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Why Travel Stocks Tanked on Friday

What happened

With reports that a possibly very threatening variant of the coronavirus has been found in southern Africa (certain countries have already enacted restrictions on visits), travel stocks really took it on the chin Friday.

The two bellwether online travel agencies (OTAs), Expedia (NASDAQ: EXPE) and Booking Holdings (NASDAQ: BKNG), were down by nearly 10% and more than 7%, respectively. Joining them in red territory were (NASDAQ: TCOM), with an over 4% decline; Sabre (NASDAQ: SABR), with a nearly 13% drop; and lodging specialist Marriott International (NYSE: MAR), down almost 7%.

Image source: Getty Images.

So what

Since it became a worldwide health scourge in early 2020, the coronavirus has been the single most important factor affecting the travel industry. Restrictions enacted, lifted, then in some cases lifted again have constrained the operations of companies throughout, and affiliated with, the sector. None has been immune: airlines, hoteliers, OTAs, etc.

Understandably, investors are thus very sensitive to any indication that the pandemic will worsen; already they're concerned about the recent rise of cases in the U.S. due to the onset of cold weather. The delta variant and its deleterious effects are still fresh memories. These early reports indicate that the newly discovered Omicron variant, with its large number of mutations, could be at least as much of a threat.

Now what

It's important to bear in mind, however, that there is still much the authorities don't know about Omicron. It's either unclear or unknown whether the variant is relatively more contagious, if it is deadlier, and whether or not it can result in breakthrough COVID cases in vaccinated individuals. While Omicron certainly is bad news for the travel industry at least initially, investors shouldn't be so quick to hit the panic button and sell.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Booking Holdings. The Motley Fool recommends Marriott International and recommends the following options: long January 2023 $115 calls on Marriott International. The Motley Fool has a disclosure policy.


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