I'm not a doctor, nor do I play one on TV, but this swine flu has got me worried. Remember the Avian Flu? At the very least, the disease runs a fairly isolated course and the hysteria has already peaked. At worst, the world has a big problem. The degree and duration of the uncertainty will ultimately decide what impact this outbreak could have on leisure stocks; it is too early to tell whether a negative trade and/or trend will result.
Even under the optimistic scenario, leisure stocks are likely going lower for more than just today. The Health Commissioner for the EU urged Europeans to forgo travel to the US and Mexico. Travel will take a big hit. For traders, it's difficult to make the case that anything leisure related should be owned at this point, especially given the huge two month run we've had in the space.
The following sectors within Leisure could be affected:
- Cruise lines: The thought of being stuck on a ship in close proximity with thousands of other people is likely to strike fear into would-be cruisers. Considering the history of contagious pathogens such as the Norwalk Virus, E. Coli, and Entamoeba Histolytica infiltrating cruise ships, this sector could be the hardest hit.
- Major market gaming: Las Vegas/Macau = lots of people who don't have to be there. One breakout at a hotel casino and that's all she wrote.
- Lodging: Hotels rely on travel. We all know airplanes are flying Petri dishes. At least some travel is necessary (business, family, etc.), but much is leisure related. Even at today's depressed occupancies, there are still too many people at one location for comfort in a flu outbreak.
- Regional gaming - Few people fly to regional gaming destinations but there is still a large, concentrated number of people in a casino at any given time.