Expedia shares slide as US-Iran war fallout prolongs pressure on travel firms

By Nandan Mandayam and Anshuman Tripathy

Nov 5 (Reuters) - Shares of Expedia Group EXPE.O tumbled nearly 13% on Thursday after the booking platform forecast earnings below estimates, joining travel companies from Hilton to Booking that continue to see the war in Iran scuttling demand.

The day's move eroded more than $4.6 billion in the company's market value and the stock swung to a year-to-date loss of 2.5%.

Travel-dependent companies have struggled to predict demand in the Middle East as the war stretches into its ninth month. Houthi attacks on Saudi Arabia last month led to fresh flight cancellations and event disruptions, weighing on forecasts for major hotel chains and further delaying a recovery.

"Booking platforms are flagging a more visible fourth-quarter slowdown. Managements seem to be assuming continued Middle East disruption will persist," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.

Expedia on Wednesday forecast revenue and EBITDA for the current quarter below analyst estimates, reflecting growth slowdown due to disruptions in Europe and the Middle East, despite upbeat third-quarter results.

It echoed Booking Holdings BKNG.O warning of a hit to fourth quarter earnings, stating that it "assumes that both the direct and indirect impacts of the Middle East conflict on travel persist through the end of the year."

GEOGRAPHIC DIVERGENCE

Hotel operators reported resilient third-quarter earnings on strong US demand, but noted that declines in Middle East room revenue could worsen in the fourth quarter after moderating in the July-September period.

"Hotel operators are seeing geographic divergence instead of broad demand collapsing. The Middle Eastern operations are under pressure while other areas are seeing robust growth," Jacobsen said.

A weaker October, generally a peak period for tourism in the region, has prompted Sheraton brand owner Marriott MAR.O to forecast room revenue to drop more than the 12% level seen in the third quarter, which itself was on the back of a 40% second-quarter slump.

Hilton HLT.N also now expects a more acute room revenue decline in the Middle East and Africa region.

The Middle East accounts for 3% of Marriott's open rooms globally and about 6% of its pipeline. Hilton last week said the war, along with issues in Mexico and timeshare licenses, has added $60 million to $70 million in "headwinds" this year.

"Continued weakness in China and geopolitical disruptions in the Middle East could weigh on fourth-quarter results and temper international travel demand," said Peter Zabierek of Easterly Ranger.

Industry executives and insiders, however, remain confident of a recovery next year. Resilient US leisure, group and business travel "should provide an important offset," said Zabierek.

"We certainly don't expect double-digit deceleration in Middle East room revenue to continue, going into 2027," said Jan D Freitag of hospitality analytics firm CoStar Group.