International travel is more popular today than ever before, with the International Air Transport Association stating that airline passenger demand grew by 7.8% in June 2017. To keep up with this growing demand, travel companies have to continuously adapt and develop to stay competitive.
In 2015 the travel company Expedia bought over HomeAway, an accommodation rental site, in an attempt to rival Airbnb. Work is now under way to better integrate the two platforms, making it easier for customers to find holiday homes as well as flights all on one same site. In the current quarter the number of rentals available on the main Expedia site was increased from 20,000 to 60,000. The investment in HomeAway has so far yielded positive results for Expedia, with revenue increasing by 31% relative to the level of revenue in the same time period of 2016. Overall earnings were higher than predicted, boosting investor confidence. As a result the price of Expedia shares was up 3.4% on the 28th of July.
As Expedia’s position in the travel sector gets stronger other, rival companies are struggling to keep up. Travel comparison site TripAdvisor has launched a campaign of television advertising in an attempt to reach a larger audience. The company aims for the television strategy to benefit its financial situation in the long term but has noted that, in the short term, profits could take a hit. Although the company’s second quarter earnings exceeded expectations, it may still fall behind other big name travel businesses such as Expedia and Priceline whose spending on advertising along is more than TripAdvisor’s revenue.
The increased demand for international travel has benefited aircraft companies as well. BOC Aviation, Asia’s largest aircraft operating leasing company, has grown its portfolio to 261 planes, from only 50 in 2004. With another 80 deliveries planned it is set to be the largest buyer of aircrafts in 2017. This increased demand for air transport has pushed shares of BOC Aviation up by 7% from last year while DBS Vickers analyst Paul Yong predicts that the company will see its net profit rise by 18% annually over the next five years. Major US airline Delta Air Lines has similarly benefited from the increased demand for flights. Shares have reached $50, which is around nine times its 2017 estimated earnings per share, with Andrew Bary of Barrons believing there is a possibility of Delta’s stock rising by a further 35% in the next couple of years.
As travel becomes accessible to more people many companies in the sector will continue to benefit. However, with so many companies offering similar services, some are destined to fall behind in the market if they do not innovate.
(Please note: James O’Leary does not currently hold a position in Airbnb, Expedia, Trip Advisor, Priceline, or BOC Aviation. Henry James International does not currently own a position in Airbnb, Expedia, Trip Advisor, Priceline, or BOC Aviation.).
(Please note: James O’Leary currently holds a position in Delta Airlines. Henry James International currently owns a position in Delta Airlines).