The recent narrative surrounding the travel industry hasn't exactly been bullish. The so-called swell of "revenge travel" stemming from COVID-19 pandemic lockdowns has reportedly run its course. The inflation-hampered economy isn't helping, either.
It's curious, however. A closer look at actual travel trend data suggests people are still traveling as much as they've been since the pandemic wound down. Travel agents are as busy as they've ever been as well, with the results to prove it. Even shares of online travel agents are holding up when they seemingly shouldn't be.
Take Booking Holdings (BKNG 0.53%) as an example. The stock's knocking on the door of yet another record high following the release of its rock-solid third-quarter report. Maybe these companies are worth owning despite the naysaying. Maybe Booking Holdings stock's persistent bullishness is a hint that the foreseeable future looks brighter for its travel arrangement business.
Reality is trumping assumptions
There's more than a little bit of shade being thrown in the travel industry's direction these days. The U.S. Travel Association indicates that September's (the most recent report available) spending on domestic travel was up a mere 0.8% year over year. Barron's bluntly opined in October that "revenge travel is dead," while the Bureau of Labor Statistics reports that same month's airfare prices were down 13.2% year over year. They're even below pre-pandemic levels, following the suggestion made by many airlines in the middle of this year that price cuts must be made in order to maintain demand.
Don't be too quick to jump to conclusions about the industry's health based on such headlines, though. U.S. domestic air travel reached record-breaking levels this past Sunday, according to the United States Transportation Security Administration, as Thanksgiving travelers made their way home. Meanwhile, real estate industry research outfit CoStar reports this year's hotel occupancy rates are roughly in line with last year's levels. October's average daily room rates were up 3% year over year, while revenue per available room (or RevPAR) was higher to the tune of 1.2%.
Booking Holdings' numbers underscore this sustained demand. Last quarter's top line was up 18% year over year on a constant-currency basis, with total room bookings growing 15%. Sales and earnings both also topped estimates for the three-month stretch in question.
What gives? This resiliency puts something Booking Holdings' CEO Glenn Fogel said of last quarter's results back into focus. That is, "Betting against human nature -- they like to travel -- is a bad bet."
He seems to be right.
The foreseeable future looks bright enough
That's not all Fogel said following the release of Booking's third-quarter numbers, even if it was enough to make a valid point. He goes on to explain during the company's earnings call: "Overall, we continue to see resiliency in global leisure travel demand. And as we take a very early look ahead to 2024, we see strong growth on the books for travel that will take place in the first quarter of next year."
He adds for clarity: "Given current trends, we expect customers and consumers will continue to prioritize travel over other discretionary spend in 2024."
He's not the industry's only bull. A recent survey performed by hotel chain Hilton and Ipsos indicates 64% of global travelers say they're reducing spending in other areas of their lives to ensure they can afford to continue traveling in the coming year. The same survey adds that 80% of would-be travelers feel they should be able to book an entire trip online, where Booking Holdings' websites Booking.com, Priceline, and Kayak are waiting to serve these customers. At the same time, American Express's business travel arm predicts that worldwide hotel rates could rise an average of 17.5% in 2024, underscoring the strength of travel demand.
The analyst community believes Booking Holdings will be able to capture at least its fair share of this growth too, modeling 2024 revenue growth of 11%. The tailwind should prove an even bigger boost to the online travel agent's bottom line, though. Analysts are calling for this year's projected per-share profits of $147.36 -- already up from last year's $99.83 -- to reach $175.25 per share in 2024.
Now read between the lines. This year's resilience wasn't expected of the travel industry, and yet it materialized. The economic environment is far from being ideal for consumers, and yet several signs clearly point to travel's continued strength in 2024. Perhaps Fogel is on target when he says betting that people won't travel "is a bad bet," even in challenging economic circumstances.
Looking ahead for Booking Holdings stock
Take any investment prediction with a grain of salt, of course, including the ones you're about to read regarding Booking Holdings. Nobody's got a functioning crystal ball.
On the other hand, your chief job as an investor is weighing true risk against plausible reward, and then figuring out what this comparison means for a particular stock. That's no easy task, but it is possible to make well-informed guesses.
To this end, based on all the data and perspective above, here are the three educated guesses as to where Booking Holdings and its shares will be a year from now.
Revenue: Analysts' forecast for 11% revenue growth in 2024 is in the right ballpark, but arguably too conservative given the industry's persistent strength in the face of a headwind. The consensus top-line call of $23.6 billion could be $1 billion short of what's actually in the cards. It may even be markedly shy of what awaits now that Booking.com is selling maritime cruises.
Earnings: As tempting as it might be to suggest analysts' expectations for a 2024 profit of $175.28 per share are also too conservative, that's not a call anyone wants to be too quick to make. Booking Holdings' single biggest expense is marketing, accounting for about half of its outlays. There's no evidence that this cost's current growth pace will be meaningfully curbed anytime soon.
Stock price: Perhaps the trickiest predictions of all to make within the investing arena are ones regarding a stock's future price. Such a guess requires not only an accurate assessment of a company's future sales and earnings, but a guess as to how the majority of investors will feel about those results and that company's prospects in the future.
To the extent one can meaningfully make such a short-term call, however, analysts' current consensus 12-month target price of $3,439 seems too timid as well. Booking Holdings shares are currently priced at a modest forward-looking price-to-earnings ratio of less than 18, which is well below this valuation measure's long-term average for this particular ticker.
BKNG Revenue (Quarterly) data by YCharts
The bigger point being made here, of course, is that Booking stock is a buy for most investors needing a good consumer cyclical name to add to their portfolio heading into 2024. You could certainly do a lot worse.
