Analyst Note| Dan Wasiolek |
Booking Holding’s third-quarter bookings recovered to 94% of 2019 levels, versus 88% last quarter. Harmonizing with industry trends, improvement was driven by ramped-up Europe demand, sustained stout U.S. travel, and rate. Regarding rate, it was 10% above 2019 levels, or 4% when adjusting for the positive mix of U.S. versus Asia travel. We may slightly increase our 2021 booking forecast of 78% of 2019, but plan to lift Booking’s $2,450 fair value estimate around a high-single-digit percentage, mostly to account for worker flexibility driving higher long-term travel demand. Our constructive stance is formed by higher income occupations (like computers, finance, legal, architecture) being the most likely industries to sustain remote work arrangements. Further, we reiterate that investors interested in travel exposure should shift their focus from nonurban U.S. players that have led the travel recovery (like narrow-moat Choice and Wyndham) to those with a Europe and China presence (like narrow-moat Booking and Accor), which we believe will experience stronger relative demand improvement next year versus the former. Specifically, we highlight Accor, which trades at a 20% discount to our EUR 40 fair value estimate while offering 60% hotel exposure to Europe.