TripAdvisor Q1 2015 Earnings Preview: Strategic Investments Might Lead To Growth

TripAdvisor (NASDAQ:TRIP) is set to release its results for Q1 2015 on May 6th. The company 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 $1.25 billion in 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]

We will shortly update our valuation of $87 for TripAdvisor post the first quarter earnings result.

See Our Complete Analysis for TripAdvisor Here

TripAdvisor’s Instant Booking Platform Will Increase TV Advertisement Expenses In 2015

TripAdvisor launched its Instant Booking platform in the U.S. in Q1 2014.The platform allows users to carry on the end to end steps of the booking process — from selecting a room to inputting personal and credit details — on TripAdvisor’s platform itself. 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. ^[3]

TripAdvisor Grows In The Tours And Activities Space

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’s competitive advantage over its peers lies in its “curation model”. 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.

Restaurant Reservation Business Is Expected To Be A Major Growth Driver

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.

In 2015, TripAdvisor continued its tryst with European restaurant booking websites with the acquisition of Portugal-based Best Tables in April 2015. Best Tables also operates in Brazil and has a database of 1,200 bookable restaurants. The details of the acquisition are yet to be disclosed. ^[4]

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. 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. ^[5]

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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 (TRIP) Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, February 11, 2015 [↩]
4. TripAdvisor Acquires Restaurant Reservation App In Portugal, Skift, April 9, 2015 [↩]
5. TripAdvisor (TRIP) Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, February 11, 2015 [↩]