Sabre lowers Q1 revenue outlook

Sabre’s stock plunged 16% on Wednesday after the company said the Covid-19 coronavirus outbreak would impact its first-quarter revenue by $100-$150 million.

“While we hope its impact is short-term in nature, we anticipate that the coronavirus will have a material impact on our 2020 financial results, and at this point no one can predict the timeline and ultimate effects of the outbreak,” CEO Sean Menke said on the company’s Q4 earnings call.

CFO Doug Barnett provided the estimate of the revenue hit that Sabre will take in the first quarter.

“History shows that health epidemics have a major impact on global travel,” Barnett said. “Quarter to date GDS industry bookings are down mid-teens, and we have little insight as to when to expect relief.”

Menke said the company didn’t provide full-year guidance on the impact of coronavirus because it’s too soon to tell what that will be.

“What I can share is over the past couple of days, we’ve seen increased cancellations in the European marketplace, or a bookings slowdown in the European marketplace, so this is very fluid,” Menke said.

The effects of coronavirus on bookings began in mid-January. It has mostly affected the Asia-Pacific region, followed by Europe, followed by North America.

The timing of the Covid-19 outbreak is similar to that of SARS in 2003, Menke said. Sabre saw double-digit booking declines in the mid-teens for the first and second quarter of 2003. Bookings increased in the back half of the year. The full-year impact was about a 9% decrease in bookings, according to Menke.

Tech investment

Sabre on Wednesday also announced a $150 million investment in technology in 2020, in support of five strategic initiatives.

The bulk of the money, about $100 million, will go to Sabre’s efforts to move its platform away from the mainframe and build a marketplace entirely on the cloud.

Sabre recently partnered with Google to further that goal. Moving away from the mainframe has taken longer than expected, Menke said.

The other $50 million will go toward efforts to enable more personalized offers from suppliers; distribute those personalized offers (in part using IATA’s New Distribution Capability); develop a full suite of retailing, distribution and fulfillment capabilities for low-cost carriers; and create a full-service property management system for hoteliers.

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