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Why short-sellers are targeting these travel stocks

People walk in front of the entrance of the five-star Paris Marriott Hotel.
Fred Dufour | AFP | Getty Images
People walk in front of the entrance of the five-star Paris Marriott Hotel.

Short sellers are targeting legacy travel firms like hotel groups, timeshare companies and cruise operators, as online players like Airbnb start to take a larger share of the leisure market, a report released Tuesday showed.

Companies including Marriott International, Diamond Resorts and lodging group Wyndham Worldwide are struggling as price-conscious consumers turn to comparison websites for budget travel options, a report by financial information services firm Markit explained.

As a result, those three firms's stocks have become some of the most shorted in the industry, with nearly a fifth of their shares currently short-sold.


Short selling is an investment tactic by which a speculator borrows an asset such as a stock, and sells it in the hope of buying it back later at a lower price, thereby making a profit. Research firm Markit measures this short interest by calculating the amount of shares that are out on loan.

Diamond Resorts has seen its share price drop 28 percent over the last year, with short interest jumping seven-fold to 21 percent.

Marriott International has also seen short interest surge above 21 percent, while Wyndham Worldwide has seen a tripling of short interest to 8.9 percent.

That's as competitors like home rental platform Airbnb gain ground.

"While Airbnb growth will see the firm book almost 80 million room nights in 2016 (from zero just eight years ago), a billion nights is in reach within 10 years," the report, penned by Markit analyst Relte Stephen Schutte, explained.

"This growth has undoubtedly come at the expense of traditional hotel and vacation providers, as well as limiting any substantial price growth in the industry," the report added.

Airbnb, which is not listed on the stock market, has been valued at $25.5 billion as of June 2015 according to media reports.

That competition has also eaten into market share previously held by traditional high street travel agents like Flight Centre. The company's stock has dropped 30 percent since March, despite intentions to transition to a more mobile-centred business model.

Short interest on Flight Centre's stock has jumped above 12 percent in the last week, Markit's data showed.