Online Travel Agencies No Longer 'Growth Disruptors': Bernstein

Online travel agencies are no longer "30%-plus growth disruptors," as the group has evolved to become a core part of the travel landscape, according to Bernstein.

The Analyst: Richard Clarke initiated coverage of three OTA stocks Monday: 

Booking Holdings Inc BKNG at Underperform, $1,720 price target.

Expedia Group Inc EXPE at Market-Perform, $113 price target.

Tripadvisor Inc TRIP at Outperform, $35 price target.

The Thesis: The era of OTAs showing double-digit revenue growth has likely come to an end, as hotels are actively taking back control of their room inventories, Clarke said in the initiation note.

Major hotel brands like Hilton Hotels Corporation HLT are investing heavily to "educate" the public on how booking directly with them is not only cheaper, but offers more flexibility, the analyst said — like mobile check-in.

Instead of 23% revenue growth from 2010 to 2019, OTAs will show a single-digit growth rate in the post-pandemic era, he said. 

OTAs do have exposure to travel themes outside of hotels, but the group is up against tougher competition from the likes of Airbnb, Clarke said.

Flights and bundle packages offer lower take rates and margins while car rentals and cruises are "small" market opportunities, the analyst said. 

Related Link: Multiyear Travel Recovery Likely, Booking Holdings Analyst Says After Q2 Beat

Bearish On Booking: Booking's 90% exposure to lodging implies it "suffers the most" from a lodging slowdown, according to Bernstein. 

Neutral On Expedia: Expedia faces the same headwinds as Booking, but to a lesser degree, Clarke said. This is due to the company's "sizeable" B2B and flight business and ability to offset headwinds with cost savings, the analyst said. 

Bullish On Tripadvisor: Experiences are the "final frontier of travel," and Tripadvisor holds a leadership position in restaurants and B2B services, he said. 

Price Action: Shares of Booking were trading higher by 1.8% Tuesday at $2,065.01. 

Shares of Expedia were trading higher by 1.41% at $126.25.

Shares of Tripadvisor were trading higher by 5.02% at $27.41.