Will tourism stocks ever recover from Covid-19?

• Tourism sector offered life line by new economic stimulus from France and Germany
• TUI and Carnival Group up on Thursday, but recovery a long way off
• Uncertainty weighs heavy on TUI and Carnival Group shares

The tourism sector has been overwhelmed by the economic impact of the coronavirus pandemic, with shares in German tour company TUI and British-American cruise operator Carnival Group down more than 64% year-to-date. With investors worried about the future of both companies with no end to the global pandemic in sight.

However, the pair were thrown a life line on Thursday, after French and German authorities pledged further economic stimulus and the US Centre for Disease Control and Prevention (CDC) said that states should ready themselves to distribute a Covid-19 vaccine from 1 November.

‘News that France is throwing an additional €100 billion at its economy, and comments about the strength of the euro from ECB policymakers, have combined to provide fresh impetus to the rally in European stocks this morning,’ Chris Beauchamp, chief market analyst at IG, said.

‘Equities continue to exhibit notable strength as they rise heedless of the ongoing tick higher in virus cases and signs that the economic rebound is slowing,’ he added.

TUI is trading 6% higher at 344p at the time of publication, while Carnival Group is up 9% at $18.13 per share.

Carnival cruises tied up until November

Earlier this week, Carnival said that its ultra-luxury cruise brand Seabourn will put a stop to additional voyages for three ships in its fleet, with the company opting to hit the pause button amid the Covid-19 pandemic.

‘Our utmost priority is the health, safety and well-being of our guests, crew and the people in destinations,’ Seabourn president Josh Leibowitz said.

‘We recognise the long lead time for planning an ultra-luxury Seabourn experience and with that in mind, we proactively announce the cancellation of these additional voyages.’

‘We are working very closely with science and medical advisors as well as our source and destination markets to develop protocols for the ultimate return to operations,’ he added.

Meanwhile, last week the cruise operator announced that AIDA Cruises are expected to resume operations in Germany in November, with the company cancelling trips in September amid increasingly tighter government-imposed restrictions.

‘Even though it is currently not possible for cruise ships to call at Norway, which is so important for our voyages to the north, we are confident that the first AIDA ships from Germany will be able to travel to Northern Europe again at the beginning of 2021,’ Felix Eichhorn, president of AIDA Cruises, said.

TUI withdraws full-year guidance amid Covid-19 uncertainty

In March, TUI withdrew its full-year guidance due to the uncertainty and economic fallout from the coronavirus pandemic, which has acutely impacted companies operating within the travel industry.

The company also admitted that the Covid-19 crisis will have a ‘considerable impact’ on the development of the group’s earnings, with cost-saving measures only partly able to compensate for the negative effects of the viral outbreak.

In its third quarter (Q3) results in August, the tour operator generated €75 million in revenue, representing a 98% decline, wit the company’s operations running at a reduce capacity throughout most of the first half of 2020.

‘Due to the updated travel advice from the UK Foreign Office advising against all but essential travel to all areas of Spain, TUI UK has now cancelled all holidays to Spain, including the Balearic Islands and Canary Islands, up to and including Sunday 16 August 2020,’ Tui said in a statement.

‘In light of the on-going uncertainty customers with holidays to Mainland Spain before Tuesday 1 September can amend their holiday for free or cancel and receive a full cash refund,’ the company added.

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