stock

Investing.com -- A strengthening U.S. dollar is set to weigh on online travel companies’ revenue growth in 2025, with currency headwinds expected to shave 2-3% off gross bookings and reported revenue, but investors appear to have priced in the FX impact and are shifting focus to companies’ product development efforts.

UBS noted that major online travel firms, including Airbnb, Booking Holdings (NASDAQ: BKNG ), and Expedia (NASDAQ: EXPE ), face near-term currency-related pressures as the dollar strengthens against global currencies. Booking, which has significant European exposure, is expected to see a 3% FX-driven headwind on gross bookings for the year, while Expedia and Airbnb will experience slightly lower impacts.

Despite this, the sector’s fundamentals remain intact, with travel demand holding steady and companies looking for new ways to boost engagement. Booking's "Connected Trip" initiative, aimed at bundling travel services, and Airbnb’s efforts to expand alternative accommodations in emerging markets are expected to drive growth.

Expedia’s Vrbo platform showed 14.5% year-over-year growth in gross bookings in the fourth quarter, according to UBS, while Airbnb recorded strong gains in Latin America, supported by increasing listings and regional demand.

Investors are now more focused on execution strategies rather than FX volatility, UBS analysts say noting that cost-saving initiatives, monetization of value-added services, and product enhancements will be key to offsetting currency pressures.

With fourth-quarter earnings on the horizon, the sector will provide a clearer picture of how companies are navigating FX headwinds and positioning themselves for growth.