Wells Fargo has released a report outlining the future of the travel industry through 2025, emphasizing significant opportunities for online travel agencies (OTAs) in the travel experience market. The report suggests that Airbnb (ABNB, Financial) could achieve moderate growth in its experience services by 2025, with potential increases of 3% in bookings and 5% in EBITDA.
As post-pandemic growth in accommodation bookings slows, Airbnb is shifting its focus to the $235 billion travel experience market. This move is expected to draw investor attention. Currently, online penetration in the travel experience market is only around 30%, significantly lower than the 60% penetration seen in the accommodation sector. Wells Fargo predicts the online travel experience market will grow at a compound annual growth rate (CAGR) of 23% from 2024 to 2027, compared to 12% for online accommodations.
The travel experience market is more fragmented than the accommodation OTA market, creating opportunities for new players. By 2024, the largest platforms in the online experience sector are expected to be Viator (4.1billion),Klook(3.8 billion), and GetYourGuide ($2 billion). Together, these platforms are projected to hold about 15% of the market. In contrast, Booking Holdings, Expedia, and Airbnb dominate 80% of the online accommodation market.
However, the report identifies several challenges for online travel experience platforms. These include tough supply-side economics, difficulties in cross-selling due to high customer expectations, and the unstructured nature of many experiences. Wells Fargo believes Airbnb can overcome these hurdles by organically acquiring suppliers and using its strong brand to drive traffic to its self-service platform.
Despite Airbnb’s potential to address these challenges, Wells Fargo expects the company’s travel experience segment to contribute only modestly to its net earnings before interest and taxes (NEB) and gross booking value (GBV) growth by 2027.
The report underscores the growing importance of the travel experience market and Airbnb’s strategic positioning to capitalize on this trend, even as it faces significant industry challenges.
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