TripAdvisor Continues Its Tryst With Restaurant Reservation By Acquiring iens and SeatMe

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On January 8th, TripAdvisor (NASDAQ:TRIP), the world’s largest travel review website, announced the decision to acquire leading Dutch restaurant review and booking websites, iens and SeatMe. Although the terms of the acquisitions have yet to be disclosed, the Dutch media are reporting a figure close to €10 million ($11.8 million). [1]

With the completion of the deal, TripAdvisor would be a leader in the Dutch restaurant booking and review space. Sixteen year old iens.nl currently contains reviews for 20,000 restaurants and witnesses approximately 20 million annual visitors. The company iens expects sales to the tune of €6 million in 2015. [1]

SeatMe, which merged with iens in 2012, completes the booking process for iens. SeatMe is a standalone service and is used by around 300,000 diners a month through  Android, Apple, and Windows applications. The Dutch version of SeatMe is independent of another brand of the same name that was acquired by US review giant Yelp in 2013. [2]

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Earlier in May 2014, TripAdvisor acquired LaFourchette (meaning “The Fork”) for $140 million. LaFourchette is one of the leading Internet and mobile restaurant reservation systems in France and Spain with over 12,000 participating restaurants. [3]

LaFourchette generates revenues by selling its online reservation software to restaurants and its APIs to third-party developers for analyzing data to increase a restaurant’s business. The company has already achieved scale in France and Spain, and it turned profitable in 2013.

The team at La Fourchette, will lead the integration of iens and SeatMe with TripAdvisor. [2]

Our price estimate of $94 for TripAdvisor is at a considerable premium to the current market price.

See Our Complete Analysis for TripAdvisor Here

What Is TripAdvisor’s Rationale Behind Acquiring Multiple Restaurant Reservation And Booking Websites In Europe?

We list down the key aspects that TripAdvisor might have considered before investing in multiple ventures in the online restaurant reservation and booking space:

  • Expanding Functionality: TripAdvisor receives over 200 million page views per month from its restaurant traffic. With these acquisitions, it will be able to provide a better experience to these users by offering a booking service and taking them further down the booking funnel.
  • Seeking Uncharted Territories: The scope of growth in the online restaurant reservation category is much bigger internationally than that in TripAdvisor’s domestic market—the U.S. While over 20% of restaurant bookings in the U.S. occur online, the percentage stands at low single-digits in nearly every international market. [4] However, international diners are increasingly using the internet to make restaurant reservations due to the convenience and discounts offered online. We expect the proportion of diners who book tables online at full-service restaurants to increase in the future. Restaurants are also increasingly adopting online booking models as they help fill up empty tables, offer more convenience, and enhance efficiency.
  • Monetary Benefits: TripAdvisor will be able to better monetize its restaurant traffic by converting many of its users into seated diners. The booking feature will also attract new users and restaurants to its website, presenting an opportunity to substantially grow its restaurant reservation revenues.
  • Global Expansion: iens and LaFourchette are regional market leaders but they lack significant global presence. TripAdvisor’s strong global reach, coupled with an average of 315 million monthly unique visitors, can convert a huge chunk of TripAdvisor’s traffic into diners. Along with the global expansion of these restaurant reservation and booking brands, this will help TripAdvsior in gaining dominance in the table reservation industry.

  • Growth Opportunities:Priceline‘s (NASDAQ: PCLN) OpenTable dominates the North American online restaurant reservation market with over 50% market share and with approximately 23,000 partner restaurants. This will make it an arduous task for TripAdvisor to penetrate the market. Targeting international markets gives a greater scope for growth, under these circumstances.
  • Diversifying Its Portfolio: Online travel market is currently at its dynamic best with continuous influx of new players (Read our article on how Competition Is Shaking Up The Online Travel Space). The competition has  intensified further, since the recession. Many hoteliers have moved to online bookings due to the slump they witnessed in occupancy rates, thus fueling the rise of many online travel agencies. For these reasons, the industry veterans—Priceline, Expedia (NASDAQ:EXPE), Orbitz and Tripadvisor—are tapping the less penetrated but fast growing markets such as mobile bookings and meta-search, and now restaurant reservations.

TripAdvisor has a history of acquiring startups, such as SeatGuru, Jetsetter and Niumba, and integrating their services with its own. The company not only possesses considerable investment capital ($614 million as cash and cash equivalents as of September 30, 2014) but also has the relevant experience and resources to grow brands like iens and LaFourchette into formidable leaders in the European market, and even globally.

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Notes:
  1. Tripadvisor acquires leading Dutch restaurant rating site, Reuters, January 2014 [] []
  2. TripAdvisor increases restaurant focus with acquisition of IENS and SeatMe, tnooz, Jan 2015 [] []
  3. Restaurant Reservation Service LaFourchette Gobbled Up By TripAdvisor For ~$140M, TechCrunch, May 07, 2014 []
  4. TripAdvisor’s (TRIP) CEO Stephen Kaufer on Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, May 06, 2014 []