Shares of European and U.S. hospitality companies fell sharply on Monday as investors weighed the potential effects of U.S. and Israeli strikes on Iran on travel across the Middle East region.
Paris-listed Accor saw one of the steepest declines, sliding by more than 9% in early trading after reporting that some of its luxury locations in Dubai and Bahrain had been struck in retaliatory Iranian air attacks. In London, InterContinental Hotels Group (IHG) shares declined by over 4%.
Analysts at Bernstein, including Richard Clarke and Sabrina Blanc, cautioned that the threat of further attacks and the operational fallout - notably the closure of airports in Dubai and Dhabi and ensuing flight cancellations - will directly pressure hospitality revenues in the region.
The Bernstein team highlighted how exposure varies across groups. They noted that Accor is the most exposed among the names discussed, with just under 10% of its rooms located in the Middle East and earning a considerably higher revenue per available room due to a higher chainscale mix. The phrase "chainscale mix" was used to describe the distribution of hotel properties across different quality and price tiers within a specific portfolio, market, or development pipeline.
IHG was identified as the second-most exposed hotel operator, although Bernstein pointed out its portfolio places relatively greater weight on Saudi Arabia - a market that has experienced less immediate impact than the UAE.
For U.S.-based hotel groups, the analysts said the Middle East represents a relatively small share of overall room counts, implying a more muted direct exposure compared with the European chains discussed.
Cruise operators were assessed differently. Bernstein suggested demand for cruises is unlikely to be materially dented by the Iran conflict itself, but indirect channels could hit the sector. Those channels include rising oil prices and the need to reroute a limited number of voyages that normally pass through Gulf states or parts of North Africa.
The analysts flagged that higher fuel costs would particularly pressure Carnival Corp and Royal Caribbean Cruises. In premarket U.S. trading, Carnival shares fell by 7%, while Royal Caribbean shares dropped by more than 6%.
Summary - Market concerns over strikes on Iran and retaliatory attacks have driven a sell-off in hospitality shares, as analysts warn of airport closures, flight cancellations and potential fuel-driven cost pressures for cruise lines.
Key points
- Accor declined over 9% in early trading after its Dubai and Bahrain luxury properties were struck in retaliatory Iranian air attacks.
- IHG shares fell over 4% in London; Bernstein places IHG as the second-most exposed hotel group but notes heavier exposure to Saudi Arabia than to the UAE.
- Cruise operators face indirect pressure from higher oil prices and possible rerouting; Carnival and Royal Caribbean fell about 7% and more than 6% respectively in premarket U.S. trading.
Risks and uncertainties
- Operational disruption from airport closures in Dubai and Dhabi and subsequent flight cancellations could reduce room nights and revenues for hotel operators with Middle East exposure - a direct risk to hospitality revenue streams.
- Rising oil prices driven by geopolitical tensions could increase operating costs for cruise operators and broader travel firms, squeezing margins if costs cannot be passed through to customers.
- Rerouting of voyages that traverse Gulf states or North Africa could lengthen itineraries and raise fuel and logistical costs for cruise lines, affecting profitability.