This battered travel stock is seen as an AI victim. But the data suggests otherwise
Investors are afraid chatbots will supplant online travel agencies, but direct bookings are still on the rise.
TL;DR
- Booking Holdings' stock is trading at a discount due to fears that AI chatbots will disrupt the online travel agency model.
- The company's actual results show strong performance, exceeding guidance on key metrics despite geopolitical conflicts.
- AI's impact on bookings is minimal, with less than 1% of room nights originating from large language models.
- Direct bookings through Booking's own channels continue to grow, strengthening its position.
- The company possesses a two-decade-old flywheel of supply, payments, and loyalty that is difficult for AI to replicate.
- Three factors have weighed on the stock: AI fears, geopolitical instability in the Middle East, and currency exchange rate illusions.
- Booking's business model, particularly its merchant model which handles payments and customer service, provides a structural advantage against AI disintermediation.
- The company is actively developing its own AI capabilities to enhance customer experience and maintain direct relationships.
- Kayak's impairment highlights AI's impact on thin, top-of-funnel businesses, but Booking.com's fulfillment layer remains robust.
- The company's long-term growth algorithm targets at least 8% annual growth in gross bookings and revenue (constant currency) and 15% growth in EPS.
- The stock's valuation disconnect suggests significant upside potential if it reverts to its historical trading multiples.
- Risks include potential re-escalation of Middle East conflict and continued erosion of free search traffic by AI.