Biggest Recession Since The Great Depression?

Economic activity is at a standstill. We must rely principally on alternative data to measure this because of how quickly the collapse in activity has occurred. An example of this is the number of riders on the NYC subway. On March 17th, there were 1.8 million riders which was down from 5.6 million on the same day in the prior year. OpenTable shows there was an 84% decline in bookings on March 17th compared to last year. Many cities literally can’t get any worse. New York, Los Angeles, San Francisco, Seattle, DC, Boston, and Toronto all had 0 bookings. An optimist would say that will make for easy comps in 2021. A pessimist will say firms won’t make it to 2021 if they have no sales now. If you own a restaurant that can’t open for a few weeks, it’s cheaper to end the business than to take out a loan. What’s the loan for if there are no revenues?

The S&P 500 has had such a bad year that only 3 sub-industries were up as of the 18th. The 3rd worst performing industry year to date is hotels, resorts, and cruise lines which is down 66.81%. The hotel industry is asking the government for a $150 billion bailout. The worry for shareholders is that the equity gets wiped out. The situation is dire for these firms even if a cure for COVID-19 is found this summer and economic activity gets back to normal in a few months. As you can see from the chart below, at this point in the year occupancy in hotels is usually in the high 60% range as we are in spring break season. The past week was dreadful for these firms as occupancy has fallen to the low 50% range. That weakness will continue in the next few weeks as shutdowns only amp up.

If you’re curious, the airlines are also in dire shape. On Wednesday, Delta announced it would shrink its flight coverage by 70%. The firm is eliminating 80% of its international flights in the next 2-3 months. It expects sales in March to be $2 billion less than last month.

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