Artificial Intelligence Sets a New Direction in Travel
Is Now the Time to Invest in Expedia and Booking Holdings?
Artificial intelligence (AI) is reshaping industries globally, and the travel sector is no exception. Companies like Booking Holdings (BKNG) and Expedia (EXPE) are leveraging AI to redefine user experiences and gain a competitive edge.
Growing Demand for Travel
Post-pandemic travel demand has surged. Despite challenges such as inflation and geopolitical uncertainties, more people are traveling to explore new cultures and destinations. Increased disposable income and lifestyle shifts have further driven the popularity of wellness-oriented leisure trips.
Projections from Statista suggest the global travel and tourism market will hit $1.1 trillion by 2029, creating significant opportunities for companies like Expedia and Booking Holdings to thrive. Here's an analysis of their performance and growth potential.
Booking Holdings: The Market Leader in Online Travel Services
As the world's largest online travel service provider, Booking Holdings (BKNG) operates across 220 countries and territories. Its diverse portfolio of brands, including Booking.com, Priceline, and Kayak, makes it a global powerhouse.
Financial Performance and Growth
Year-to-date stock performance: Up nearly 50%, outperforming the S&P 500 Index’s 26.8% gain.
Q3 2024 results: Gross travel bookings rose by 9% year-over-year to $43.4 billion, and revenue climbed to $8 billion, exceeding expectations by $366.6 million. Adjusted EPS grew 16% to $83.89.
AI Investments Driving Innovation
Booking Holdings has made significant AI advancements:
Personalized search results
Dynamic pricing
AI-driven customer support
The AI Trip Planner, launched last year, continues to evolve, enhancing customer satisfaction and supplier relationships. Meanwhile, Priceline introduced 30 new AI-powered features, streamlining travel planning and booking processes.
Future Outlook
Management anticipates:
8% increase in full-year gross bookings
10% revenue growth
High-teens rise in adjusted EPS
Analysts forecast revenue growth of 9.6% to $23.4 billion in 2024 and earnings growth of 20.1%. While the stock's valuation (25 times forward 2025 earnings) seems high, its strong financials and innovative initiatives make it an attractive investment.
Analyst Consensus: A “moderate buy” rating, with potential upside of 12% over the next 12 months.
Expedia Group: Expanding Horizons in Online Travel
With a $23.7 billion market cap, Expedia (EXPE) is another major player in the online travel industry, supported by brands like Hotels.com and vacation rental platform Vrbo.
Performance Snapshot
Year-to-date stock performance: Up 23.4%, reflecting strong recovery in travel demand.
Q3 2024 results: Revenue rose 3% year-over-year to $4.1 billion, while earnings jumped 13% to $6.31, exceeding expectations.
Gross bookings increased 7%, with B2B revenue surging 18% to $1.2 billion.
AI and Strategic Partnerships
Expedia leverages AI to enhance user experiences through:
Chatbots for personalized recommendations
Dynamic pricing
Efficient customer service
Strategic partnerships with Ryanair, Alaska Airlines, and Microsoft further expand its reach. Additionally, Expedia’s study reveals high spending intent among affluent Asian travelers, indicating growth opportunities.
Future Prospects
Management forecasts:
5% growth in gross bookings
6% revenue increase in 2024
Analysts project revenue growth of 5.7% to $13.6 billion in 2024, with earnings rising by 21.7%. At 13 times forward 2025 earnings, Expedia offers a reasonable valuation amid surging travel demand.
Analyst Consensus: A “moderate buy” rating, with potential upside of 22.5% over the next 12 months.
Conclusion: Should You Invest Now?
Both Booking Holdings and Expedia stand out as promising investments in the rapidly expanding travel market. While challenges persist, their focus on AI innovation and strong financial performances position them well for long-term growth.
Booking Holdings is ideal for investors seeking exposure to a market leader with cutting-edge AI initiatives.
Expedia offers value through its competitive pricing and strategic partnerships.
With travel demand expected to grow, now might be the right time to consider adding these stocks to your portfolio.