Expect 'lasting reduction' to travel sector warns Magellan

Magellan/ASX/covid-19/coronavirus/Qantas/webjet/flight-centre/

3 April 2020
| By Laura Dew |
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There is likely to be a ‘lasting reduction’ in demand for travel firms and cruise companies even after the market recovers from COVID-19 as people change their travel habits, according to Magellan.

Travel firms were among the worst-hit sectors from the pandemic with stocks such as Qantas, Webjet and Flight Centre seeing falls of more than 50%.

In an update to the Australian Securities Exchange (ASX), the firm said: “There are areas such as the cruise industry where there is likely to be a lasting effect on consumer behaviour. It is possible that the travel industry will experience a fundamental and lasting reduction in demand.

“Retirees will probably not travel overseas like they did previously. Businesses might determine much business travel is inefficient and discretionary and that meetings can be held just as effectively via video conference.”

Other sectors the firm felt remained at risk as people changed their lifestyles following the pandemic included hospitality, consumer discretionary, consumer staples and technology.

“Other questions investors must ask themselves: Will there be a fundamental shift in consumption patterns? Will people dine out in restaurants less frequently? Will there be a less conspicuous consumption? Will people change their hygiene habits enough to lead to higher demand for cleaning and hygiene products? Will there be a change to how people work? Will this lead to increased demand for software like video conferencing? What will happen to the savings rate? Will people delay renovations?”

However, Magellan said, the answer to these questions would depend on several factors such as the duration of the output gap, the effectiveness of the policy response from the Government and central banks and the speed and shape of the economic recovery.

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