Skift Health Score: April 2021

Overview

The Skift Health Score is a proprietary metric that assesses the strengths of public travel companies. Our current version includes scores for 94 travel companies across hospitality, airline, cruise, and online travel and distribution sectors.

A company’s final health score is derived from analyzing and combining three underlying company sub-scores, each formulated to measure a specific component of the business. The sub-scores are:

  • Survivability: how prepared the company is to weather the current COVID-19 crisis.
  • Current Performance: how the company is operating at present.
  • Future Prospects: how well-positioned the company is to return to growth in a post-coronavirus world.

Skift Health Score Overview

The Skift Health Score is a proprietary metric that indicates the strength of travel businesses on a scale of 0–100.

This cross-sectional approach allows us to compare travel companies to their peers within the industry. A high score indicates a best-in-class travel business, even though that business may still be struggling with the broad-based challenges that all travel companies face today.

The Skift Health Score combines three underlying company sub-scores, each designed to measure a specific component of the business. The sub-scores are Survivability, how prepared the company is to weather COVID-19 or other crises; Current Performance, how the company is operating at present; and Future Prospects, how well-positioned the company is to return to growth in a post-coronavirus world.


Updating the Skift Health Score for 4Q 2020 Earnings and More

We are returning the regular publication of Skift Health Scores after a hiatus. 86 out of the 94 (91%) public travel companies that we provide health scores for have public filings available through December 31, 2020. This means we can close the books on 2020 with a high degree of certainty that our 2020 scores and rankings are close to being the final numbers. We continue to add and remove companies as new travel businesses IPO, like Airbnb, or stop trading, like Red Lion hotels which was recently acquired.

Our April 2021 Skift Health Score takes into account the most recently available financial information, in this case mostly 4Q 2020, but also blends in real-time metrics of company performance such as stock price performance and analyst forecasts.

Last year was certainly the worst in the history of the travel industry with earnings troughing in the summer and slightly recovering in the fourth quarter. As a result, we have seen a shift in the relative importance of Skift Health sub-scores. While previously the survivability score played a dominant role in determining companies’ rankings, its importance is diminished in this report.

Travel companies saw green shoots in their 4Q financial performances, analysts slowly began raising earnings estimates, and stocks soared on investor optimism for a post-pandemic world. As a result our current performance and future prospects sub-scores rose dramatically and were key determinants of which companies rose or fell in the rankings of this report.


Top Travel Companies for April 2021

Skift Health Scores perked up in April as hopes for a travel recovery solidified and companies moved past their dismal summer 2020 financial performance.

The severity of localized COVID-19 outbreaks continues to be the primary driver or inhibitor of travel industry performance. Differences in the success of government lockdowns and quarantine measures had already been driving a regional divergence between companies. And now, the uneven rollout of a COVID vaccine has only exacerbated those geographical differences.

Europe, which had been successfully locked down when we published this report last, has since seen a resurgence in COVID cases, while the U.S.’ vaccination program has outpaced most of the world leading to travel optimism. As a result, U.S. companies surged to the top of our Skift Health Score rankings, displacing their European counterparts.

The top four companies of our Skift Health Score for April 2021 are Hilton Holdings, Booking Holdings, Airbnb, and Marriott International. All are based in the United States and focus on the hospitality industry. Booking Holdings, admittedly, still primarily operates in the European market, but it has been taking advantage of the current state of disruption to gain market share in the United States.

Booking has fallen from the number one spot to number two. While Intercontinental Hotels (formerly #2) and Ryanair (formerly #3) fell in the rankings. Again, this is to be expected with the reversal in the relative success of Europe and America’s COVID-fighting efforts since last summer.

Top Travel Companies in April 2021

Rounding out the rest of the top ten are a mix of Chinese travel and low-cost leisure air carriers. Both nicely embody ongoing trendlines in the industry.

Top 10 April 2021 Skift Health Scores

Spots five, six, and seven are held by Huazhu Group, China Southern Airlines, and Trip.com Group (Ctrip). They are among the largest Chinese hotel chains, airlines, and online travel agents, respectively. Effectively, this trio is a strong stand-in for the state of the entire Chinese travel value chain.

It has been widely reported that the Chinese travel sector is one of the best performing in the world. A strict, and ultimately successful, government quarantine combined with a strong domestic market eager to travel has helped all of these Chinese tourism businesses be amongst the best performing in the world.

The other airlines on the top ten list, Southwest and Azul, are non-network carriers with a strong leisure-focus. It is these kinds of airlines that are best positioned to capture the first round of returning travel demand while business travel is lagging. We cover the shakeup in airlines in more detail below.


Scoring Airbnb for the First Time

One of the most exciting travel industry developments of the last six months was the public listing of Airbnb. Its $47 billion IPO was the largest in the history of the travel industry and yet this record-setting offering still undervalued the business. Shares surged to make Airbnb the largest travel company in the world, with a $112B market capitalization today.

Airbnb’s IPO in Context

Complementing this impressive debut, Airbnb’s initial Skift Health Score rank places it as the third strongest travel company in the world.

Airbnb Skift Health Score Breakdown

Airbnb’s strongest aspect is its impressive survivability. The company ranks as the fifth most survivable travel company in the world. This is fitting for a large company that just demonstrated the ability to raise capital quickly and cheaply and which has more than $6B of cash on its balance sheet.

The company’s current performance is also top tier, consistent with our previous reporting that short-term rentals have been one of the biggest winners of the pandemic. Airbnb is most dragged down by its future prospects score. What explains this, when investors seem to have such high hopes for the booking platform?

Part of the issue is directly tied to the fact that Airbnb has had such good performance during the pandemic. This translates to its strong current performance score relative to peers. But it also means that the bar will be raised higher for Airbnb next year, while it will get easier for its peers.

Let’s compare it, for example, to Expedia. After Expedia’s revenue declined -$6.9B in 2020, a 57% fall, analysts expect the company will have easy year-on-year comparable sales as it begins to rebuild its revenue base. Consensus expects Expedia to post two years of ~40% growth as it works its way back to 2019 levels of revenue by 2023.

Airbnb on the other hand only saw its revenue fall by $1.4B, or -30% and analysts expect the company to return to 2019 levels of revenue by the end of 2021. Perversely, this will make posting strong year-on-year growth rates more difficult and analysts expect Airbnb’s growth to fall below Expedia’s in 2022 and 2023.

The other issue facing Airbnb is profitability. Alternative accommodations certainly thrived during the pandemic, but this shows up primarily as top-line and not necessarily as margin. Airbnb has a long track record of posting profit losses over the last five years. Analysts expect the company to barely break even and post a 2.4% EBITDA margin in 2021. By contrast online travel agencies are some of the most profitable businesses in all of travel with Booking Holdings regularly earning a 30-40% EBITDA margin.

We designed the Skift Health Score to holistically incorporate dollar revenue growth, percent revenue growth, and profitability among other metrics. And all of the profit metrics that we track sum up to a full quarter of a company’s final Health Score (See our methodology for more details).

While these concerns count against Airbnb, they don’t outweigh the company’s many strengths, including its healthy balance sheet and impressive performance during the pandemic. Overall Airbnb ranks as one of the strongest businesses in all of travel. But a deep dive into our scores reveals that even strong companies have areas of needed improvement.


Biggest Decliners and Gainers – The Shakeup in Airlines

Examining the biggest changes in Skift Health scores since our last update in the summer reveals a lot about changes that took place in the travel industry over the winter.

Top Ten Decliners
Top Ten Gainers

Airlines have been the most volatile sector of the last six months. Across the 20 companies that saw the biggest upward or downward changes in Skift Scores, 13 are airlines. A further five are closely linked to the airline industry, like Amadeus IT Group or Flight Centre Travel Group. That’s a grand total of 18 out of 20 of the biggest moves coming from the airline industry.

What we have seen in the airline industry is a dramatic rotation away from hunkering-down and towards a recovery and growth mindset. Survivability scores, which previously drove the leaderboard, are being outweighed by strong improvements in current performance and future prospects. The greatest improvement in health scores came not from the less profitable though large and safe legacy carriers, but the more fragile and higher-growth-potential leisure carriers. These leisure carriers are both more sensitive to the downturns but also to the recovery and have begun to swing back towards growth.

Delta Airlines, by far the strongest airline in the U.S., and among the most survivable travel companies in the globe, fell 28 positions in our Skift Score rankings. National flag carriers like Qantas and Thai Airways also dropped significantly. Though easyJet and Ryanair are both low-cost carriers, they have historically been among the most profitable airlines in the world with a strong ability to raise external capital. Both saw dramatic declines as well. This is not necessarily due to their own bad performance, but rather because peers have caught up to them in terms of profitability, and so the stronger carriers stand out less sharply and don’t feature as highly in the rankings.

On the other hand, low-cost Latin American leisure carriers like Copa climbed sharply in our rankings Copa went from a current performance score of 15 in August 2020 to 65 in April 2021. The Panamanian airline offers almost no domestic service and was particularly hard hit by the pandemic with revenue falling from $596 million in Q1 2020 to just $15 million in Q2 2020 and $32 million in Q3 2020. Copa is beginning to bounce back having reported $159 million of sales in Q4 2020 and it was this 400% quarterly growth, among other things, that is driving its large current performance improvement.

Despite Latin American airlines being some of the most fragile in the world, Azul and Volaris also rose in our rankings. American Airlines and Air France-KLM, perhaps the weakest legacy carriers in the U.S and Europe respectively, both also saw large gains in Health Scores. In all cases these rebounds were driven by similar dynamics creating large improvements in current performance scores. This change has been borne out by a positive fourth quarter earnings season for the airlines as well as two new IPOs in a matter of weeks.

Lodging and online travel on the other hand have been much more stable as they were able to attract drive-to guests and thus did not experience the sharp peaks and valleys in demand that created this dynamic in the airline industry.


Top Ten by Industry

For ease of use we have drawn up a list of the top ten highest ranked companies for the four major sub-industries we cover. We will not provide an in-depth write-up for each.

Top Ten Airlines
Top Ten Online Travel and Distribution
Top Ten Hospitality
All Cruise


Full Skift Health Score Tables

These full tables track 94 public companies with a Skift Health Score, regardless of when they last reported earnings.

Rank: 1–20
Rank: 21–40
Rank: 41–60
Rank: 61–80
Rank: 81–100