Travel demand set to take flight
Airbnb, Booking.com, TripAdvisor and Expedia face a post-covid surge, but big tech may get in on the act too.
Mentioned: Airbnb Inc (ABNB), Amazon.com Inc (AMZN), Expedia Group Inc (EXPE), Meta Platforms Inc (META), Flight Centre Travel Group Ltd (FLT), Alphabet Inc (GOOG), Alphabet Inc (GOOGL), Booking Holdings Inc (BKNG), Qantas Airways Ltd (QAN), Tripadvisor Inc (TRIP), Web Travel Group Ltd (WEB)
The permission to shed our covid masks from Monday coincides with the deluge of ads exhorting us to travel again. “Come to Adelaide!” “Fly to Perth for $159.” It’s a far cry from the situation a year ago when the idea of travel was reduced to a brisk walk around the block. Sadly, that’s still the case in parts of Europe but there are more positive signs elsewhere.
Two voices of optimism this week are Morningstar’s Dan Wasiolek and that plain-speaking Englishman Marcus Padley. Both expect that the travel market will fully rebound from the global pandemic demand shock.
“After demand shocks like 9/11 and the great financial crisis, travel demand made a full return to prior levels in three to four years,” notes Wasiolek. “While COVID-19 is different from past events because of its global reach, we think travel-related companies could still recover at a similar pace.” Bon voyage, indeed.
But while Wasiolek sees expansion ahead for the big operators such as Airbnb, Booking.com, TripAdvisor and Expedia, he sees a threat from, you guessed it, the tech titans: Google, Amazon and Facebook. TripAdvisor, in particular, faces higher competitive challenges as Google’s metasearch platform competes more directly with around 60 per cent of TripAdvisor’s business.
Wasiolek foresees Amazon entering the global travel market via a metasearch product, which creates a similar competitive risk as Google’s platform. Amazon has had several goes at a travel-related pilot but has withdrawn without saying why. They haven’t given up, however. “Although a more complete Amazon travel platform might be a few years away as the company focuses on building out its apparel, grocery, home furnishings, and pharma presence, we think it’s a matter of when, not if, it occurs,” Wasiolek says.
And don’t forget Facebook, that receptacle of holiday snaps for 2.7 billion-odd people. The social network has the potential to moonlight as an indirect marketing channel for Booking, Airbnb, and Expedia and a competitor to TripAdvisor’s hotel metasearch offering, according to Wasiolek.
As for local names, travel could benefit from a “tidal wave” of demand, says Padley, who this week nominated the sector as an investment theme to watch in the next few years. “The chances are that companies like Qantas will one day look back at the pandemic and thank their lucky stars,” Padley told Firstlinks this week. “It obliterated the competition and ingrained their market dominance. The share prices of companies like Flight Centre (ASX: FLT), Webjet (ASX: WEB) and Qantas (ASX: QAN), will, one day, recover and improve. But it will take years. That’s why nobody buys them, and that’s why you should.”
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