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ASX travel shares on watch as coronavirus travel restrictions take effect

ASX travel shares are on watch as the Australian Federal Government introduces restrictions on arrivals from China. On Saturday, the government announced tough new restrictions on arrivals from China in the latest effort to combat the spread of coronavirus.

Entry to Australia is being denied to people who have left or travelled through China from 1 February. Exceptions apply to Australian citizens and permanent residents, their immediate families, and air crews. 

Restrictions impact tourist arrivals

The restrictions were implemented on the advice of Australia’s chief medical officers in an effort to reduce the threat from the coronavirus outbreak. Those who arrive after the restrictions took effect will have their visas cancelled and be quarantined in detention.

The impact on the number of arrivals from China has been immediate and significant. According to ABC news, 12 flights from China cancelled in the first few hours of the restrictions. An estimated 5,000 people were scheduled to arrive in Melbourne from China in a 24-hour period over the weekend, but with the restrictions in place, only 700 were expected.  

Travel shares fall

The ABC article reports that impact of the coronavirus on Australia’s tourism market was estimated to be as high as $1 billion, even before the implementation of the Federal Government’s travel restrictions. Airlines, travel agencies, and airports have already seen share prices impacted.

Shares in Qantas Airways Limited (ASX: QAN) have declined 12.66% over the past month as investors take account of the potential impacts of the virus. The Webjet Limited (ASX: WEB) share price has fallen 14.12% over the same period, while Flight Centre Travel Group Limited (ASX: FLT) shares are down nearly 13%. 

Casinos set to suffer

Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR) both generate significant income from Chinese guests. According to the ABC piece, UBS has estimated volumes from VIP gamblers could be down 50%, which would in turn reduce FY20 earnings per share by 10%, and FY21 earnings per share by 20%. The Crown Resorts share price has fallen 5.29% in the past month, while the Star Entertainment share price has declined more than 13%.

Corporate travel exposed 

Corporate travel has also been impacted as businesses cut back on travel to China. UBS has indicated Corporate Travel Management Ltd (ASX: CTD) is heavily exposed to these cutbacks, with Asian business travel accounting for 20% of its earnings. Corporate Travel Management shares have fallen more than 14% over the past month.

UBS has estimated that if the coronavirus has the same impact on travel as SARS, Sydney Airport Holdings Pty Limited (ASX: SYD) could expect a 5% downgrade in operating cash flow. Shares in Sydney Airport are down 5.77% in the past month.

Coronavirus infections have already overtaken SARS infections, with more than 14,000 coronavirus infections reported to date compared to approximately 8,000 SARS infections. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Crown Resorts Limited, Flight Centre Travel Group Limited, and Sydney Airport Holdings Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Kate O'Brien