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Why Marriott International's Shares Plunged on Tuesday

What happened

Shares of hotel company Marriott International (NASDAQ: MAR) fell as much as 8.4% in trading Tuesday as concerns over coronavirus, or COVID-19, hit the market. Shares ended the day down 8% and are now down 13.4% for the week.

So what

The concern over coronavirus is now more than just theoretical for investors, especially in the hospitality business. There are reports that Hong Kong hotels are virtually empty and early data from the Asia-Pacific region isn't very encouraging. According to research firm STR, occupancy was down 11.3% in January 2020 to 57.8% and revenue per available room dropped 7.5% to $60.15.

Image source: Getty Images.

Hospitality and consumer goods businesses are clearly starting to be affected by fears of coronavirus. Travel is starting to drop, especially in Asia, and that doesn't bode well for the hotel business. What we don't know right now is how long the downturn will last.

Now what

We don't yet know what the impact coronavirus will have on the hospitality business, but the early data doesn't look good. If travel fears last for a few months, it could have a significant impact on hotel companies that have high operating leverage in their operations. As a result, I don't see today as a buying opportunity and would take a cautious approach to the hospitality business right now.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends Marriott International. The Motley Fool has a disclosure policy.


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