The Impact of COVID-19 on Hotel Stock Prices in Europe: An Event Study Approach

Abstract

The outbreak of the novel corona virus has severely impacted the world economy. Along with the challenges imposed on the healthcare sector, the pandemic also affected the performance of all sorts of industries. With many businesses already shut and many more struggling to survive, the overall impact of the pandemic on different sectors of the economy remains a subject of further research. In this paper, the impact of corona virus outbreak on the performance of hotel stock prices in Europe is analysed through an Event Study Methodology. Four major events in the corona virus timeline of Europe between January and May 2020 were considered for the study. For the 15 publicly listed hotels, significantly high negative average abnormal return and the cumulative abnormal return was observed during event 2 and event 3 that occurred on March 11 and March 17 respectively. These two events marked the peak of the outbreak in Europe when the travel and movement restrictions were strictly imposed. The average and cumulative abnormal returns showed signs of positive change during event 4 (May 11) which can be attributed to easing of lockdown in many European countries. Thus, for businesses including hotels to start recovering from their current losses it is required that the restrictions are gradually uplifted, and people start moving towards normalcy in their lifestyle as well as the governments to provide support in the form of stimulus packages.

Keywords: Coronavirus, Hotel industry, Europe, Event Study Methodology, Average Abnormal Return, Cumulative Abnormal Return

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