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Booking/Expedia: travel stocks grounded by marketing spend

The sun is out, the wallets are out. The summer hiking season is fast approaching and it will be busy. After two years of epidemic-related restrictions that have spawned non-essential journeys, millions are expected to hit roads and skies in the coming weeks. The World Travel and Tourism Council (WTTC) estimates that U.S. travel and tourism will exceed pre-epidemic levels by More than 6 percent This year.

Online travel sites have implemented a collective sigh of relief. The two big ones – Booking Holdings and Expedia – predict that this could be the busiest summer travel season ever. Yet despite the bold forecasts, stock price performance is lagging behind.

Expedia, which owns Airbnb’s Vrbo competitor, dropped a 27% campaign this year. Booking, a much larger competitor with a market capitalization of $ 96 billion, has fallen by about 4%.

Revenue growth is not the issue. Booking, whose properties include Priceline and Kayak, was reported $ 27 billion in gross orders During the first quarter. This is more than double the period a year ago and is the best quarter in history. At Expedia, both orders and revenue returned despite inflationary pressures on consumer spending. Future globetrotters have no fear of paying more for flights and hotels to visit tourist spots.

Instead, the issue is costs; In particular, heavy spending on marketing and advertising. Expedition spent Almost 60 percent Of its revenues from sales and marketing during the first quarter, compared to 53% a year ago. In booking the figure rose from 40 to 43%. Despite top-line growth, the two companies reported a net loss in the quarter.

Google is partly to blame. The search giant’s push into the travel industry means it is now introducing services like Google Flights more prominently. This has reduced the visibility of travel agents in search results. With so-called free links being pushed down the page, both Expedia and Booking are forced to spend more on click ads. The shares will remain grounded until expenses fall to the ground.

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