Booking Holdings, Expedia Group face slowing travel headwinds amid wary consumers

Investing.com -- Online travel booking platforms Booking Holdings (NASDAQ:BKNG) and Expedia (NASDAQ:EXPE) Group are facing moderating travel growth as cash-strapped consumers are becoming more cost-conscious, looking for "value play" vacations.

"U.S. leisure accommodation revenue trends are on average flattish-to-down y/y as consumers seek 'value play' vacations," analysts at Truist Securities said in notes to clients on Friday after starting coverage on both companies with a hold rating.

The analysts point to moderating macro travel growth as a key factor in their hold ratings on both Booking and Expedia stocks. This caution comes despite the companies' strong positions in the global online travel market, with Booking having a stronger presence in Europe and Asia-Pacific, while Expedia dominates in North America.

Both companies are pursuing strategic initiatives to drive growth and improve efficiency. Booking is focusing on expanding non-lodging bookings through its "Connected Trip" strategy, growing alternative accommodations offerings, and enhancing its Genius loyalty program.

Expedia, meanwhile is simplifying its corporate structure, unifying its loyalty programand reducing reliance on performance marketing as part of a turnaround plan.

"EXPE readily admitted to growing 'big without many of the benefits of scale' and where an internal transformation is intended for a more simplified, faster growth platform," the analysts said about Expedia's ongoing turnaround efforts.

Despite these initiatives, both companies face challenges. Booking's average daily room rates were flattish in the first half of 2024, while Expedia's Vrbo brand is experiencing mixed results due to shifts in travel patterns and legacy market share issues.

The analysts forecast mid-single digit revenue growth through 2025 for both companies, which, while solid, represents a deceleration from historical rates. 

The Truist team initiated coverage on Booking with a hold rating and a $4,100 price target, while maintaining a hold rating on Expedia with a $148 price target.