TripAdvisor Seems To Be Struggling To Hook Customers To Its Platform, But Will A Different Messaging Be Good Enough?

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After a two year hiatus, TripAdvisor will once again return to TV advertising but this time it won’t focus solely on the hotel booking option through its Instant Booking platform, but will rather convey the message that the best hotels at the cheapest prices could be searched for and booked on TripAdvisor. However, the problem with this messaging is that it is not a differentiating factor for TripAdvisor. Almost all the OTAs aim to provide the same. Hence, though the company had shown improvements in its top line growth in the first quarter, how much of the improvement will continue in the future will depend on TripAdvisor’s messaging and products to finally click with its customers.

The company did see some recovery in the first quarter performance with a 2% y-o-y growth in its revenue per hotel shopper, a metric with which it had been struggling for almost two years now. Sequentially it is the fourth quarter of growth. Its revenues grew by 6% y-o-y which is a significant improvement from its revenue growth in low single digits for the third and fourth quarter of 2016, with a 1% decline in y-o-y revenues for fiscal 2016. The improvement in its click-based and transaction business was primarily responsible for this recovery. However, TripAdvisor is yet to recover its bottom line as its EBITDA declined by 14% due to investments in the Hotel segment and its consolidated GAAP net income declined by 55% y-o-y for the first quarter.

Will The TV Advertisement Campaigns Be Strong Enough To Drive Growth?

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As had been earlier pointed out by Skift, TripAdvisor has started downplaying its Instant Booking capability. Quarter after quarter of weak performance and the lack of traction on the Instant Booking platform which has been its major business focus, might have made the company come to this decision. TripAdvisor will be rolling out a $70 to $80 million TV advertisement campaign in the U.S. and some other markets this year. The television advertisements are expected to occupy a greater part of its marketing spends in the future. Even though TripAdvisor is the world’s largest travel review website and one of the biggest hotel metasearch platforms out there, the cross selling of hotels to the same people who search for hotels or look at their reviews on TripAdvisor, proved to be more difficult than anticipated. There had been technical glitches and inconsistencies on the Instant Booking platform, but even after those were addressed and the company tried everything within its means to sell Instant Booking as its focal product, it did not work. Travelers seem to be happier booking hotels through other OTAs or independent hotel platforms. Maybe, the company’s dismal performance in its hotel segment last year (that accounts for 80% of its revenues) or the erosion of its stock price by over 40% over the last couple of years, were some of the reasons why TripAdvisor finally gave up and thought it should also advertise the metasearch options which is something it was already doing well before Instant Booking came over to overshadow its importance in the company’s portfolio.

The company is currently also focusing on rolling out a sleeker version of its mobile and desktop websites to make it a better experience for travelers to book hotels, vacation rentals, flights, tours and activities, and restaurants on its platform. The change will make it emphasize more on the lower priced offerings than the erstwhile focus on the best rated offerings. The problem with focusing on the lowest priced deals is that it wouldn’t provide a distinct differentiation or competitive advantage to TripAdvisor’s products. When travelers book for their travel needs online, they generally go through many websites before they book the best hotel or airline ticket within their budget. Hence, no matter what messaging TripAdvisor uses, travelers won’t change their search patterns and only look for hotels or airline tickets on the TripAdvisor website. It is still difficult to understand how this messaging might act as a huge game changer for the company.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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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