Boosted By Its Host Of Acquisitions, TripAdvisor Glides Over Currency Headwinds in Q2 2015

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TRIP: Tripadvisor logo
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Tripadvisor

TripAdvisor (NASDAQ:TRIP) braved currency headwinds to register 25% topline growth, boosted by the growth of its attraction, restaurant, and vacation rental business. While its Instant Booking Platform gained partnership with 6 out of the top 10 global hotel chains, its restaurant platform TheFork now spans across 12 countries, and its attraction listings via Viator has more than doubled post 2014. However, the company’s profitability had been subdued on account of weak international exchange rates against the strong U.S. dollar. Consequently, TripAdvisor has lowered guidance for 2015, despite witnessing traffic growth. Most people in regions like Europe and Asia are refraining  from buying high priced services. Additionally, these people are opting for local attractions for the time being, as they are cheaper. Consequently, this is bringing down the average order value for the company. However, we believe that this is a temporary setback and the company is well-placed on its strategic growth path.

TripAdvisor’s revenues for Q2 2015 were $405 million and its adjusted EBITDA grew by 5% to $123 million. The core hotel business grew by around 13% and the attractions, vacation rental, and restaurant business grew by a whopping 210% mainly due to acquisitions in these segments. [1]

TripAdvisor’s business listing witnessed a 23% growth to 5.2 million businesses. The company’s monthly unique visitors increased to 375 million, depicting a 30% growth. In Q2 2015, TripAdvisor launched mobile applications for Apple Watch, Samsung Gear, and Pebble devices.

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For full year 2015, the company has guided to around 20% revenue growth and EBITDA growth around the low to mid-single digits.

We are in the process of updating our price estimate of $87 for TripAdvisor.

See Our Complete Analysis for TripAdvisor Here

Instant Booking Platform Gaining Prominence Amongst Hotel Chains And Users

TripAdvisor’s standard meta-search model follows a cost-per-click (CPC) structure where partner hotels bid for each click made by users on the partners’ links. TripAdvisor’s Instant Booking (currently available only in the U.S. and select destinations), on the other hand, requires partners to pay a commission for each completed transaction. Hence, willing partners bid via an auction, for the commission percentage they are ready to pay for completed transactions. The commission based model is similar to most of the OTAs’ pricing process of a fee per transaction, charged after the completion of a stay. [2]

  • TripAdvisor’s Important Advantage Over Traditional OTAs?

The unique advantage that TripAdvisor’s Instant Booking possesses over traditional OTAs is that even if the hotels are not on the Instant Booking platform, TripAdvisor still has the properties of other OTAs listed on its websites. So, there is a scope to induct those properties into Instant Booking gradually. Hence, even without Instant Booking, TripAdvisor’s presence and therefore, revenue generation continues through its meta-search platform. The Instant Booking feature, coupled with meta-search, provides users with end-to-end services starting from listings to the comparison of availability and pricing, to completing their bookings.

In Q2 2015, TripAdvisor partnered with 10 leading hotel chains for the Instant Booking Platform, the most prominent among them being Marriott International. Currently, it has 6 out of the top 10 global hotel brands on its platform. Presently, Instant Booking is available for almost one-third of the e-commerce enabled properties (roughly, 235,000 properties) on the TripAdvisor platform.

  • TripAdvisor Is Aggressively Advertising Its Changed Image

In 2015, TripAdvisor has doubled its advertising spend over the previous year to $60 million. [3] The main reason is to spread the message of ‘Plan, Compare, and Book.’  Previously, users viewed TripAdvisor as a travel related product search and review website. So, to spread the awareness for Instant Booking, which allows booking on the TripAdvisor website, the company is aggressively marketing its new brand image. TripAdvisor is mainly advertising offline through Television and also through its website.

Viator’s Inventory Has Doubled Since 2014

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. 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. [3] In February 2015, TripAdvisor and Viator announced the launch of a new tours and activities supplier platform called Marketplace. Marketplace enables more partners to list their business on, and more users to book tours and activities through, Viator. The reception of Marketplace has been positive, so far. In the second quarter, Viator almost doubled the number of attractions listings on its platform, as compared to all of 2014. [4]

TripAdvisor’s Restaurant Platform, TheFork, Now Spans Across 12 Countries

Since 2014, TripAdvisor has been on a shopping spree when it comes to restaurant reservation websites. It 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. 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. [5] In May 2015, the company acquired Australia-based restaurant booking website, Dimmi. Dimmi claims to contain the largest Australian restaurant reservation network, featuring around 30% of Australia’s restaurants. [6]

As a result of its restaurant reservation platform acquisitions, the company has expanded the restaurant booking business into 12 countries, in less than a year’s time. TripAdvisor has been re-branding its restaurant platform as TheFork and its reach was expanded to Portugal and Australia in Q2 2015. TheFork now caters to reservations in over 28,000 restaurants. [3]

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Notes:
  1. TripAdvisor Reports Second Quarter 2015 Financial Results, TripAdvisor Investor Relations, July 23, 2015 []
  2. What TripAdvisor’s instant booking means for hotels, tnooz, November 2014 []
  3. TripAdvisor Introduces New Feature to Help Travelers Research, Compare and Book Tours, TripAdvisor.com, Nov 2014 [] [] []
  4. TripAdvisor’s Q2 2015 earnings Call Transcript, Seeking Alpha, July 23, 2015 []
  5. TripAdvisor Acquires Restaurant Reservation App In Portugal, Skift, April 9, 2015 []
  6. Hungry again, TripAdvisor acquires Dimmi, a restaurant-booking site Down Under, tnooz, May 20, 2015 []