What happened

It's no big surprise that shares of Booking Holdings (NASDAQ:BKNG) have fallen this year as the travel industry has gotten shellacked by the coronavirus pandemic. What is surprising, however, is that shares of the world's largest online travel agency only fell 22% through the first half of the year, according to data from S&P Global Market Intelligence, showing the stock has been relatively resilient during the crisis.

As you can see from the chart below, the stock has moved in tandem with the broad market more or less, falling sharply through the crisis.

^SPX Chart

^SPX data by YCharts

So what

Like other online travel agencies, Booking began the year facing challenges unrelated to the coronavirus pandemic as competition from Google, the rise of Airbnb, and a maturing market have pressured growth in what has historically been a high-growth sector. 

The back of a woman looking at a Venice canal.

Image source: Getty Images.

As a travel-focused company, Booking was more sensitive to news of the coronavirus pandemic and began slumping in January, as reports emerged that the virus had brought the Chinese economy to a standstill. Though most of Booking's business, which includes Priceline, Kayak, and Open Table, comes from Europe and North America, its Agoda brand is focused on Asia. The stock then plunged as the pandemic spread to Europe and North America.

The company posted better-than-expected results in its fourth-quarter earnings report at the end of February. However, its guidance called for a decline in revenue and profits, worse than the analyst consensus, and it still underestimated the impact from COVID-19. Two weeks later, the company pulled that guidance, and in April it raised $3.25 million in convertible debt to help it weather the crisis.

In early May, the company reported first-quarter results with revenue down 19% and profits sharply lower, badly missing estimates, though Wall Street mostly blew off the numbers.

Later in May, the stock started to rally as economies in Europe and the U.S. began to reopen, showing pent-up demand for some discretionary activities, though travel spending was still down sharply.

Now what

Online travel agencies like Booking and Expedia are in a better position than other travel businesses like airlines, cruise lines, and hotels. These companies can rapidly scale their advertising budgets up and down according to demand, which is what they've done during the crisis, as marketing is by far their biggest expense item.

With the modest pullback in the stock, investors appear to be looking past the crisis for operators like Booking, confident that travel demand will eventually return. While that's true, Booking's financial results will suffer significantly in the interim, and the stock could fall if the recovery drags out.