Below is a chart and brief excerpt from today's Early Look written by GLL analyst Todd Jordan.
Leisure travel is exploding here in the US and while that favors EXPE, the Europe is on the come so BKNG can play catch up. Frankly, the investment community is just not bullish enough. But what about the Quad 3 impact on GLL?
Well, the OTA sector actually back tests the best among our coverage in Quad 3 owing in part to their “organic growth” and “high quality” business models. The OTAs have been stealing share which will likely be compounded by hotels leaning into the OTAs to fill lost business travel room nights. At the company level, there are drivers as well.
EXPE should benefit from cost cutting, marketing realignment, leveraging core brands, and the explosive growth in alternative accommodation (AA via Vrbo).
While EXPE works to improve its operations, BKNG is already there operationally. BKNG’s catalysts include a bigger 2nd derivative of growth as Europe catches up to the US, AA, and leveraging its enormous funnel and marketing might to push for share in the US. These companies should be in growth mode for a long time and without extensive capital needs, will be big time cash generators. Bottoms up = Macro (Quad 2 or Quad 3) for the OTAs. #Balance