Overview
Travel activity has shown unexpected resilience through the first quarter, even as geopolitical tensions in the Middle East continued to attract attention. In a note to investors, Bernstein analyst Richard Clarke reported that travel demand "seems to be holding up well in Q1," citing a number of regional and channel-specific indicators that point to broadly healthy industry performance.
Hotel performance - U.S. leads with a February inflection
Clarke highlighted U.S. hotel metrics as a particular bright spot. Revenue per available room (RevPAR) in the United States "inflected in February to 4.3% growth, the fastest in >1 year," and that upswing "stayed strong through March," according to the note. The analyst said that February's U.S. strength positions hotel companies to "comfortably deliver within or beyond their guidance in Q1."
Regional picture
Outside the U.S., Clarke reported a mixed-but-firm regional backdrop. China and the broader Asia-Pacific region "also had a strong February," while Europe has "held steady." The Middle East, by contrast, "weakened in March as expected," but Bernstein emphasized that the region represents a relatively small portion of revenue for most hotel groups.
Online travel agencies and booking trends
Bernstein's web and app traffic checks suggest online travel agencies (OTAs) are experiencing resilient demand. Clarke's note indicates OTA volume growth in the "high single digits to low double-digits" range. The firm observed a deceleration in March demand for longer-lead platforms such as VRBO and Airbnb, but expects cancellation-related drag to be minimal - on the order of less than 0.5%.
Within the OTA cohort, Clarke singled out Expedia as appearing particularly robust, saying it "looks particularly strong and should lead on growth in 1Q."
AI-driven referral traffic
Bernstein also assessed the role of AI in directing consumer bookings. Referrals from AI-driven sources account for "<0.5% of total traffic," the note said, and traffic routed by AI has been declining since last year, implying limited near-term disruption from AI referrals to OTA traffic patterns.
Outlook and cautions
Despite the early-year momentum, Clarke warned that rising oil prices and ongoing regional uncertainty "threaten to derail" the nascent rebound in the global hotel pipeline. These factors could introduce downside risk to the currently observed resilience across hotels and online travel platforms.
Key takeaways
- U.S. hotel RevPAR accelerated to 4.3% year-over-year in February, the strongest pace in more than a year, and maintained strength into March.
- OTA volumes are growing in the high single digits to low double-digits, with Expedia noted as a leading growth candidate in Q1.
- Regional performance is mixed: China/Asia-Pacific were strong in February, Europe steady, and the Middle East weakened in March but represents a small share for most hotel groups.
Risks and uncertainties
- Rising oil prices - may increase travel costs and compress margins for travel and hospitality companies, posing a risk to the early-year recovery.
- Regional geopolitical uncertainty - further escalation in the Middle East could weigh on demand, particularly for operators with exposure to that region, despite its relatively small share of revenue for many chains.
- Deceleration in longer-lead bookings - observed softening for platforms that rely on longer booking windows (e.g., VRBO, Airbnb) introduces timing risk for revenue recognition in coming quarters.
Note: Analysis is drawn from Bernstein's investor note as summarized in this report.