TripAdvisor (NASDAQ:TRIP), a leading online platform for travel related reviews, is constantly working on enhancing user experience and providing better business opportunities to its clients, thereby addressing the needs of both the front-end and the back-end customers. The company launched a new meta search feature in Q4 2012 that collates all search results on a single page, offering greater convenience to travelers. It followed this with the launch of a new free-to-list transaction model in Q1 2013, that provides a greater number of businesses an opportunity to list themselves on TripAdvisor’s website. And now, the company is scheduled to launch TripAdvisor Connect in the latter part of 2013 to bridge the gap between large hotel chains and smaller, independent hotels.
Although these initiatives will impact TripAdvisor’s profit margin in the short-term as incremental investments would be required, we believe the company will benefit from this in the long run by attracting more Internet booking engines, businesses and users to the website.
The Fully Rolled Out Meta Display Will Help Attract More Visitors To The Website
TripAdvisor rolled out its new meta display feature globally across its smartphone traffic in Q4 2012. By Q1 2013, about 20% of the company’s desktop and tablet users were using the meta display feature. The transition to 100% meta display across all devices globally was completed in the latter part of Q2 2013. 
Earlier, TripAdvisor’s partner pages appeared in a pop-up window when a user entered a travel query. However, the company has now integrated all the search query results on the main page known as meta-search. When users perform a search on TripAdvisor, they get all results on the page along with a map that pinpoints the location in the user’s search results. This enhancement allows users to see travel content, real time hotel pricing and availability from booking partners, all on a single page.
We believe the meta-display feature will help TripAdvisor expand its user base in the long run as it enhances the overall user experience by addressing queries on a single page. This in turn will lead to revenue enhancement as the company’s vast user base is its key growth driver. Additionally, the feature will also help the company compete against Priceline’s Kayak and Expedia’s Trivago, the meta search market leaders in the U.S. and Europe respectively.
The New Free-To-List Transaction Model Is Bringing More Businesses On Board
The new transaction based model introduced in Q1 2013 is different from the old subscription model under which properties paid a subscription fee to TripAdvisor for business listing. Now, properties are free to list but they pay on a per transaction basis, which has resulted in a greater number of businesses listing themselves. Additionally, this allows TripAdvisor to list those properties at the top which have higher conversion rates, thus providing the best recommendation to the user. 
TripAdvisor’s subscription, transaction and other revenue increased by 68% y-o-y in Q2 2013. The company expects to see continued sales productivity in business listings and higher vacation renting due to the introduction of the offering. We estimate the company’s subscription and other related revenue will double by the end of our review period to more than $230 million.
The Launch Of TripAdvisor Connect Will Attract More Internet Booking Engines
TripAdvisor recently announced that in late 2013 it will be launching TripAdvisor Connect, an online platform that will give independent hotels and B&B’s of all sizes access to online tools for managing online promotions and analyzing their advertising results. The platform will enable business listings subscribers to provide real-time availability and online booking to travelers via their Internet booking engines.
These services were earlier only available to major online travel agencies, booking engines and hotel chains. In addition, TripAdvisor Connect also includes Review Express, an offering that automatically generates emails to be sent to guests for post-stay review solicitation. This will help hoteliers add fresher, more valuable and verified content about their properties on TripAdvisor. 
A total of 210 Internet booking engines covering 135,000 hotels and B&Bs worldwide have signed up for TripAdvisor Connect before the launch, ahead of the company’s expectations. Moreover, close to 90% of these committed 210 Internet booking engines have opted for the premium offering. TripAdvisor estimates a greater number of booking engines to sign up in the next few weeks. 
Our price estimate of $79 for TripAdvisor is at a premium of about 10% to the current market price.Notes:
- TripAdvisor Q2 2013 Earnings Call Transcript, Seeking Alpha, July 24, 2013 [↩] [↩]
- TripAdvisor Connect: Known Knowns, Known Unknowns and Unknown Unknowns, Tnooz, July 12, 2013 [↩]
- Hundreds Of Booking Engines On Board For TripAdvisor Service In Anticipation Of Launch, TripAdvisor Press Center, Aug 2013 [↩]