TripAdvisor (TRIP) Last Update 4/14/21
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% of Stock Price
Revenue
Gross Profits
Free Cash Flow
TripAdvisor
STOCK PRICE
DIVISION
% of STOCK PRICE
Other
5.8%
$2.56
Net Debt
2.9% $1.28
TOTAL
100%
$44.10
$42.82
Yours
Trefis Price
N/A
$45.37
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

TripAdvisor Company

VALUATION HIGHLIGHTS

  1. Hotels, Media & Platform constitutes 88% of the Trefis price estimate for TripAdvisor's stock.

WHAT HAS CHANGED?

  1. TripAdvisor Reports Better-Than-Expected Q3
Total revenue for Q3 was $151 million – a marked improvement from Q2 revenue of $59 million. Also, the EBITDA figure turned positive in Q3 to $15 million from a $74 million loss in Q2, although that’s still an 88% drop from the same period last year. In addition, monthly unique users on Tripadvisor sites as compared to last year inched up each month of the quarter, from 67% of the 2019 figure in July to 74% in September.

  1. Launch of subscription product
Tripadvisor will roll out its first direct-to-consumer subscription offering in the coming months. The company doesn't share specific details on how the program will operate but hints that subscribers will get access to discounts on hotels and experiences and to special perks such as room upgrades or spa credits. Tripadvisor already has more than 100 million users, which is currently a free service. It also saw around 400 million unique monthly active users pre-Covid.

  1. Hotel Segment Continues To See Declines

TripAdvisor's Hotel segment accounted for almost 60% of the company's revenues in 2019. Revenues in this segment are expected to decline going forward, due to a continued negative impact from marketing pullbacks and some additional currency headwinds. In addition, the decline could likely result due to a softer travel spending environment. The company is also facing aggressive competition from Google as it is pushing its own hotel products in search results. TripAdvisor believes that the potential hotel auction headwinds will be more than offset by non-Hotel revenue lines in the years to come.

  1. Strong Performance from Non-Hotel Segment

The company's Non-Hotel segment continued to grow strongly in 2019, similar to the previous years, driven by the strong demand in its Experiences and Restaurants segments. The growth in the Experiences segment reinforces the company's leadership position as the world’s largest online platform to book and sell tours, attractions, and travel experiences. The company will continue to capitalize on the significant supply and demand advantages in the Non-Hotel offerings and remain focused on driving revenue growth and market share gains.

TripAdvisor will be restructuring its Experiences unit - where Viator will operate outside of this segment. TripAdvisor experiences would be geared towards consumers who might book a hotel or restaurant reservation on Tripadvisor and might be looking to add an attraction to their trip. Viator, on the other hand, would be positioned more for the traveler looking to simply book a standalone experience in the destination. There are plans for product rollouts in 2020, such as a new Tripadvisor mobile app.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Hotels, Media & Platform Segment

  • Hotels, Media & Platform EBITDA Margin: Hotels, Media & Platform EBITDA Margins improved by 7% in 2019 and are expected to remain at similar levels in 2020. There could be an upside of 10% if the margins improve by 7% in 2020.
  • Experiences and Dining EBITDA Margin: Experiences and Dining EBITDA Margins declined to 1.1% in 2019 from 12.9% in 2018. We expect to grow by 13% in 2020. There could be a downside of 6% if the margins improve by 10% only in 2020.

BUSINESS SUMMARY

TripAdvisor is a leading online platform for travel-related reviews, aggregating 859 million reviews and opinions about destinations, accommodations, restaurants, and activities as posted in 2019. According to the third annual Access America Vacation Confidence Index, 60% of American consumers say they factor other travelers' online reviews into their plans when booking a vacation. Benefiting from the trend and capitalizing on the traction gained from users, TripAdvisor continues to introduce travel planning tools on its websites to act as a definitive resource for travelers.

TripAdvisor branded websites include tripadvisor.com in the United States and localized versions of the website in 48 markets. TripAdvisor branded websites globally averaged 463 million monthly unique visitors in 2019.

With rich user-generated content, TripAdvisor has valuable monetization opportunities. Travel businesses can advertise on TripAdvisor's platform and benefit from its large audience and global reach. TripAdvisor derives most of its revenue from the sale of advertising, primarily through click-based advertising and to a lesser extent, display-based advertising. The remainder of TripAdvisor’s revenue is generated through a combination of subscription-based offerings, content licensing, and its recently launched private sale site, SniqueAway. It also offers deals on top hotels at lucrative discounts. TripAdvisor has diversified its geographical mix in the past few years with the contribution of its US operations declining from 82% in 2008 to approximately 54% in 2019. Long-term revenue growth is expected to be driven by expanding traffic and user-generated content.

Of late, Google has upgraded its travel search tools in recent years to compete with trip booking websites like TripAdvisor and Booking Holdings. Google is pushing its own hotel products in search results and siphoning off quality traffic that would otherwise find TripAdvisor via free links and generate high margin revenue in its hotel click-based auction, which is now leading to the revenue to decline in this segment.

SOURCES OF VALUE

TripAdvisor's global reach is highly attractive to advertisers

TripAdvisor maintains a global presence both through the reach of its global portfolio of ~30 websites and through its in-market staffing in more than ten countries. The flagship TripAdvisor brand operates websites in 48 countries in 28 languages. Its core TripAdvisor platform and many of its other brands are uniquely positioned to appeal to travelers globally and strive to provide universally relevant content and community. Since 2013, the company focused on enhancing its brand image in the emerging markets by incorporating more local language content to drive higher user engagement.

The sheer scale and reach of TripAdvisor should help it command attractive rates from advertisers seeking placements on TripAdvisor websites.

TripAdvisor Business Listings are delivering an excellent return on investment

TripAdvisor launched Business Listings in January 2010, which allows property managers to directly connect to TripAdvisor's community of people.

As part of a Business Listings subscription, accommodation businesses may display any combination of contact information on their TripAdvisor listing, including their URL, email address, and phone number. Subscribers also gain access to TripAdvisor's special offers feature, enabling properties to attract travelers with customized offers.

TripAdvisor launched the Instant Booking platform in 2014

In Q1 2014, TripAdvisor rolled out its Instant Booking feature which aimed at reducing the friction related to mobile bookings. The user experience is enhanced by allowing users to complete all booking related steps from selecting a room to inputting personal and credit details on the TripAdvisor platform itself. With its Instant Booking Platform, TripAdvisor plays the role of an intermediary between a traditional online travel agent (OTA) and a travel advertising website.

Facebook partnership continues to boost traffic as travelers increasingly use social media to access travel information

Consumers are increasingly leveraging social networks for research before making purchases for any product including travel. Trefis sees social media, such as Facebook, being used heavily as a means to communicate and exchange travel information and opinions. The trend can create strategic growth opportunities, allowing TripAdvisor to attract new consumers and develop unique and effective advertising solutions.

To capitalize on the social media boom, TripAdvisor entered into a partnership with Facebook in 2010 and launched a setup that allowed users to receive “Instant Personalization” when visiting the site with an active Facebook account. Using the system, TripAdvisor users can check out their friends' travel experiences before planning their own trip. Under the system, users who are already logged into Facebook can view friend reviews of various locations while checking out places their friends visited during their travels. Users are also treated to a “most popular” destinations screen based on their friends' cumulative travel information.

KEY TRENDS

Growing global travel market and online penetration

Recent historical trends show that each year, an increasing percentage of global travel spending has been conducted online through supplier websites and online travel agencies. The trend is expected to continue as online penetration continues, mobile smartphone and other devices continue to proliferate, and as travel grows along with an expanding middle class in certain developing countries like China and India.

The internet is expected to become increasingly integral to the travel planning process due to increasing worldwide online penetration, particularly given the capability that the internet provides travelers to refine searches, compare destinations, and view real-time pricing. With internet penetration currently estimated at 40% globally (88.5% in North America, over 80% in Europe, ~ 60% in Latin America and ~ 30% in Asia), TripAdvisor has the potential to grow in all markets.Link

Increasing online advertising spend

The global online advertising market is growing as advertisers continue to shift their spending from offline to online channels, mirroring the trend in consumer media consumption.

Given the size of the travel market, travel providers and travel-related advertisers will continue to be motivated to devote significant resources to advertise their travel products and services. In addition, as more travel dollars are spent online generally, an increasing amount of travel advertising spending is expected to migrate from traditional offline advertising channels to online advertising opportunities.

Growing mobile travel spend

Consumers are increasingly using mobiles and tablets to access the internet. Mobile is expected to exceed the growth of display by 2019. Display Internet advertising revenue was the second-largest component of Internet advertising revenue in 2014 and is expected to maintain a solid 7.9% CAGR to 2019. However, mobile Internet advertising revenue is growing at the rate of 23.1% CAGR and is expected to overtake display in the future. Link

TripAdvisor has been investing heavily in its mobile platforms such as GateGuru mobile and tablet applications. The company introduced the Facebook log-in functionality and launched its new iPad application a few years back.