Online Travel Seen As 'Attractively Valued'
28.01.2010, 17:25
Merrill Lynch analyst Justin Post maintained a "neutral" view on the online travel industry and said Sabre Holdings' Travelocity has the best U.S. net revenue outlook in the group.
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"We believe the online travel group is attractively valued," wrote the analyst in a recent research note. However, "momentum investors returning to the Internet may prefer higher growth opportunities in other large-cap Internet names."
Post is forecasting 16% U.S. online agency bookings growth and 30% international online agency bookings growth in 2006. He estimates that industry penetration levels still have room for growth, as total online bookings represented only 30% of U.S. travel bookings in 2005 and less than 10% of bookings in Europe.
Travelocity, a unit of Sabre Holdings (nyse: TSG - news - people ), had the highest fourth-quarter and 2005 growth among U.S. online booking companies, according to Post. The analyst expects Travelocity's market share to increase to 24% in 2006, driven by additional hotel and package inventory on the site.
Post estimates that U.S. market share for Expedia (nasdaq: EXPE - news - people ) in the fourth quarter dipped slightly to 41% from 42% as the company's 14% growth was below his industry estimate at 18%.
Priceline (nasdaq: PCLN - news - people ) had the leading fourth-quarter growth rate in Europe with 88% organic growth, and is expected to gain share in 2006, according to Post's estimates. However, Priceline trailed other online travel companies in the U.S. with fourth-quarter booking growth of 3% due to pressure on air ticket sales.