How Can Instant Booking Stir Up The OTA Space And Be A Game Changer For TripAdvisor?

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27.85
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Trefis
TRIP: Tripadvisor logo
TRIP
Tripadvisor

Instant Booking is emerging as the biggest strength for TripAdvisor. According to a Piper Jaffray report, TripAdvisor’s penetration improved significantly in several regions over a three month period as shown below:

trip penetration

Source: Skift

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It is noteworthy that despite the presence of OTA (online travel agency) giants such as Priceline and Expedia, Instant Booking managed to penetrate to around 90% even in fragmented markets like Europe and Asia/Pacific. Perhaps Instant Booking’s biggest victory was its alliance with Priceline’s Booking.com. It is being predicted by industry experts that the second largest OTA (in terms of revenues), Expedia, is also not far away from joining this booking platform. Since over 40% of TripAdvisor’s revenues come from Priceline and Expedia, it can only work in favor of TripAdvisor for its two biggest customers to join the Instant Booking fray. Currently, Instant Booking is optimizing the user’s experience on its platform. TripAdvisor’s performance in Q1 2016 remained subdued on account of its investments to improve the Instant Booking experience, other strategic investments, and changing its transactional model for vacation rentals. However, the company expects to pick up its performance towards the latter half of 2016.

We feel that Instant Booking does have the capability of being a major game changer in the online travel scenario. With the presence of the top global hotel chains and the major OTAs, Instant Booking does speak of a promising future. To add on to its competitive advantage, Instant Booking offers around a 20% lesser price than the existing metasearch engines. Whether the existing leaders come up with a newer, improved solution to combat TripAdvisor’s rise to power is something that the future will answer.  But going by the current trend, it seems that Instant Booking does possess the potential to upgrade TripAdvisor’s stock valuation to a great extent in the future.

trip estimate for ib

Observing our current forecasts, TripAdvisor’s click & display based advertising revenue is expected to reach over $2.5 billion. But what if, TripAdvisor’s number of pageviews per visitor increases to 4.5 by the end of our review period and its RPM crosses $110? In such a case, the click and display advertising revenues for TripAdvisor would cross $3.5 billion by the end of our forecasted timeline. Given that scenario, the stock price estimate for TripAdvisor can improve by over 25%. Instant Booking’s continuous growth can potentially give rise to a similar scenario in the future.

 

Have more questions about TripAdvisor? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for TripAdvisor

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