TripAdvisor Q2 2015 Earnings Preview: Broad-Based Growth To Continue On The Back Of Recent Acquisitions

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TripAdvisor (NASDAQ:TRIP) is slated to release its Q2 2015 earnings on July 23. The company has been displaying healthy organic and inorganic growth over the last couple of quarters. In Q1 2015, TripAdvisor’s revenues reflected a 29% year on year jump to reach $363 million and its adjusted EBITDA grew by 4% to $127 million. The company’s core hotel business displayed healthy growth along with the other segments, namely, attractions, vacation rental, and restaurant reservations. TripAdvisor’s acquisitions in 2014, and so far in 2015, are helping the company in securing a dominant position in several markets. TripAdvisor’s Instant Booking platform (available in the U.S. and select countries) facilitates users in completing the entire booking process on its platform. The company is planning a greater rollout of the platform soon.

Our price estimate of $87 for TripAdvisor’s stock is marginally lower than the current market price.

See Our Complete Analysis for TripAdvisor Here

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TripAdvisor’s Instant Booking Platform Might Witness Broader Rollout

TripAdvisor’s Instant booking platform, launched in Q1 2014 in the U.S., allows users to have a holistic booking experience on the TripAdvisor platform itself. Starting from selecting a room, to filling up  personal and credit details, the entire process can be completed on the TripAdvisor page. In the first quarter of 2015, TripAdvisor launched the Instant Booking feature for independent hotels on its TripConnect platform.

Additionally, Instant Booking Platform’s reach was expanded to mobile phone users in the U.K., Australia, Canada, Ireland, and New Zealand. The company is gradually rolling out this platform across all the English-speaking countries.

Marketplace Will Further Attract Global Traffic For The Entertainment Category

TripAdvisor acquired a dominant position in the entertainment category (its third largest source of demand after hotels and restaurants) with its 2014 acquisition of Viator. Viator is a leading online service provider of over 20,000 tours and attractions. Since the acquisition, bookings via Viator have more than doubled.

In February 2015, a new tours and activities supplier platform called Marketplace, was launched by TripAdvisor and Viator. Marketplace will facilitate tours and attractions operators to reach a wider global audience. [1]  There are currently 530,000 attractions on TripAdvisor’s listings.

According to TripAdvisor’s management, despite the market for attractions being sporadic in nature, the 170 million downloads of TripAdvisor’s mobile applications, does ensure that tourists get the richest repository for attractions from the TripAdvisor platform. Hence, currently, it is the foremost provider of an attractions’ database, which, in turn, is acting as a growth driver for the company. [2]

TripAdvisor Might Gain Further Prominence And Growth In The Restaurant Reservation Space With Its Acquired Websites

TripAdvisor has gained a leading position in the European restaurant reservation space with its host of acquisitions in 2014, and also so far in 2015. 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 restaurant booking websites with the acquisition of Portugal-based Best Tables in April. Best Tables also operates in Brazil and has a database of 1,200 bookable restaurants. In Q1 2015, the restaurant content, traffic, and listings experienced healthy organic and inorganic growth. TripAdvisor re-branded its restaurant platform as TheFork. The company is expanding the reach of TheFork and recently entered markets in Sweden and Turkey. TripAdvisor seeks on leveraging its rich content, deep mobile engagement, and 2.7 million restaurant listings to match more travelers and locals with more restaurants. [2]

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. [3] 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. 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.

 

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Notes:
  1. TripAdvisor (TRIP) Q4 2014 Results – Earnings Call Transcript, Seeking Alpha, February 11, 2015 []
  2. TripAdvisor (TRIP) Stephen Kaufer on Q1 2015 Results – Earnings Call Transcript, Seeking Alpha, May 6, 2015 [] []
  3. TripAdvisor’s (TRIP) CEO Stephen Kaufer on Q1 2014 Results – Earnings Call Transcript, Seeking Alpha, May 06, 2014 []