COVID-19 and the Stock Market: Impacts on Tourism-Related Companies

Nhamo, Godwell; Dube, Kaitano; Chikodzi, David

The unprecedented outbreak of the coronavirus in 2020 provided an illustration of a neglected risk that brought about an economic disaster for the world. The COVID-19 pandemic, which started as a public health emergency, rapidly transformed into an economic crisis the world had not witnessed in over a century. In particular, the COVID-19 pandemic was a source of systematic risk, which filled global stock markets with uncertainty and resulted in big moves of share prices. Using the event study methodology that significantly utilised secondary data collection and analysis, the chapter examined the impacts of COVID-19 on tourism-related stocks. Vicissitudes in stock value were used as a signature mark for the impacts. It was observed that the news of the COVID-19 outbreak and measures put in place to curb its spread dampened the stock markets and led to declines in tourism-related stock prices. The measures included travel bans, bans on mass gatherings, as well as the closure of hotels and restaurants. Tourism firms and those in their value chain became the worst performers on global stock markets with some losing up to 80% of their value within a 2-week period. This translated into billions of dollars in lost value. Governments responded to these losses by issuing stimulus and rescue packages for distressed industries. These led to notable recoveries by some firms, although most in the tourism industry remained negative. The chapter recommends an additional rescue package for the tourism industry that must be timed with visible signs that the pandemic is under control.