Booking Holdings: Expedia & Airbnb Are Back In The Game (Downgrade)
The landscape of online travel has entered a new, intensely competitive phase as of late 2025. For a considerable period, Booking Holdings (NASDAQ:BKNG) stood as the unequivocal champion, a stock favored by fundamental investors for its profitability, consistent market share gains, and seemingly attractive valuation relative to its dominant position. However, the narrative has shifted following the Q3 2025 reporting cycle. Analyst scrutiny, underscored by a recent downgrade of BKNG to a “Hold” rating on November 17, 2025, suggests that the competitive moat is eroding, and the premium valuation once easily justified by superior outperformance is no longer as self-evident. This article examines the evolving strategies of its chief rivals, Airbnb and Expedia Group, and scrutinizes the valuation contraction driving the cautious outlook on the incumbent leader.
Airbnb’s Evolving Strategy and Niche Dominance
Elevating the “Experiences” Offering as a Core Pillar
Airbnb’s strategic focus in two thousand twenty-five appears to be concentrating on deepening the utility of its platform beyond simple accommodation bookings, primarily through the enhanced integration of its Experiences offering. While the company has long been synonymous with alternative lodging, the recent emphasis suggests a concerted effort to capture a larger share of the entire trip-planning budget. The market perception is that this particular vertical—attractions, local tours, and unique activities—is currently better integrated into the core lodging search and booking flow on the Airbnb application compared to the similar offerings available through Booking Holdings’ suite of platforms.
This commitment to expanding beyond core stays is part of a broader evolution toward becoming a “comprehensive lifestyle platform,” a vision CEO Brian Chesky has articulated, drawing parallels to Amazon’s transformation. The revamped Experiences program, which saw a major relaunch in May 2025, is designed to offer more local, authentic activities directly within the app, directly challenging established players like Viator. Furthermore, Airbnb is backing this with significant capital, allocating $200 million to new offerings, including these Experiences and newly launched “Services” (such as mid-trip upgrades), signaling they are no longer side projects but major revenue drivers. This superior integration allows Airbnb to present a more holistic, end-to-end travel solution, particularly appealing to the leisure traveler seeking authentic, localized activities, thereby capturing ancillary spend and deepening customer dependency.
Airbnb’s Stronger Velocity in Gross Bookings Acceleration
Despite potentially lagging in overall sheer accommodation volume growth compared to Expedia in the most recent period, Airbnb has showcased impressive acceleration in its overall gross bookings metric. The reported year-over-year growth rate for gross bookings signifies a strong recapture of traveler spend, outpacing the growth of the market leader in this specific metric during the same period. For investors, this growth in total monetary value transacted is a key indicator that the company’s brand strength and unique inventory—which often includes high-value, long-term stays—is successfully translating into an expanding revenue base.
In Q3 2025, Airbnb grew its Nights and Experiences Booked by 7% year-over-year, pushing Gross Booking Value (GBV) up 11% to $23.5 billion. While the company is making substantial near-term investments that are expected to temper margins for the rest of 2025, the market is looking toward 2026 for margin expansion, suggesting confidence in the strategic trajectory. The velocity in gross bookings, even as Booking Holdings reported losing room night share to both competitors in Q3, suggests Airbnb is effectively attracting higher-spending customers or that its user base is booking more expansive stays.
Valuation Contraction and the Future Investment Thesis
The Multiples Compression: Comparing P/E and EBITDA Ratios
The cornerstone of the recent downgrade argument rests on the comparative valuation metrics, which reflect the market’s diminishing tolerance for a premium when growth is leveling off. The data indicates that Booking Holdings trades at a significant multiple when benchmarked against its peers, though the specific premium over Airbnb is described as the narrowest it has been in years, and the premium over Expedia is also tighter. While Booking Holdings has historically commanded a substantial premium due to its scale, diversification, and superior margins (reporting 25% profit margins in 2024 versus Expedia’s 19% and Airbnb’s 24%), this gap is closing.
At the time of the downgrade, Booking was trading at 22 times forward earnings, which is in line with its historical average. However, this valuation is beginning to look less compelling when juxtaposed against competitive deceleration. Another analyst viewpoint suggests a sell rating given a P/E ratio exceeding 20x in an environment where room night growth is lagging peers. The central thesis for the “Hold” rating is the belief that the premium is no longer adequately justified by outperformance; the market is pricing in a scenario of parity or near-parity in growth rates, which historically warrants a valuation closer to that of its direct competitor, Expedia. The investment premise, therefore, shifts from “buy the premium market leader” to “wait for the premium to de-rate to a level commensurate with its current, less-differentiated growth profile”.
Navigating the Analyst Price Target and Near-Term Volatility
The price target assigned to the stock, hovering around five thousand seven hundred units for the following year (by the end of 2026), suggests only a modest upside from the current trading level, reinforcing the “Hold” recommendation derived from the valuation analysis. This limited expected upside—only a few percentage points beyond the current valuation—is insufficient to warrant an enthusiastic “Buy” rating, especially when considering the heightened risk of competitive surprises or macroeconomic shocks that could easily erase that small margin of safety.
Investors are thus advised to adopt a position of watchful waiting. This strategy is designed to avoid selling into any potential short-term weakness that might be attributed to seasonal factors, while simultaneously hedging against the possibility that the structural competitive erosion observed in Q3 is indeed indicative of a long-term trend rather than a temporary blip. The near-term focus must be on assessing the Q4 results to definitively categorize the Q3 room night slowdown as either a temporary seasonal trough or a more permanent structural recalibration of market share dynamics. Booking Holdings itself guided Q4 room nights growth at a decelerating 4% to 6%.
Broader Sector Headwinds and External Disruptors
Macroeconomic Anxiety and Discretionary Spending Pressures
The wider economic environment in two thousand twenty-five presents a pervasive, albeit indirect, headwind across the entire travel sector. Growing consumer anxiety regarding persistent inflation, coupled with cautionary signals from related discretionary sectors such as dining and general retail sales, suggests that the consumer’s willingness to spend on non-essential travel, while resilient thus far, is being tested. Analysts point to weaker traffic at prominent restaurant chains and general retrenchment in retail purchases as leading indicators that travel demand, which is inherently discretionary, could be next to feel the strain. While consumers have historically prioritized vacations even during mild downturns, the current combination of high costs and economic uncertainty introduces a level of unpredictability that makes projecting sustained high-double-digit growth rates across the entire industry significantly more complex than in previous periods. This environment mandates a higher discount rate for future earnings streams for all OTAs.
The Looming Shadow of Generative Artificial Intelligence in Travel Search
A significant, looming external development threatening the entire online travel agency ecosystem is the aggressive advancement of large language models and generative artificial intelligence within major search platforms. The introduction of new AI-powered search modalities that can construct comprehensive, agentic travel itineraries—handling everything from initial inspiration to final booking across multiple partners—presents an existential challenge. In fact, a mid-2025 Consumer Pulse survey indicated that generative AI now officially surpasses social media and OTAs as the leading source of travel discovery.
These tools aim to remove the need for a dedicated OTA website or application altogether by integrating booking capabilities directly into the primary search interface. The potential impact is severe: if travelers begin planning and booking entire trips through these AI agents, the value proposition of the established OTAs diminishes significantly. This dynamic is already in motion, with major OTAs like Booking.com and Expedia releasing basic applications for platforms like ChatGPT, with more advanced “agentic AI” capabilities expected to follow. The dependency of OTAs on these very technology giants for traffic means this development requires constant monitoring as it threatens to fundamentally disintermediate their core business model from the ground up. However, some analysts maintain a contrarian view, suggesting that OTAs’ massive transaction history, global brand recognition, and battle-tested API infrastructure position them to become the trusted, default content providers—the “blue checkmarks”—within the AI agent decision-making process. The challenge for BKNG, Expedia, and Airbnb is whether their existing scale can secure them as the preferred data source for the new AI gatekeepers.