Travel stocks are hot. But not everything is smooth

This is the message from companies like Marriott (MAR)Airbnb, Booking Holdings and Trivago (TRVG)who tell investors that after two difficult years, business is booming again.

“The sentiment is getting better and better,” Axel Hefer, CEO of Trivago, told me. “This year will be much more normal than last year, from our perspective.”

Adding to that optimism: Marriott said last week that it expects a major measure of revenue to reach pre-pandemic levels in the United States and Canada for the rest of the year.

And Trivago is confident enough in the business climate to start increasing its spending on TV ads again.

Investor Perspective: Travel stocks have not been immune to the recent market meltdown. But Wall Street has rewarded companies in the sector for their strong earnings and upbeat outlook. Shares of Marriott rose nearly 5% after the earnings release, while Airbnb jumped nearly 8%.

Yet despite newfound optimism, the travel industry is not entirely on the hump.

The wounds inflicted by the pandemic are still not healed. Airlines and airports are struggling to recruit staff as they grapple with continued worker shortages, forcing carriers to cancel flights. This could impair the industry’s ability to take full advantage of a surge in demand this summer.

British Airways now expects to fly just 74% of its 2019 capacity this year as it strives to “build operational resilience this summer”. EasyJet just said it will limit some flights to 150 passengers, so it only needs to fly with three cabin crew.

The highest inflation in decades also carries the risk that some people will cut spending on non-essentials.

“Inflation is obviously accelerating everywhere, in the Western world in particular,” Hefer said. “That means people are more cost-conscious overall.”

However, he doesn’t expect rising prices to really eat away at travel demand until next year. And Hefer pointed out that companies like Trivago, a platform that focuses on cost comparisons, could actually benefit from increased savings.

Further: As travel agencies gear up for a scorching summer, it is more difficult to paint a picture of the autumn and winter seasons given the possibility of a seasonal increase in Covid infections.

“There will be a new variant, that’s for sure,” Hefer said. “We’ve seen it now for two years, that infections go up when the weather gets worse.”

Trivago plans to reduce its fixed costs in case there is another crisis, he continued. But, he added, “there is not much you can do.”

China faces ‘complex and severe’ labor market, official warns

One of China’s top leaders has paints a dark picture labor market in the world’s most populous nation as widespread Covid lockdowns dampen the economy.

Chinese Premier Li Keqiang — the No. 2 official of China’s ruling Communist Party — called the employment situation “complex and serious” over the weekend, reports my CNN business colleague, Laura He.

China faces

In a statement released on Saturday, Li called on all levels of government to prioritize measures to boost employment and maintain stability. This includes incentives that encourage people to start their own businesses and unemployment benefits for laid-off workers.

“Employment stabilization is essential for people’s livelihoods and is the main support for the economy to operate within a reasonable range,” Li said.

Take a step back: His remarks come at a time when the country’s unemployment rate has climbed to the highest rate in nearly two years, according to government data.

Every year, China must create millions of new jobs to keep the pace of the economy going. The government has set a target of creating at least 11 million jobs in cities by 2022, and is aiming for up to 13 million.

But that effort has been made more difficult by a slowdown in growth, which has been exacerbated by Covid lockdowns. Chinese exports fell in April as efforts to contain the spread of the Omicron variant disrupted supply chains.

Li, who handles economic management in China, has made repeated calls to stabilize employment in recent weeks.

Investor Outlook: The Chinese yuan plunged as traders rushed to assess the impact of restrictions in major cities like Beijing and Shanghai. It is now at its weakest level against the US dollar in over a year.

Bitcoin can’t seem to cushion its fall

Bitcoin fans hope that one day the cryptocurrency will serve as “digital gold” and that investors will use it as a store of value in difficult times.

But this promise has yet to be fulfilled. As risky investments like stocks have risen this year, so has bitcoin. It is now trading below $33,000, its lowest level since July 2021.

Bitcoin has fallen 26% since the start of the year. The S&P 500 is down 13.5%.

“Bitcoin is now approaching the bottom of the 16-month range,” Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, told clients on Monday.

Falling but not exhausted: Although the price of cryptocurrencies remains volatile, businesses are taking new steps to accept them as payment, a sign they believe adoption will continue to grow.

Gucci recently announced that it will start accepting crypto payments in New York, Los Angeles, Miami, Atlanta, and Las Vegas, calling itself the “first digital luxury brand”. High-end handbags in the metaverse, anyone?

Following

BioNTech (BNTX)Lordstown Motors, Palantir and Tyson Foods (TSN) publish the results before the opening of the American markets. AMC Entertainment (CMA)SmileDirectClub and XPO Logistics follow after the close.
Coming tomorrow: income from Fox Company (FOXA), Platoon (PTON) and Hyatt (H).

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