Riding On Strategic Acquisitions And Insightful Investments, TripAdvisor Delivers A Healthy Fourth Quarter

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TripAdvisor (NASDAQ:TRIP) announced its fourth quarter 2014 financial results on February 11th. Propelled by the growing click based revenues and the full quarter contribution of its acquisitions (LaFourchette and Viator) the world’s largest travel review company posted revenues of $288 million in Q4 2014, up by 35% year on year.

All the three divisions of TripAdvisor contributed to the strong top line growth in the fourth quarter:

  • Click-based advertising revenue increased by 25% year on year to $181 million, due to 23% hotel shopper growth and a robust cost per click pricing structure. Revenue per hotel shopper growth was a positive 3% for the fourth quarter of 2014 (versus a negative 9% in Q4 2013).
  • Display-based advertising increased by 13% year on year to $36 million, due to higher page views, a shift to a more profitable client-mix, and  an improvement in advertisement technology which fueled better targeting of customers by marketers.
  • Subscription & transaction revenue increased by 97% year on year to $71 million. Apart from the full quarter contribution of LaFourchette and Viator, the other factors for this growth were: value based pricing in Business Listing and increased traffic and transactions in the attractions, restaurants and vacation rentals segment. [1] [2]

The setback faced by TripAdvisor in the last quarter, due to the seasonal decline in the click per hotel shopper and a weak bottom line growth, was adequately overcome in the fourth quarter. In Q4 2014, TripAdvisor’s adjusted EBITDA increased by around just 88% on a year-over-year basis to reach $98 million. This was mainly due to high expenditures in television advertising in Q4 2013, which increased expenses and in turn reduced EBITDA for that quarter. TripAdvisor’s non-GAAP net income increased year on year by 73% to reach $52 million in the fourth quarter. According to Google Analytics, TripAdvisor’s websites had more than 2.5 billion unique visitors during 2014, reflecting a 25% year-on-year growth.

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We have mentioned in our previous articles, that we believe TripAdvisor will eventually reap the benefits of its investment initiatives and it will translate its strong top line performance into healthy bottom line growth. It seems that the TripAdvisor’s growth path is pretty viable now. The earnings results came out at the higher end of management expectations.

According to TripAdvisor’s President and Chief Executive Officer, Stephen Kaufer, TripAdvisor laid its foundation for future growth in 2014. Bookers can now plan, compare, as well as complete the booking process of the three most popular travel categories (hotels, attractions, and restaurants) through TripAdvisor’s website. TripAdvisor has gradually evolved into a “supermarket” for travel needs with its exhaustive array of products and services. The company plans to aggressively scale and promote this holistic travel platform in 2015. [1]

We are in the process of updating  our current price estimate of $94 for TripAdvisor’s stock.

See Our Complete Analysis for TripAdvisor Here

TripAdvisor’s Instant Booking Platform

In Q1 2014, TripAdvisor rolled out its Instant Booking feature which aimed at reducing the friction related to mobile bookings. The user experience is enhanced by allowing users to complete all booking related steps from selecting a room to inputting personal and credit details on the TripAdvisor platform itself. With its Instant Booking Platform, TripAdvisor plays the role of an intermediary between a traditional online travel agent (OTA) and a travel advertising website. Customers can do the booking while remaining on the TripAdvisor page, however, the customer information is sent to the hotel so that the credit card is charged by the hotel and other payment related support is offered by the hotel itself. This is a unique model in the existing marketplace and hence gaining partners on the platform is taking longer than usual according to management. The company aims to spread the new avatar of TripAdvisor through online and offline channels, through their “plan, compare, and book” message. In 2015, the company plans to spend around $60 million towards TV advertisements, in order to spread the message across the globe. [2]

  • Monetization Should Improve With Instant Booking On Mobile Applications

The mobile platform has been a double edged sword for TripAdvisor until now, because TripAdvsior’s mobile web version, though one of the most popular downloads on the travel space, lacks monetization to a great extent. Most of the time  people use it do their research and then go back to desktop to finish their transactions. Hence the lack of monetization creates a headwind for TripAdvisor. The Instant Booking initiative will change the scenario, as the booking option will be available in the mobile application itself. The application will encompass an overall travel experience for the user, for example, starting from finding a restaurant, to planning the entire day when the user is on a trip. This in turn will build the stickiness for the product. Hence, the monetization factor will receive a stimulus with the Instant Booking Application. In 2014, TripAdvisor mobile applications have been downloaded nearly 175 million times (110% year-on-year growth). Though the company has achieved monetization on the phone, it has not been huge and TripAdvisor expects Instant Booking to drive more meaningful growth through the mobile platform.

  • How Is The Instant Booking Platform Progressing?

According to a recent comScore study, above 40% of online hotel bookers, in nine of the top markets for TripAdvisor, visited the travel review website  at some juncture prior to booking. Hence, Instant Booking will aid in monetizing the user views by offering them a platform to compare prices and eventually book. Instant Booking is being rolled out to desktop and tablet users in the U.S. and a small percentage in the U.K. The platform would be rolled out on a global scale, eventually. [2]

  • Partner Aspect of The Booking Platform

Currently, there are 43 partners (12 of which are currently live on the platform) who have committed to the Instant Booking platform. In the fourth quarter, an Instant Booking beta was launched on TripConnect (TripAdvisor’s self-service auction platform), thus providing independent hoteliers with direct access to TripAdvisor’s global booking demand. Partners have so far given positive feedback noting that Instant Booking has rapidly become one of their most effective marketing channels.

 

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Notes:
  1. TripAdvisor Reports Fourth Quarter and Full Year 2014 Financial Results, February 11, 2015 [] []
  2. TripAdvisor (TRIP) Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, February 11, 2015 [] [] []