What happened

Shares of online travel agent Booking Holdings (BKNG -0.71%) rallied 34% over the course of the first six months of 2023, according to numbers from S&P Global Market Intelligence. The big gain reflects a post-pandemic recovery in demand for leisure travel.

So what

Most investors knew it would happen sooner or later. By and large, though, most investors didn't expect leisure travel demand to bounce back as well as it has this soon.

The latest layer of evidence to this end surfaced earlier this month. Using numbers supplied by the U.S. Transportation Security Administration, Barron's reports that Friday, June 30 was the nation's busiest-ever day for domestic air travel, with nearly 2.9 million people boarding a plane somewhere in the United States.

It's not just airlines seeing unprecedented demand, however. Carnival Corp. reports the total number of cruise reservations made during its recently ended second fiscal quarter also reached record levels, as did deposits toward future trips. In fact, as early as May The Wall Street Journal pointed out that several cruise lines were well overbooked, and being forced to bump passengers.

Don't look for this growing demand to abate anytime soon. The U.S. Travel Association's most recent forecast suggests "[domestic leisure travel] volume is expected to grow faster year-over-year than inflation-adjusted spending in 2024 and beyond." Inbound international travel is expected to grow by 31% this year and another 19% next year, finally reflecting a bounce-back in demand in other parts of the world.

And Booking Holdings' results align with this industrywide data. Its first-quarter top line was up 40% year over year, with sales expected to grow nearly 21% for the entire fiscal year. Next year's revenue growth is projected to cool to a pace of only 11%. With more scale and stability in place, however, analysts expect per-share earnings to swell from last year's $99.83 to $137.84 this year to $162.36 per share next year.

Investors are simply connecting the dots. Not only are shares up 34% through the first half of the year, but they're also up 65% from last year's low.

Now what

Booking Holdings stock is priced reasonably at 27 times its trailing earnings and less than 17 times next year's expected bottom line. And there's no doubt the demand tailwind it's catching now has some life left to it, despite the prospect of economic turbulence ahead. The biggest risk to newcomers here is simply the scope of the recent rally. Other investors may be hesitant to buy it now, at the possible tail end of a run-up.

On balance, though, there's still more potential long-term upside than there is risk in owning Booking Holdings.