Morgan Stanley has opened formal coverage of the online travel agency sector, assigning differentiated ratings to three leading platforms. The bank rated Booking Holdings Overweight, Airbnb Equal-weight and Expedia Underweight, arguing that companies with distinctive inventory and a strong ability to capture direct traffic will be best positioned as artificial intelligence changes how travelers search and book.
Analyst Matthew Cost framed AI as more of an opportunity than an existential threat for OTAs, saying the bank views artificial intelligence "as a new acquisition channel and product opportunity for OTAs rather than a threat, but execution will determine the winners." Morgan Stanley expects broadly available AI tools to work like a new search layer that funnels high-value demand to booking platforms, while travel-specific AI agents could enhance discovery, personalization and customer support for those platforms.
On valuation and targets, Morgan Stanley set a $230 price target for Booking Holdings. That target is based on about an 18-times multiple of average 2027-28 earnings per share, a level below Booking's roughly 20-times long-term average. The analysts described Booking's risk-reward as "most compelling," citing the company's 4.7 million unique properties, a direct booking mix in the mid-60% range and "a >20 year history of executing through channel transitions." Those attributes were highlighted as supportive of Booking's ability to capture traffic that may be redirected by new search experiences.
Airbnb received a $170 price target from Morgan Stanley, implying roughly 26 times average 2027-28 earnings. The bank moved Airbnb to Equal-weight from a prior Underweight rating, arguing that the company's leading 90% direct traffic mix and improving product execution make sustainable double-digit room night growth more credible.
Expedia was downgraded to Underweight from a previous Equal-weight designation, with a $235 price target. The analysts stated that Expedia's valuation discount to Booking has narrowed substantially over the last 12 months and no longer sufficiently reflects what they characterize as Expedia's greater U.S./chain-hotel/air exposure and its "less differentiated consumer assets." That assessment underpins the bank's less favorable view of Expedia's relative upside.
Morgan Stanley's sector thesis is grounded in continued expansion of travel spending and rising online penetration. The analysts noted that services have increased from roughly 65% to 69% of U.S. consumer spending since 2005. At the same time, global leisure travel is only about 70% penetrated online, leaving roughly $700 billion of bookings still offline. Based on these dynamics, the bank projects online travel bookings will grow at about a 7% compound annual rate from 2026 through 2030.
The research team also emphasized the value of fragmented supply as AI-enabled distribution scales. Independent hotels and alternative accommodations are harder for third parties to contract directly when compared with chain hotels and airlines. That structural characteristic, the analysts said, will make unique supply relationships increasingly valuable and will favor platforms that can maintain the strongest and most distinctive inventory connections.
Implications for market participants
For investors and industry participants, Morgan Stanley's coverage frames the coming AI-driven changes as a test of execution. Platforms that can translate improved discovery, personalization and direct traffic into bookings should gain. The bank's ratings and price targets reflect differences in inventory breadth, direct booking mixes and exposure to legacy channels.