As the U.S. travel industry remains ablaze with activity, investors are presented with a compelling conundrum: Airbnb (ABNB-0.83%) versus Booking Holdings (BKNG0.19%). While Airbnb’s popularity is undeniable, there’s a contender hiding in plain sight that might just outshine it. This article delves into the dynamics of these two giants and explores why Booking Holdings could emerge as a more astute investment choice.
Riding the Travel Wave
The resurging allure of travel within the U.S. has sparked fervent interest among investors. With American households prioritizing travel experiences and global vacationing on the rise, the travel industry seems poised for sustained growth. Airbnb, a frontrunner in the industry, embodies the potential of these trends and holds significant long-term promise.
A Hidden Contender: Booking Holdings
Amidst the spotlight on Airbnb, Booking Holdings, the online travel powerhouse, lurks as a potent player in the industry. Boasting a portfolio that encompasses Booking.com, Priceline, Agoda, Rentalcars.com, and Kayak, Booking Holdings possesses an array of brands that wield influence across various travel domains.
Can Slower Translate to Mightier?
Contrary to common assumptions, recent performance data reveals an intriguing narrative. Over the past year, Booking Holdings’ stock performance has far surpassed that of Airbnb. Airbnb’s meteoric valuation rise, steeped in ambitious growth projections, contrasts starkly with Booking’s more measured trajectory. However, the notion that “big and slow is bad” is debunked, as Booking’s revenue growth has been resurging impressively. In the second quarter of 2023, Booking reported a remarkable 27% year-over-year surge in revenue, overshadowing Airbnb’s 18% growth. Both companies exhibit strong cash generation capabilities, yet Booking’s steady focus on refining its online booking accommodation model continues to pay dividends. Notably, Booking’s Q2 2023 net income skyrocketed by 51% compared to 2022, showcasing the company’s adeptness at uncovering new profit avenues. The surge in net income per share, a staggering 66%, underscores the company’s commitment to rewarding shareholders through stock buybacks. A testament to this is the impressive $5.25 billion worth of stock repurchased in 2023, nearly tripling the figure from the prior year’s first half.
Simultaneously, Airbnb’s trajectory has not gone unnoticed. The company displayed a commendable 72% increase in year-over-year net income. Despite this progress, Airbnb has yet to close the gap on Booking’s formidable operating profit margin.
The Timeliness Conundrum
Several factors contribute to the question of timeliness when it comes to investing in either Booking or Airbnb. Currently, Booking’s stock holds an appealing valuation, trading at 19 times the expected earnings for 2024. In contrast, Airbnb’s valuation stands at a higher 31 times the projected earnings for the same period.
While these valuations might raise eyebrows, it’s vital to recognize that both companies operate within a premium valuation sphere. Airbnb’s potential for growth expands into new realms of the travel industry beyond its core accommodations platform. Booking, on the other hand, already demonstrates robust diversification. As 2023 experiences record travel within the U.S., indications of inflation’s impact on American wallets are evident. This might trigger a moderation in growth for 2024.
Interestingly, Booking’s management reveals a noteworthy tidbit. International room nights booked only recently recovered to 2019 levels in the second quarter of 2023. Despite expectations of tempered travel expenditures, global vacation demand remains poised for considerable expansion.
Navigating the Investment Landscape
It’s crucial to underscore that Booking does not fall under the realm of value stocks. The journey ahead might entail turbulence, particularly if travel demand experiences moderation. However, for investors seeking a robust travel-centric stock with a long-term horizon, Booking Holdings could emerge as a more opportune selection than Airbnb.
Conclusion
The face-off between Airbnb and Booking Holdings presents a captivating investment dilemma. As the U.S. travel industry thrives and international vacationing beckons, these companies stand as vanguards in the sector. The narrative, however, takes a nuanced turn as Booking’s steadfast resurgence and strategic prowess shine brightly. The trajectory of these travel titans underscores the intricate interplay between valuation, growth prospects, and timing. While the allure of Airbnb’s star power remains undeniable, the hidden gem that is Booking Holdings might just hold the key to unlocking greater investment value in the dynamic landscape of the travel industry.
