Travel businesses are not short of challenges: airports passenger caps, staff shortages, surging oil prices, health restrictions, and slower growth… but holiday-booking marketplaces are proving resilient as consumers are focused on “revenge spending”. Could travel stocks be poised for a comeback?
US travel spending fell 42% in 2020, but rose 3% above pre-pandemic levels by April 2022, a strong sign that travel is back. Amid a challenging first half for financial markets, travel stocks suffered as central banks began to withdraw stimulus and investors worried about growth. With a possible brighter second part of the year, travel stocks could offer compelling out-of-the-beaten-path opportunities. In addition, platform businesses may be less vulnerable to the rising wages, causing headwinds to corporate margins.
Booking.com: Leading online travel marketplace
Booking Holdings (ticker: BKNG) acts as an online travel agency offering hotel accommodation, transportation, and car rentals. The American travel technology company operates several travel booking sites including Booking.com, Priceline.com, Kayak.com, Rentalcard.com, and Agoda.
Booking.com and other brands of the group have become a widely recognizable household name for travelers and a must for hotels to win reservations. It also employs incentives to lure consumers back to the platform such as reward points and discount offers.
Over the years, Booking.com’s user-friendly platform and free cancellation features have won over travelers. In 2019 alone, consumers booked 845 million nights of accommodation, 77 million rental car days, and 7 million airplane tickets using online platforms owned by Booking.
During the global pandemic, Booking Holdings saw its flexibility put to the test as lockdowns forced travelers to stay home. It slashed its workforce to save USD300 million annually, preserving its cash-rich balance sheet.
The group had almost fully recovered to pre-pandemic profitability by the first quarter of 2022. Yet the stock is down more than 25% this year and around 10% below its pre-pandemic level.
Momentum appears resilient for the company according to web traffic estimates as it is taking advantage of a surge in travel demand this summer. Despite low consumer confidence, consumer spending suggests travelers are not cutting back much on expenditures after being restricted during the pandemic. With a bright business outlook, the company is still vulnerable to an economic slowdown since travel is generally cyclical. Booking Holdings will announce second-quarter earnings on the 3rd of August.
Expedia: Leading one-stop travel site
Expedia Group (ticker: EXPE) is an American online travel company offering a platform for travelers to book trips including accommodation, transportation, and car rentals. The group owns Expedia.com, Hotels.com, Hotwire.com, Orbitz, Travelocity, trivago, and CarRental.com. It also owns Vrbo, an American vacation rental platform.
Expedia uses a multi-branded strategy to target different types of consumers and travel needs. It is also famous for its Expedia(R) Best Price Guarantee – Expedia.com promises to attract its customers with the best rates online for various travel bookings. The platforms offer deals and robust search engine capabilities to narrow down offers to specifically what travelers are looking for.
Expedia returned to profitability in the third quarter of 2021, after suffering during the pandemic, boosted by vacation rental unit Vrbo. The stock is down almost 50% this year and about 20% below pre-pandemic levels.
Expedia’s CEO predicted earlier this year that this summer will be the busiest ever as travel is boosted by vaccines and the lifting of most Covid restrictions. Expedia will announce second-quarter earnings on the 4th of August.
Airbnb: Online vacation rental marketplace
Airbnb (ticker: ABNB) operates an online platform that allows homeowners to list their homes as places to stay. It’s become a hugely popular alternative to hotels and distinguishes itself with its unique locations that are listed on the platform. The platform saw explosive growth boosted by remote work and travelers desiring unique holiday spots at affordable rates.
The founder-led company also recently upgraded its platform with new features making the process to become a host faster and easier. The leading community platform could be a strong beneficiary of the post-pandemic world as people continue to want to rent homes and holiday rental units.
The stock suffered amid a brutal first half of the year for the stock market. It is down 40% this year and around 35% below its IPO closing price. Airbnb will announce second-quarter earnings on the 11th of August.
Travel names could offer exciting opportunities amid the market sell-off. The devastating effects of lockdowns and restrictions could give rise to years of strong growth in travel as people prioritise experiences and vacations, after being deprived during the pandemic years. Moreover, the travel-technology companies may be well positioned to adapt to a fast-changing environment.