TripAdvisor Has Its Eyes Set On Long-Term Growth With A Holistic Travel Platform

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TripAdvisor (NASDAQ:TRIP) , the world’s largest travel review website, released its Q4 2015 earnings on February 11th. TripAdvisor’s growth story, as predicted, continued in the fourth quarter as well. Though the company is facing financial hurdles currently on account of its ongoing investments to expand the presence of its Instant Booking platform across the globe, it believes that these investments will lead to long-term growth. Given Instant Booking’s popularity across top hotel chains and now also with the world’s largest OTA, Priceline, we believe TripAdvisor is on the right track. However, TripAdvisor’s quest for growth doesn’t end here. The company is investing in its restaurant booking platform, TheFork, and its entertainment platform, Marketplace, and aims to carve out huge portions of the market from those segments, as well. Over the years since 2011, the user contribution on TripAdvisor  has increased from 30 contributions per minute to over 200 per minute. There were 82 million contributions added on TripAdvisor in 2015 alone, making the website’s reviews expand to 320 million in total, spanning across 6.2 million businesses around the world. [1] [2]

TripAdvisor’s revenues for Q4 2015 stood at $309 million, reflecting  7% year-on-year growth. The company’s revenues for fiscal year 2015 were up by 20% to almost $1.5 billion. On account of the ongoing investments by the company, its adjusted EBITDA remained almost flat for 2015 at $466 million, and its GAAP net income declined by 12% to $198 million. [1]

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We will shortly update our price estimate of $80 for TripAdvisor.

See Our Complete Analysis for TripAdvisor Here

Instant Booking: The Rising Star

In 2013, TripAdvisor’s newly launched Hotel Metasearch feature aided users in comparing the best prices for properties across 200 different booking engines over the internet. Hence, in order to further facilitate the booking process wherein travelers could compare as well as book properties on the TripAdvisor website itself (rather than visiting several websites to once again check and complete the final booking), the Instant Booking platform was launched in 2014. Till now, TripAdvisor’s Instant Booking has entered partnerships with eight of the top 10 hotel chains in the world. The biggest breakthrough for the booking platform came in October 2015, when Priceline’s booking.com agreed to feature on Instant Booking. Consequently, TripAdvisor now boasts of 450,000 bookable properties on its platform. Post the full launch of Instant Booking in the U.S. and the U.K. in September 2015, in January this year the platform was launched in all English language speaking countries. [2]

In February, the launch was completed in major European markets and in March the company plans on launching it in Asia Pacific and the Latin American markets. Though the roll outs and other investments on the platform is dampening the near term financial performance, the company is confident about the significant returns on investment from Instant Booking in the future.

But TripAdvisor Doesn’t Stop At Hotel Bookings…

TripAdvisor wants to create a holistic travel plan for travelers. It wants to assist the traveler to not only look up hotels and book the same, but also with the other plans during a holiday such as, what restaurants would they like to visit, or what sights would they want to see?  Keeping these points in mind, TripAdvisor is strengthening its restaurant reservation platform, TheFork, and its entertainment booking platform, Marketplace, with the help of its tour and entertainment based website, Viator.

TheFork now spreads across 12 countries and boasts of websites such as LaFourchette, the leading online restaurant reservation website in France and Spain, mytable and restopolis in Italy, Iens in The Netherlands, Best Tables in Portugal, and Australia’s largest restaurant booking website, Dimmi. TheFork currently assists in reservations in over 33,000 restaurants. TheFork was launched in Denmark in Q4 2015. [2]

TripAdvisor believes that attractions can be its next billion dollar revenue generating segment. The market is in a fragmented state and it provides for an $80 billion market potential in the U.S. and the U.K. alone. After the launch of Marketplace in 2015, Viator’s bookable properties has almost tripled from 11,000 to 32,000. [2]

We feel that TripAdvisor’s plans for expanding its functionalities, and gradually transforming into a one-stop shop for travel, might work well for the company. TripAdvisor seems to be trying to address the potential gaps in demand and supply in the market, for example, people looking up reviews on its platform had to book hotels elsewhere, as well as the fragmented nature of the entertainment market in most geographies, and this vision of consolidating things into one place might ultimately lead to a bright future for the company.

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Notes:
  1. TripAdvisor Reports Fourth Quarter and Full Year 2015 Financial Results, Investor Relations, Feb 11, 2016 [] []
  2. TripAdvisor (TRIP) Stephen Kaufer on Q4 2015 Results – Earnings Call Transcript, Seeking Alpha, Feb 11, 2016 [] [] [] []