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Online travel agencies flying high

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Airbnb said rental bookings jumped 52% in Q1 from the same quarter last year as the company anticipates a post-pandemic travel boom.
Airbnb said rental bookings jumped 52% in Q1 from the same quarter last year as the company anticipates a post-pandemic travel boom.
Yuriko Nakao/Getty Image

Unsurprisingly, the Covid-19 pandemic has had a devastating impact on the travel industry, but despite this, the performance of listed online travel agencies (OTAs) has exceeded that of global equity markets since the end of the first quarter of 2020 (see table).

Major OTAs’ earnings have continued to be poor after the second quarter of last year, so we note that the outperformance of their share prices has not been driven by earnings growth. Furthermore, several OTAs have either guided to continued losses in 2021 or have suggested that any recovery will take years rather than quarters.

Given this poor short-term earnings outlook, we believe the sector’s outperformance in equity markets since the first quarter of 2020 has been mainly driven by investors using it to gain exposure to a recovery trade (buying into those industries that are especially sensitive to an economic recovery or return to “normal”).

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