To Where Is TripAdvisor Traveling: TripAdvisor’s Growth Plans For 2015 And Beyond

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TripAdvisor (NASDAQ:TRIP) ended 2014 on a healthy note, riding on its host of acquisitions, upgrades, and its newly introduced Instant Booking Platform. The world’s largest travel review company posted revenues to the tune of $1.246 billion in FY 2014, up by 32% year on year. All the three divisions posted strong top line growth — click-based advertising revenue grew by 25% year on year to $870 million, display-based advertising increased by 18% year on year to $140 million, and subscription & transaction revenue was up by 82% year on year to $236 million. [1]

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. The company plans to aggressively scale and promote this holistic travel platform in 2015. [2] In this article we explore the growth path that TripAdvisor has envisioned for each of its significant acquisitions.

Our valuation of $87 for TripAdvisor is almost in line with the current market price.

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TripAdvisor And Viator Introduced New Features And Recently Formed Marketplace-A Tours And Activities Supplier Platform

TripAdvisor acquired Viator in September 2014 in order to extend its reach in the entertainment sector, which is TripAdvisor’s third largest source of demand after hotels and restaurants. Viator is a leading online service provider of over 20,000 tours and attractions. Viator operates in 1,500 destinations spanning across 160 countries. Viator’s competitive advantage over its peers lies in its “curation model”. Viator lists a selective number of tours and activities for each location, whereas its rivals such as GetYourGuide provides a complete market view including each and every available tour or activity.

In November 2014, TripAdvisor leveraged Viator’s tour inventory and pricing information to introduce a new feature on its platform. The feature facilitates comparison and reservation of tours and tickets for over 7,900 attractions worldwide. Any attraction chosen by travelers will generate up to three tour options, namely, small group, private or skip-the-line options. Travelers can book their chosen option through Viator. [3]

Since the acquisition, bookings via Viator have more than doubled.  In February 2015, TripAdvisor and Viator announced the launch of a new tours and activities supplier platform called Marketplace. Marketplace will enable more partners to list their business on, and more users to book tours and activities through, Viator. A 2013 Special Report by Skift found that the tours and activities market is highly fragmented, with high barriers to entry, and operators requiring big brands to achieve scale. [4] TripAdvisor might provide Viator the scale it requires to achieve further profitability and expansion in the tours and activities sector. This in turn might aid TripAdvisor to emerge as a market leader in this segment.

TripAdvisor Assumes Dominance In The European Restaurant Reservation Space With Multiple Acquisitions

TripAdvisor acquired LaFourchette, the leading online restaurant reservation systems in France and Spain, in May 2014. In Q4 2014, TripAdvisor acquired mytable and restopolis in Italy, and Iens in The Netherlands. Other than the countries where these entities belong, TripAdvisor’s restaurant inventory (as a result of these acquisitions) now spans across France, Spain, Switzerland, Belgium, Turkey, Sweden and Denmark, making it a market leader in the European online restaurant reservation domain.

The scope of growth for TripAdvisor in the online restaurant reservation category is much bigger internationally than that in its 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. [5] However, international diners are increasingly using the Internet to make restaurant reservations due to the convenience and discounts offered online. Restaurants are also increasingly adopting online booking models as they help fill up empty tables, offer more convenience, and enhance efficiency. 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 U.S.  market. Targeting international markets gives a greater scope for growth, under these circumstances.

TripAdvisor receives over 200 million page views per month from its restaurant traffic. The company will be able to better monetize its restaurant traffic by converting many of its users into seated diners.

As a consequence of these acquisitions, restaurant booking activities have increased by four times on the TripAdvisor platform. TripAdvisor is currently re-branding its restaurant platform as TheFork. The company plans on expanding TheFork’s reach to newer markets over the next 3 to 5 years. [6]

Vacation Rental Listings Gains Huge Popularity

In May 2014, TripAdvisor acquired Massachusetts-based VacationHomeRentals.com, which offers around 14,000 vacation rentals in 89 countries with around 50,000 user reviews. TripAdvisor’s vacation rental assets currently include TripAdvisor Vacation Rentals and Flipkey in the U.S., Holiday Lettings in the U.K. and Niumba in Spain. [7]

The vacation rental listings on TripAdvisor have crossed 650,000 by the end of 2014, primarily due to the listings growth in the free-to-list business. Free-to-list bookings grew 130% in Q4 2014 and more than 280% for the full year. The company aims to grow the listings and owner engagements in the future. [6]

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Notes:
  1. 4Q14 Supplemental Financial Information, TripAdvsior Investor Relations, February 2015 []
  2. TripAdvisor Reports Fourth Quarter and Full Year 2014 Financial Results, February 11, 2015 []
  3. TripAdvisor Introduces New Feature to Help Travelers Research, Compare and Book Tours, TripAdvisor.com, Nov 2014 []
  4. Special Report: Why the tours and activities market is more hype than the next big thing, Skift, February 2013 []
  5. TripAdvisor’s (TRIP) CEO Stephen Kaufer on Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, May 06, 2014 []
  6. TripAdvisor (TRIP) Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, February 11, 2015 [] []
  7. TripAdvisor Acquires VacationHomeRentals.com as it Tries to Catch HomeAway, Skift, May 1, 2014 []