Hotel, Resort and Gaming Stocks Fall
Shares of most major hotels, resorts and travel companies fell further Tuesday on investor fears that tourism and business travel will drop dramatically and consumers will curb their spending after the Sept. 11 terrorist attacks.
The nation’s top four gaming stocks--MGM Mirage Inc., Mandalay Resort Group, Harrah’s Entertainment Inc. and Park Place Entertainment Inc.--all hit lows for the year.
Prospects for these operators of Las Vegas casinos and hotels have been dimmed by cancellations from business groups and leisure travelers. Las Vegas expected to be 90% full for the busy mid-September weekends, but now figure they’ll average 70%, said a spokesman for the Las Vegas Convention & Visitors Authority.
Shares of other major hotel chains also retreated for a second straight day, as did major providers of travel services.
Expedia Inc., the nation’s No. 2 online travel service, said Tuesday that reservations fell by as much as 65% after it suspended bookings following the terrorist strikes. Its shares lost $4.36 to close at $19.64 on Nasdaq on Tuesday, on top of Monday’s $12.25 loss.
Rival Sabre Holdings Corp., operator of the Travelocity Web site, fared better Tuesday. After reporting it expected to meet its third-quarter profit forecast, the largest Internet travel seller gained back $1.45 on Tuesday to close at $25.25 on the New York Stock Exchange, but with Monday’s drubbing, its stock was still down 36% over two days.
American Express Co., which has spent much of the last week rerouting customers and canceling trips, Tuesday saw its shares fall $2.87 to close at $27.38 on the NYSE. That also was a 52-week low.
“We’re getting to the point where stocks are oversold--cheaper than they ought to be--but investors still aren’t buying,” said William A. Crow, an analyst at Raymond James & Associates in New York.
Analysts say that’s because no one knows when or where the U.S. might retaliate and whether the terrorists will strike again. And that uncertainty, is holding back both travelers and leisure stock buyers.
“People are just preoccupied,” said Jason N. Ader, a Bear Stearns analyst who covers leisure industries.
But analysts don’t expect the drop-off in business and leisure travel in the near future to drive hotels, restaurants, casinos and theme parks into the ground. They say many companies have good management, strong balance sheets, cash on hand and low debt levels. Others carry less risk than some might think.
Marriott International Inc. slid $1.45, or 4.5%, to $30.80 on NYSE. But analysts point out that the company relies mostly on fee income from its franchisees; it doesn’t own many properties itself.
“So it’s not going to do as well in good times as others, but it’s not going to do as bad in bad times, either,” Crow said.
Meanwhile, analysts say more highly leveraged companies, such as Hilton Hotels Corp., stand to benefit from declining interest rates, as they will be able to refinance debt. Hilton’s stock was off 70 cents on Tuesday to close at $7.85 on the NYSE.
Still, the ripple effect of the attacks--less spending, more layoffs and corporate losses--or at least lower profits--is expected to take a toll on a broad swath of leisure industry companies.
Independent travel agents have spent the last week handling rebookings and cancellations--and seeing very little income. One New York agency with five employees earned only $32 last week, said Paul Ruden, senior vice president for the American Society of Travel Agents. “And there’s no relief in sight,” he said.
Analysts have lowered their profit expectations for many travel companies for the rest of the year and next year. But for many, the exercise seems almost pointless.
“It’s hard to even say what the numbers are going to be,” Ader said. “The fourth quarter is going to be worse than we thought, but we have no idea how much worse. Unfortunately, we’re in uncharted water now.”
At Disneyland, where attendance fell over the weekend, spokesman Ray Gomez said the Anaheim theme park has no idea how the next few months--or longer--will play out.
Theme parks are a significant part of Walt Disney Co.’s revenue and profit. After falling 18% in trading Monday, Disney’s shares dropped 85 cents on Tuesday to close at $18.40 on the NYSE.
Amusement parks and some other tourist spots are mostly frequented by local residents. That may help companies such as Disney if Southern California’s tourism weathers the drop-off better than most areas of the nation, as some analysts expect.
The Ritz-Carlton Laguna Niguel in Dana Point, for instance, gets about 90% of its leisure business from residents of Los Angeles and Orange counties, said John Dravinsky, the resort’s general manager.
“We had a drop-off on the business side only,” Dravinsky said, but bookings are returning. “The phones are going strong now.”
Times wire services were used in compiling this report.
