TripAdvisor (NASDAQ:TRIP), a leading online platform for travel reviews, witnessed a 20% increase in its 2012 revenues, beating the soft macro conditions. Despite its increasing long term investments, the robust growth in hotel shoppers combined with an expanding international user base contributed to a 9% rise in TripAdvisor’s net income. The company is set to announce its Q1 2013 earnings Tuesday, May 7, and we expect it to mark a strong start to its fiscal 2013.
While there are certain factors that can limit growth this year such as a mix shift towards international markets, increasing hotel shoppers on mobile devices and lower click-based pricing, we believe that TripAdvisor is well-positioned to continue expanding its business in the future. Rising traffic, a strong member base and increasing content across its growing global footprint will help TripAdvisor continue its growth momentum in the future as well. We think that the company is well positioned to leverage growth in the online travel market.
TripAdvisor’s Rapidly Expanding User Base
TripAdvisor currently covers 2 million tourism businesses in over 116,000 destinations around the world. The total number of unique visitors on its websites (per month) increased from 32 million in 2008 to 74 million by the end of 2012. Last month, it became the first company to cross the 100 million reviews and opinions mark, a greater than 50% y-o-y increase. TripAdvisor’s business model is primarily driven by the number of unique visitors to its website and thus an increase in the number of visitors is an important indicator of its future growth.
Despite being the world’s largest travel review website, TripAdvisor only has a 10% market penetration, which leaves tremendous scope for growth. 
Steps Taken By TripAdvisor To Accelerate Growth In Its User Base
1. Rolling out the meta display feature: During Q4 2012, TripAdvisor rolled out the meta display feature across its smartphones offering and started testing it on desktops and tablets. In TripAdvisor’s earlier feature, its partner pages appeared behind the main browser window when a user entered a travel query. However, the company has started integrating all the search query results on the main page, known as meta-search. When users execute a query on TripAdvisor, they get the results on the page along with a map, which pinpoints locations in users search results. This enhancement allows users to see hotel pricing options and availability from booking partners on a single page.
Additionally, the company redesigned its page last year by adding filters that make the search function more appealing to users by segmenting results on the basis of price, property type – family, romantic, business – etc. This enhances user experience by enabling them to quickly browse through reviews that are more suitable for their interests.
Currently, only 15% of TripAdvisor’s total traffic is using the meta-display and it claims to be witnessing higher conversion rates using this feature.  TripAdvisor plans to roll out the meta display feature to all geographies and devices within the next 3-6 months.
2. Expanding International Footprint: Over 60% of TripAdvisor’s traffic originates from outside its core markets of the U.S. and the U.K. With more than 75% increase in traffic, Asia-Pacific was one of the fastest growing markets for the company in 2012.
TripAdvisor offers its content in 21 different languages with more than 60 contributions per minute, which equates to over 30 million contributions in a single year. In 2013, it intends to focus on enhancing its brand image in the emerging markets by incorporating more local language content to drive higher user engagement. As TripAdvisor targets growth outside the U.S., we feel that it can witness higher growth in hotel shoppers as the hotel industry in international markets offer better growth opportunities compared to the U.S. market, which is nearing saturation.
TripAdvisor claims that around 50% of the traffic visiting its websites search for hotel deals.  An increase in the number of hotel searches on TripAdvisor’s websites was one of the key factors behind its growth in 2012.
3. Increasing Investment In Social & Mobile Platforms To Enhance Brand Awareness: Leveraging growth in social platforms and the rapidly expanding mobile user base remain key priorities for TripAdvisor’s long term growth strategy.
In 2012, TripAdvisor managed to more than double the members acquired through Facebook (NASDAQ:FB). At 44 million, its marketable members increased by almost 100% y-o-y. With over 32 million logged-in Facebook users, TripAdvisor’s Facebook app reached the number one spot in terms of monthly active users in Q4 2012, and was the only travel app in the top 20 applications. Presently, 35% of TripAdvisor’s new reviews are derived from its Facebook connected members.
As of Q4 2012, TripAdvisor had around 45 million monthly unique mobile device visitors, a y-o-y increase of 190%. At the end of the quarter, it reached over 31 million cumulative smartphone and tablet application downloads for the TripAdvisor application. Additionally, TripAdvisor launched 20 news free City Guides across iOS and Android which increases its coverage to 80 cities. Last month, TripAdvisor entered into a partnership with Samsung (PINK:SSNLF), making it the only travel application to come pre-installed onto the new Samsung Galaxy S4. (Read: TripAdvisor Expands Its Platform By Partnering With Samsung)
While smartphones currently account for less than 5% of TripAdvisor’s click-based revenues, tablets account for approximately 10%-15% of revenues. We expect the proportion to increase in the future.
Targeting the mobile space and social media, TripAdvisor has been focusing on expanding its avenues to increase penetration and making its platform more accessible to users. We expect both media to contribute significantly toward increasing traffic on TripAdvisor.
We will update our price estimate of $43.89 for TripAdvisor after the Q1 2013 earnings release.Notes:
- TripAdvisor’s Management Presents at Deutsche Bank’s DbAccess 21st Annual Media and Telecom Conference (Transcript), Seeking Alpha, March 5, 2013 [↩] [↩]
- TripAdvisor’s Management Presents at Deutsche Bank’s DbAccess 21st Annual Media and Telecom Conference (Transcript), Seeking Alpha, March 5, 2013 [↩]