Online travel agency Expedia's (EXPE.O) shares dropped 8% before the bell on Friday, after the ongoing conflict in the Middle East and a travel advisory in Mexico shaved about 200 basis points off its quarterly bookings and room-night growth.
International visitors have become increasingly wary of travel to the Middle East following military strikes that led to airspace closures in several countries, disrupting major transit hubs such as Dubai and prompting airlines to suspend routes.
"While the Middle East itself represents less than 2% of our total bookings, we saw elevated traveler cancellations across Europe and Asia," CEO Ariane Gorin said on Thursday.
Travel demand in Mexico also weakened after the killing of a drug lord in February sparked violence and triggered a U.S. shelter-in-place advisory for Americans.
The combined 200-basis-point headwind was greater than expected, said Baird analyst Michael Bellisario, noting that rival Booking Holdings (BKNG.O) saw a similar hit despite having twice the regional exposure.
"We thought Expedia's mix would shield it from the disruption hitting others, but we were wrong with both the Middle East and Mexico," said BTIG analyst Jake Fuller.
"However, Expedia continues to execute well and that shouldn't get lost in debate around what amounts to temporary disruptions," he said.
On Thursday, Airbnb (ABNB.O) also flagged higher cancellations due to the conflict and expects it to remain a headwind later in the year.
A recovery in U.S. travel, however, has emerged as a bright spot for both companies, after a K-shaped market slowed demand for budget and mid-scale lodgings.
"We are not particularly concerned for now that Expedia maintained its full-year guide; the rationale understandably driven by macro uncertainty," said Truist analyst Gregory Miller.
Expedia shares were trading at 11.70 times their forward profit estimates, and Booking at 15.03 — both lower than Airbnb's 26.91 times.
