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Investing.com -- The travel sector has faced a sharp decline, with hotels seeing significant corrections following warnings from US airlines.
According to Barclays, "we sympathise with investors' risk-off approach in light of the macro uncertainty," but it remains "too early to tell" how the situation will unfold.
The bank notes the downturn was triggered by negative comments from US carriers such as Delta and American Airlines (NASDAQ:AAL), which pointed to a slowdown in domestic business and leisure travel.
Recession concerns have increased, impacting hotel stocks like InterContinental Hotels Group (IHG) and Accor (EPA:ACCP).
"Concerns about a US recession are mounting and inevitably this is hurting IHG given its c60% US exposure but also Accor which only has 10% of sales from US but is always just as impacted on US recession fears," Barclays noted.
While both companies provided reassuring commentary at Barclays' recent conference, the firm acknowledged that "there is very little forward visibility for hotels, so investors are rightly getting nervous that what the airlines are reflecting on today will manifest in RevPAR soon."
The key question now is said to be the severity and duration of any revenue per available room (RevPAR) slowdown. If it is a temporary dip due to "a temporarily nervous/uncertain consumer/business," Barclays believes the impact on earnings would be "negligible" and could present "a clear buying opportunity."
However, if a deeper recession unfolds, "the hotel names likely have further to fall."
For investors seeking stability in the leisure sector, Barclays points to Compass Group (LON:CPG) as "the clearest defensive" play, citing strong business trends and resilience. "We feel very good about current trends and the business continuing to compound," the firm stated.
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