with an advertising spend of almost $7 billion.
In fact, Amazon spent an eye-watering $21,000 per minute on advertising and promotion in 2019, making them undeniably the largest advertising spender in America.
Explore the 100 biggest advertisers in 2019 below:
|Rank||Company||Total U.S. Ad Spend 2019||Industry|
|#4||Procter & Gamble||$4.3B||Consumer Goods|
|#9||American Express||$3.0B||Financial Services|
|#11||JPMorgan Chase||$2.8B||Financial Services|
|#16||Nestlé||$2.3B||Food & Beverages|
|#18||Expedia Group||$2.2B||Travel & Hospitality|
|#19||Capital One Financial||$2.2B||Financial Services|
|#20||Fiat Chrysler Automobiles||$2.0B||Automotive|
|#24||PepsiCo||$1.7B||Food & Beverages|
|#25||Bank of America||$1.7B||Financial Services|
|#28||McDonald’s||$1.6B||Food & Beverages|
|#29||Booking Holdings||$1.6B||Travel & Hospitality|
|#31||Johnson & Johnson||$1.5B||Pharmaceuticals|
|#32||Anheuser-Busch InBev||$1.5B||Food & Beverages|
|#34||Merck & Co.||$1.5B||Logistics|
|#44||Wells Fargo||$1.1B||Financial Services|
|#45||Yum Brands||$1.1B||Food & Beverages|
|#51||Diageo||$918M||Food & Beverages|
|#53||Discover Financial Services||$883M||Financial Services|
|#54||Mars||$880M||Food & Beverages|
|#58||Molson Coors||$822M||Food & Beverages|
|#61||Coca-Cola||$816M||Food & Beverages|
|#64||Kraft Heinz||$782M||Food & Beverages|
|#70||Constellation Brands||$749M||Food & Beverages|
|#80||Marriott International||$667M||Travel & Hospitality|
|#89||Reckitt Benckiser||$593M||Consumer Goods|
|#90||Keurig Dr Pepper||$593M||Food & Beverages|
|#91||Restaurant Brands International||$589M||Food & Beverages|
|#92||Inspire Brands||$589M||Food & Beverages|
The report offers several ways of looking at this data—for example, when looking at highest spend by medium, Procter & Gamble comes out on top for traditional media spend like broadcast and cable TV.
On the digital front, Expedia Group is the biggest spender on desktop search, while Amazon tops the list for internet display ads.
The Rise and Fall of Advertising Spend
Interestingly, changes in advertising spend tend to fall closely in step with broader economic growth. In fact, for every 1% increase in U.S. GDP, there is a 4.4% rise of advertising that occurs in tandem.
The same phenomenon can be seen among the biggest advertising spenders in the country. Since 2000, spend has seen both promising growth, and drastic declines. Unsurprisingly, the Great Recession resulted in the largest drop in spend ever recorded, and now it looks as though history may be repeating itself.
Total advertising spend in the U.S. is estimated this year to see a brutal decline of almost 13% and is unlikely to return to previous levels for a number of years.
The COVID-19 Gut Punch
To say that the global COVID-19 pandemic has impacted consumer behavior would be an understatement, and perhaps the most notable change is how they now consume content.
With more people staying safe indoors, there is less need for traditional media formats such as out-of-home advertising. As a result, online media is taking its place, as an increase in spend for this format shows.
But despite marketers trying to optimize their media strategy or stripping back their budget entirely, many governments across the world are ramping up their spend on advertising to promote public health messages—or in the case of the U.S., to canvass.
The Saving Grace?
Even though advertising spend is expected to nosedive by almost 13% in 2020, this figure excludes political advertising. When taking that into account, the decline becomes a slightly more manageable 7.6%
Moreover, according to industry research firm Kantar, advertising spend for the 2020 U.S. election is estimated to reach $7 billion—the same as Amazon’s 2019 spend—making it the most expensive election of all time.
Can political advertising be the key to the advertising industry bouncing back again?
Visualized: A Breakdown of Amazon’s Revenue Model
Here’s a look at the different parts of Amazon’s revenue model, and how much money each business segment makes.
Visualized: A Breakdown of Amazon’s Revenue Model
Amazon has evolved into more than just an online store. While ecommerce makes up a significant portion of the company’s overall sales, its diverse revenue model generates billions through various business segments.
This visualization provides an overview of the different parts that make up Amazon, showing each business unit’s net sales from June 2019 to 2020.
A Diverse Revenue Model
With a market cap of $1.7 trillion, Amazon is currently the most valuable retailer in the world. The company is expected to account for 4.6% of total U.S. retail sales by the end of 2020—but the tech giant is more than just a one-trick pony.
A key factor in the company’s success is its diversification into other areas. Here’s a breakdown of Amazon’s revenue mix:
|Business Segment||Net Sales (June 2019 - 2020)|
|Online stores||$163 B|
|Third-party selling services||$63 B|
|Amazon Web Services||$40 B|
|Subscription services||$22 B|
|Physical stores||$17 B|
|Total Revenue||$322 billion|
While Amazon is truly more than an online store, it’s worth noting that online sales account for a significant amount of the company’s overall revenue mix. Over the period of June 2019 to 2020, product sales from Amazon’s website generated $163 billion, which is more than the company’s other business units combined.
A significant day for online sales is Prime Day, which has grown into a major shopping event comparable to Black Friday and Cyber Monday. In 2020, Prime Day is projected to generate almost $10 billion in global revenue.
While ecommerce makes up a large portion of Amazon’s overall sales, there are many other segments that each generate billions in revenue to create immense value for the tech giant. For instance, enabling third-party sellers on the platform is the company’s second-largest unit in terms of net sales, racking up $63 billion over the course of a year.
This segment has shown tremendous growth over the last two decades. In 2018, it accounted for 58% of gross merchandise sales on Amazon, compared to just 3% in 2000. While third-party sellers technically outsold Amazon itself, the company still makes money through commission and shipping fees.
Amazon is Not Alone: Diversification is Common
Amazon isn’t the only major tech company to benefit from diverse revenue streams.
Other tech giants generate revenue through a range of products, services, and applications—for instance, while a healthy portion of Apple’s revenue comes from iPhone sales, the company captures 17% of revenue from a mix of services, ranging from Apple Pay to Apple Music. Microsoft is another example of this, considering it owns a wide range of hardware, cloud services, and platforms.
While there are several reasons to build a diverse business portfolio, a key benefit that comes from diversification is having a buffer against market crashes. This has proven to be particularly important in 2020, given the economic devastation caused by the global pandemic.
The Sum of its Parts
Despite varying levels of sales, each business unit brings unique value to Amazon.
For instance, while Amazon Web Services (AWS) falls behind online sales and third-party sellers in net sales, it’s one of the most profitable segments of the company. In the fourth quarter of 2019, more than half of Amazon’s operating income came from AWS.
In short, when looking at the many segments of Amazon, one thing is clear—the company is truly the sum of its parts.
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