Lodging, tourism and travel industries are suffering heavily as a result of COVID-19 health issues, sluggishness in the other industries, loss of jobs and the uncertain economic environment. Let’s see what the future holds for online travel giant Booking Holdings (NASDAQ: BKNG).
For the first quarter of 2020, Booking Holdings swung to a loss on GAAP basis. Adjusted profit declined 66% and revenue slid 19%. Gross bookings more than halved in the first quarter to $12.4 billion. There were more cancellations than new bookings during the quarter.
Stay-at-home orders, closures of borders, government enforced travel restrictions and strict guidelines regarding social distancing have affected all the travel companies including Booking Holdings.
Response to COVID-19
As part of the stabilization plan, the company took steps to conserve cash and increase liquidity, including pausing the share repurchases, reducing marketing spend worldwide, cutting non-essential costs, implementing a general hiring freeze, and reducing executive compensation. Senior executives agreed to forgo their salaries during this crisis and other senior managers voluntarily reduced their base salaries. In addition to reducing costs, Bookings Holdings strengthened its liquidity by raising over $4 billion in debt.
As travel begins to recover and booking trends rebound further, the company expects to see immediate cash flow benefits from the merchant model, even with new booking levels well below 2019. Booking Holdings expects domestic travel to rebound sooner than international travel as people will like to travel in their home country for safe travel option.
As governments started to relax shutdown measures, travel companies expect a rebound in leisure and business travel, albeit at a slower pace.
During Q1 earnings call, CEO Glenn Fogel said,
“We believe that either a vaccine or effective treatment is needed before people will feel fully comfortable traveling the way they did before the pandemic started. And even after a vaccine or treatment is declared safe and effective, we believe it may be some time before there is sufficient quantity and distribution of them to give people and governments confidence for people to travel freely.”
With the number of people affected by COVID-19 still increasing in many countries, witnessing a full recovery of global travel demand will not happen in the next few quarters. Booking Holdings and other travel agency companies have to wait for the next few years to return to pre-COVID-19 levels.
After Novavax (NASDAQ: NVAX) reported its progress on developing the COVID-19 vaccine at the end of February, the shares of the company started trading in double-digits after a long time.
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