The scent of post-pandemic freedom is in the air again, which must mean it’s time to buy tourism stocks.
Melia Hotels (MC:MEL) stock leaped over 24% on Monday as Spain’s biggest hotel operator rejoiced at Prime Minister Pedro Sanchez’s announcement on Saturday that the country will reopen its hotels to tourists from July.
“Spain needs tourism, and tourism needs safety in both origin and destination. We will guarantee that tourists will not run any risks, nor will they bring any risk to our country,” Sanchez said. ““We’re sending everyone a message today: Spain will be waiting for you from July.”
Melia stock still has plenty of room to recover further: the shares are still down by nearly half from January and trading at barely a third of their level of two years ago, before the U.S.-China trade war hit the eurozone economy.
International Consolidated Airlines Group (MC:ICAG) (LON:ICAG), the parent company of Spain’s Iberia and Vueling, also shot up by over 10%, while airport operator Aena (MC:AENA) rose 5.7% and Amadeus (MC:AMA), a software company that primarily serves the travel industry, rose 5.5%.
Spain was forced to impose the tightest lockdown regime in Europe, alongside Italy. Like much of the continent, it was slow to recognize the speed and extent of the coronavirus’ spread, and the pandemic threatened to hit its economy harder than most other countries in the region, due to the disproportionate effect it has had on the travel and tourism sector. Tourism accounts for around 11% of Spanish GDP, compared to some 4% the European Union as a whole.
Spain’s announcement has electrified the whole European travel sector: Flughafen Wien AG (VIE:VIEV), the operator of Vienna airport, rose over 10% on the hopes that the Austrian summer season might yet be saved (even though it depends mostly on Germans who arrive by car), while Frankfurt airport operator Fraport ‘s (DE:FRAG) stock rose 7.6% (helped also by the partial resumption of Lufthansa flights announced at the weekend) and Aeroports de Paris SA (PA:ADP) stock rose 4.4%. Tour operator Tui (DE:TUIGn) stock rose 11.7% in Germany, while Norwegian Air Shuttle (OL:NWC) rose 9.4%. The benchmark Stoxx 600 was up 0.8%, while Spain’s IBEX 35 rose 1.7%.
The big question now is – how many people will be confident enough to risk the flight, the confined spaces of the hotel and the proximity of other holidaymakers? And will the likes of Tui, which announced 8,000 job cuts two weeks ago in response to the collapse in demand, have enough resources in the right places to ensure that they benefit from a season that had already been written off (Tui in its full-year results pointedly referred only to bookings for the coming winter season)?
Either way, anything that the industry can salvage from here should be a bonus, given the apocalyptic expectations currently baked into prices.