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Despite there being plenty of rain about, summer has arrived downunder. This is generally a time of high tourist traffic, especially considering that many come to Australia's shores from a wintry Northern hemisphere. However, Australia's hotels and resorts will spend another summer without throngs of foreigners enjoying our natural wonders, as the Covid-19 pandemic continues to cause concern.
In early 2020, as the virus began to wreak havoc around the world, governments began to close borders. This started the massive contraction in businesses that rely on the movement of people, and large share price falls in what are commonly known as BEACH stocks (Bookings, Entertainment, Airlines, Cruises, and Hotels).
For example, in the first 4 weeks of the market panic starting in late February 2020, the Qantas share price crashed about 70% down to almost $2. Sydney Airport and Crown Resort shares were down 50%, whilst Flight Centre shares plummeted around 75% and Ardent Leisure shares were now only worth a tenth of their early 2020 price. BEACH stocks all over the globe felt the same sting and for a period of time there were many that looked like they were not going to survive.
As the dust settled, and then as governments started opening up their purses, many of the most affected companies were given support to remain going concerns. This made sense as there was always the likelihood that the pandemic would be over in the short-term and it would cost the economy more to have to resurrect normally-productive businesses. And so, stimulus in the form of cheap money, direct handouts and indirect boost from domestic spending saw the doom and gloom be steadily dispelled.
Most BEACH sector companies have also looked to rejig strategy in order to stay relevant in the world of Covid-19. Due to international and state border closures, most companies in the sector had to focus attention on the domestic consumer. For example, in the airline game, passenger flights switched to handling more cargo (especially with all the online purchases being made) and routes were consolidated. The one segment of the sector that had little options in regard to strategy was cruise lines, with many operators harbouring boats, waiting for the storm to clear.
Of the five ASX-listed BEACH companies mentioned previously, all except for Flight Centre had recovered much of its Covid price losses. Some of this would have been due to the low cost of capital and flood of money looking for a home. But some of this would have also been a result of confidence in management's ability to tackle the crisis. Of course, with the pandemic still lingering on, it will be important for the BEACH sector to remain vigilant and nimble.
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