Investing.com -- Morgan Stanley assumed coverage of online travel agencies (OTAs) Booking Holdings, Airbnb and Expedia, rating them Overweight, Equal-weight, and Underweight, respectively, favoring companies with unique inventory and strong direct traffic as AI reshapes travel search.

Analyst Matthew Cost said 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 horizontal AI tools to function more like a new search layer that drives high-value traffic to booking platforms, while travel-specific AI agents could help online travel agencies improve discovery, personalization and support.

Morgan Stanley set a $230 price target on Booking Holdings, based on roughly 18 times its average 2027-28 earnings per share estimate, below the company’s approximately 20-times long-term average. The bank’s analysts view Booking’s risk/reward profile as "most compelling," citing its 4.7 million unique properties, a direct booking mix in the mid-60% range, and "a >20 year history of executing through channel transitions."

For Airbnb, Morgan Stanley set a $170 price target, implying roughly 26 times average 2027-28 earnings, a premium to peers. The analysts said Airbnb’s "leading 90% direct traffic mix and improving product execution now make sustainable double-digit room nights growth more credible," supporting its move to Equal-weight from a prior Underweight stance.

Expedia was moved to Underweight from Equal-weight previously, with a $235 price target. Expedia’s valuation discount to Booking "has significantly narrowed over the last 12 months" and no longer adequately reflects the company’s "greater U.S./chain-hotel/air exposure" and "less differentiated consumer assets," the analysts said.

The bank’s broader thesis rests on continued growth in travel spending and online penetration. Morgan Stanley noted services have grown from roughly 65% to 69% of U.S. consumer spending since 2005, while global leisure travel remains only about 70% penetrated online, leaving approximately $700 billion of bookings still offline. It expects online travel bookings to grow at a roughly 7% compound annual rate from 2026 to 2030.

Analysts said fragmented supply, such as independent hotels and alternative accommodations, will become increasingly valuable as AI-enabled distribution scales, since such inventory is harder for third parties to contract directly compared with chain hotels and airlines, a dynamic the team said favors platforms with the strongest and most unique supply relationships.