After A Decent Start To The Year, What We Expect From TripAdvisor In 2018

by Trefis Team
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TripAdvisor (NASDAQ: TRIP) recently announced its Q1 results and managed to comfortably beat the expectations for both the revenue and EPS. The stock price moved up by nearly 20% due to the positive guidance for future growth prospects. The results were primarily driven by strong performance in the Non-Hotel business segment and also, due to the stabilization in the click-based auctions. Non-Hotel revenue grew by approximately 36% in Q1. This segment is expected to drive results for FY 2018, as well.

With a target of increasing its ties with travel partners and Online Travel Agencies (OTA) in comparison to the previous year, and increased investments, especially to enhance technological capabilities in order to improve customer engagement, this suggests an improved growth outlook for the company. However, with strong competition from market leaders such as Expedia and Booking Holdings, the company’s top-line growth is likely to remain restricted in the near term. Our price estimate of $42.75 suggests that the market is pricing TripAdvisor, 12% above our estimates. We have created an interactive dashboard to showcase the performance of TripAdvisor in 2018.

Segment-Wise Performance

Hotel Segment: This segment, which constitutes almost 80% of the company’s revenues, has been struggling to perform well over the quarters despite its huge investment in TV Ads. Although, it might revive in the long run as the company is focusing on three major areas which are amplifying their consumer message through brand advertising, improving product experience, and also by optimizing the marketing mix. We expect the Hotel segment to generate $$1.26 billion in revenue in 2018 from Click-based and Transaction revenue, Display-based Advertising and Subscription revenue, and Other hotel revenue. The company has witnessed increased visitors (or hotel shoppers) on its primary website,, over the recent years, where direct suppliers and Online Travel Agencies (OTA) place their advertisements. Clicking on these advertisements leads to revenue generation for TripAdvisor from travel partners. Additionally, the company also generates a commission from its travel partners for the instant booking feature, facilitated by the company. Increased visitors on the TripAdvisor website has driven more clicks and partnerships with advertisers (hotels and OTAs). However, declining revenue per shopper, amid increased competition, has put pressure on revenue growth. We expect this metric to further decline, putting further pressure on revenue growth.

Non-Hotel Segment: This segment generated almost 20% of the revenue and is likely to continue to register strong growth in 2018 as well. The growth will mostly be driven by the increase in the Attractions and Restaurants business which deepens traveler engagement with the platform. TripAdvisor is investing to enhance the product experience to broaden the marketplace and also, to grow bookable supply further. The company is one of the few operators which facilitates researching and booking local activities at travel destinations, which should help boost the revenue from the division.

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