Travel and tourism was hit hardest during the pandemic with Norwegian being the biggest pandemic … [+]
Pandemic winners came from many different industries but most losers were from travel and tourism. Not really a big surprise.
Norwegian Cruise Line is at the bottom of a list of companies whose stock price declined the most since January 13 2020. It is followed by Carnival Cooperation, a close competitor and the third big cruise line operator, Royal Caribbean, also makes the list.
But even in struggling industries companies have options.
Take the cruise operators. It’s no coincidence that Norwegian with the lowest pre-pandemic cash reserves is at the bottom. In tough times solid finances give you an edge. A study of century champions revealed that those who took a more conservative approach were more likely to survive and thrive. During the Great Depression Siemens, for example was able to gain an edge over rival AEG, as it was had access to new cash once it re-valued its assets. AEG did not have this option, as it had taken an aggressive stance earlier.
The list also points at the dangers of shareholder value obsession. Boeing is still haunted by the 373 MAX disaster where engineers under pressure to put profits first ignored strong warning signals.
Finally, bold moves—and this should be obvious—are risky. AT&T hoped to make a leap forward with the help of two big acquisitions but unfortunately ended up in markets they should have avoided. Las Vegas Sands and Wynn Resorts were not able to benefit from the bounce back of US casinos due to their aggressive move into the Chinese market raising questions about political risks.
Here is a brief overview of what went wrong for pandemic losers.
Norwegian Cruise Line (down 60 percent), Carnival Cooperation (down 54 percent) and Royal Caribbean Group (down 37 percent)
Industry executives got an early warning sign that the pandemic might hit them hard when in early February 2020 the Diamond Princess was the first cruise ship reporting a major outbreak of Covid-19. 700 people were infected and 9 died. It is not surprising that three of the ten worst performing companies are cruise operators.
Still, there is variation. Norwegian, being ill prepared for the downturn, was the worst performer. “[Of the] big three operators Norwegian had the lowest amount of cash reserves when the Covid-19 outbreak started with around $225 million,” Ben Cordwell, GlobalData travel and tourism analyst, explains. In May they narrowly avoided bankruptcy, raising $2.2 billion from investors. Royal Caribbean not only had more cash, but also raised equity to …….