Guggenheim: Online Travel Entering 'Consolidation Phase'

In a new report, analysts at Guggenheim looked at online travel stocks, which have surged in recent years due to rapid growth in the space. According to analysts, the online travel market is maturing, but there are plenty of growth and opportunities remaining.

Middle Innings

Analysts believe that eTravel is now entering the “middle innings” of its expansion. According to the report, growth is now slowing and the cycle is transitioning into a consolidation phase.

Analysts see three major themes playing out during the consolidation phase:

1. Moderate overall growth

2. Share consolidation and strong growth for a select few names

3. Growth rate convergence among leaders

The Numbers

Guggenheim is calling for growth in the online travel market to slow to about 10 percent by 2017. Analysts predict that online travel will continue to grow at up to double the pace of the overall travel market.

Related Link: Cantor Fitzgerald's Outlook For The Online Travel Industry

Among the leaders in the space, including Expedia Inc EXPE, The Priceline Group Inc PCLN and TripAdvisor Inc TRIP, analysts expects growth rates to converge in the mid-20 percent range.

Guggenheim also expects market leaders to continue to gain share from smaller competitors. “With little differentiation on pricing, competition is all about the ability to spend on marketing and technology, driving share to the deep-pocketed leaders and spurring many long-tail players to seek an exit,” analysts explain.

Stock Picks

Guggenheim lists Expedia as its top pick, but also has Buy ratings on TripAdvisor, Liberty TripAdvisor Holdings Inc LTRPA and Ctrip.com International Ltd CTRP. Guggenheim has Neutral ratings on Priceline, HomeAway Inc AWAY and Orbitz Worldwide Inc OWW.