Hedge funds lose $6bn betting against cruise lines and hotels stocks

https://www.ft.com/content/4ed9e3ae-3608-47da-b56b-48ed82fbeddc?emailId=d0cf7942-95d1-4b5d-a27f-7280e9b49018

Hedge funds have lost more than $6bn this year betting against cruise lines and hotels after underestimating the resilience of US consumers. Cruise lines Royal Caribbean and Carnival are two of the 10 most heavily shorted companies in the S&P 500 but have confounded short sellers’ expectations by more than doubling in value so far this year. Short sellers — typically hedge funds — aim to make money by selling borrowed stock and buying it back at a lower price when the shares decline. The sharp rally in cruise lines and other holiday accommodations, however, has left them sitting on $6.4bn of mark-to-market losses, according to data from S3 Partners. Carnival, Royal Caribbean and smaller rival Norwegian accounted for $2.9bn of the losses. Large short positions in Airbnb, which has rallied 70 per cent year to date, and Booking.com, which is up 44 per cent, have also inflicted big losses.

Many US investors started the year expecting an impending recession, encouraging them to avoid sectors that would be exposed to a downturn in consumer spending. However, economic growth has remained resilient in the face of higher interest rates, boosting confidence about the chances of a “soft landing” — bringing down inflation without causing a recession.