Online Travel Companies Navigate a Detour in Search Traffic

Dan Wasiolek: If you search for travel using Google's search bar, you might have noticed a platform displaying content, and a mapping feature is illustrated atop the results page. This is Google's metasearch platform, which creates a competitive threat for network-advantaged online travel companies like Booking Holdings, Expedia, and TripAdvisor. During the past several years, Google has been expanding travel content on this platform and placing it ahead of organic search links from online travel companies. As a result, it has become harder for Booking Holdings, Expedia, and TripAdvisor to get traffic from these organic links, which drive free customer traffic to their websites.

That said, we think online travel companies can manage this competitive threat. First, Booking and Expedia have noticed an increasing percentage of their total traffic is coming direct to their websites versus arriving from indirect marketing channels, such as Google's platform, where Booking and Expedia place their accommodations content in order to generate customer leads from the search giant. In our view, this is a signal that Booking Holdings and Expedia's networks are resonating with travelers, despite Google's expansion into travel. Also, in the face of regulatory pressure, Google has begun tests that place organic search links of online travel companies back above its travel platform, as these links are the most relevant to a given search query. In our view, should these tests become more prominent, it would stand to boost the direct traffic for Booking, Expedia, and TripAdvisor and help alleviate the competitive threat emanating from Google, providing a potential catalyst for discounted shares to trade toward our fair value estimates.