Booking Holdings: Tourist travel under threat (NASDAQ: BKNG)

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Investment dissertation

Booking Holdings (NASDAQ: BKNG) Q1 FY22 results underscore management’s positive comments that gross orders in April 2022 are at pre-pandemic levels. Despite such positive data, shares reacted little. We think the cost of living is a crisis will adversely affect holiday behavior in the second half of FY22/Fiscal 2022, slowing the pace and scope of the recovery. As the consensus forecast looks too optimistic, we view the stock as neutral.

Key Financial Highlights and Agreed Profit Estimates

Key Financial Highlights and Agreed Profit Estimates

Key financials and agreed earnings estimates (Company, Refinitiv)

Our goals

The easing of travel restrictions in the wake of COVID19 should mark a period of high demand for Booking Holdings in the form of pent-up demand from business travelers and tourists alike. Booking stock has outperformed the NASDAQ over the past 12 months, but not by much.

YCharts Data

In this part, we want to evaluate the following:

  • Assess the level of current travel demand and its prospects, taking into account a softer forecast for consumer sentiment.
  • Revise our March 2021 Sell recommendation to reflect the consensus outlook for the next two years.

We’ll take each one in turn.

Demand remains weak

The conclusion we are coming to is that, unfortunately for the tourism industry, demand currently remains lower than expected. As many parts of the world are facing a cost-of-living crisis and the Russian invasion of Ukraine has resulted in a significant increase in the cost of basic commodities, we believe this will have a significant negative impact on the tourism recovery going forward.

We find data disclosed by the UNWTO (United Nations World Tourism Organization) as one of the indicators of the health of the tourism industry. While the available data is not entirely up-to-date, their tourism recovery tracker highlights the positive year-on-year data for a recovery in travel sentiment and demand for short-term rentals for April 2022. On an annualized basis, hotel bookings were down 69% and hotel occupancy was down 58%. There is evidence of recovery in other countries, for example, in Japan in April 2022 the number of foreign travelers increased by 1185% year on year, but this remains 95% below the level seen in April 2019 before the pandemic. extremely high.

The risk of rising costs will affect customers as well as the hospitality industry itself, which is also facing rising costs for energy, food and wine, and wages. The potential reduction in supply will also negatively impact travel websites as sales volumes start to fall.

Business travel seems to be doing better. American Express Global Business Travel (which is merging with SPAC Apollo Strategic Growth Capital (APSG)) reported that in the first three weeks of April 2022, transaction volume reached 72% of 2019 levels. There seems to be more momentum here compared to the rest as the corporate world returns to…

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