Maintaining Hold on Booking Holdings Amidst EU Regulatory Changes and Rate Parity Implications

BTIG analyst Jake Fuller has maintained their neutral stance on BKNG stock, giving a Hold rating on May 3.

Jake Fuller has given his Hold rating due to a combination of factors surrounding Booking Holdings’ current situation and regulatory changes. Fuller recognizes that the Digital Markets Act (DMA) in the European Union classifies Booking Holdings as a gatekeeper, necessitating changes in how they handle rate parity in their hotel contracts. He anticipates that Booking Holdings will likely have to eliminate the narrow rate parity clauses, which currently ensure that the company receives the best rates from hotels comparable to those on the hotels’ own sites. This change could potentially allow hotels to directly offer better rates, bypassing Booking Holdings, which could, in theory, shift market share towards hotels’ direct channels.
Despite the potential risks associated with the required compliance with the DMA, Fuller maintains a Hold rating and does not foresee a significant threat to Booking Holdings. His analysis is informed by historical data from previous instances where rate parity was banned in certain European countries, and the outcomes did not show a notable shift in market share away from online travel agencies (OTAs) like Booking Holdings. Fuller attributes this resilience to Booking Holdings’ strong ranking algorithm and its reliance on independent hotels, which often lack robust online marketing and direct sales capabilities. Consequently, any direct discounts offered by hotels might be nullified by a lower ranking on Booking Holdings’ platform, thereby maintaining the status quo.

According to TipRanks, Fuller is a 4-star analyst with an average return of 4.7% and a 47.70% success rate. Fuller covers the Consumer Cyclical sector, focusing on stocks such as Booking Holdings, TripAdvisor, and Expedia.

In another report released on May 3, Bank of America Securities also assigned a Hold rating to the stock with a $3,950.00 price target.

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Booking Holdings (BKNG) Company Description:

Founded in 1997 and based in Connecticut, Booking Holdings, Inc. provides an online platform for making travel and restaurant reservations. The company offers its services through the following brands: Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com, and OpenTable.