21st Feb 2022 18:41
(Alliance News) - Hargreaves Lansdown said on Monday that the picture for the travel sector remains "shaky", though closer to normal than this time 18 months ago.
InterContinental Hotels Group PLC, for example, is expected on Tuesday to report a rebound in annual earnings as the hospitality sector emerges from the damage caused by the Covid-19 pandemic.
The company owns the InterContinental, Crowne Plaza, Holiday Inn and Staybridge Suites hotel chains and operates in almost 100 countries across the globe.
According to company-compiled analyst consensus, revenue from reportable segments in 2021 is expected at USD1.41 billion, up from USD992 million in 2020. Revenue per available room for 2021 - a key metric in the hotels industry - is forecast to grow 45%, reversing a decline of 53% in 2020. However, this would still be 31% below 2019 levels.
Despite this shares in InterContinental closed down 1.7% at 4,892.00 pence on Monday in London.
easyJet PLC shares performed worse on Monday, closing down 2.4% at 658.20p. The Luton-based budget airline last month reported that passenger numbers in the first quarter, which ended in December, were up almost threefold to 12 million compared with the same period the year before. Its pretax loss for period almost halved to GBP213 million.
Sophie Lund-Yates, lead equity analyst at Hargreaves, said that while demand is looking brighter for the airline, it's still possible that Omicron fears or other new variants may spoil plans.
"Airlines, especially short haul, also operate in an extremely competitive environment. For a lot of customers, the main thing they think about is price. easyJet offers a higher degree of convenience by flying into more premium/centrally located airports than some of its competitors, which means it has a bit of room to charge slightly more.
But as inflation continues to bite and discretionary spending comes under fire, convenience could be swapped for an all-out race to the bottom on prices. People might also spend less on foreign holidays as purse strings tighten. These are unlikely to be fatal problems, but margins would suffer."
Another analyst at Hargreaves, Susan Streeter, noted worries around the ongoing situation in Ukraine affecting the travel sector: "Worries that the Ukraine situation could rapidly escalate have also hit travel stocks today... Dissent at the heart of the UK government about lifting of isolation rules is adding to the uncertainty, but it is the fresh talk of conflict that seems to have led to a wave of uneasiness rippling through the travel sector amid worries that confidence in the travelling public could take a severe knock if fighting breaks out."
The Ukraine conflict escalated further on Monday, as the Kremlin said Russian President Vladimir Putin will recognise the independence of eastern Ukraine's separatist republics. The West has repeatedly warned Russia not to recognise the separatists – a move that effectively buries a fragile peace process in the region.
By Heather Rydings; [email protected]
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