TripAdvisor’s Q3 2015 Earnings Review: Instant Booking In Focus
TripAdvisor (NASDAQ:TRIP) posted its Q3 2015 earnings on November 5th. The main highlight of the third quarter call was Priceline‘s (NASDAQ:PCLN) participation on TripAdvisor’s Instant Booking platform, how that will accelerate the global rollout of Instant Booking (in September, Instant Booking became available across all devices in the U.S. and the U.K.), and how TripAdvisor has decided to not spend on TV advertisements in 2016, as TripAdvisor is confident about its reach due to the presence of Priceline on its platform and due to its own ever growing user base. [1] Despite having major wins on its Instant Booking platform and other successes on its restaurant, entertainment, and metasearch segments, the company performed below the Wall Street analysts’ expectations. The revenues for Q3 2015 grew by 17% year-on-year to reach $415 million, falling short of average analyst expectation of around $430 million. However, in constant currency terms, the revenues would have grown by 25% year-on-year. Other than the currency headwinds, the accelerated rollout plan for Instant Booking contributed around $10 million headwinds to revenues. The earning per share for the company was 53 cents, which was also less than Wall Street expectation of 55 cents per share. However, overall the company has been on a growing trend as is evidenced by its share price which witnessed a 16% rise over the last one year. [2] [3] In a recent Oxford Economic Study, it was found that TripAdvisor influenced over 10% of travel related transactions in the world in 2014. [1]
The company’s monthly unique users grew by 23% and hotel shoppers by 16%. TripAdvisor’s database contains information for over 3.6 million restaurants and attractions and its mobile application downloads crossed 230 million in Q3 2015. Over 50% of TripAdvisor’s traffic comes from mobile. [1]
Due to the accelerated global rollout plans of Instant Booking and the integration of Booking.com, the company expects full 2015 revenue growth to be in the high teen range and a slightly negative growth for EBITDA. [1]
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We’ll shortly update our $80 price estimate for TripAdvisor.
See Our Complete Analysis for TripAdvisor Here
TripAdvisor Plans On Curtailing Its Television Advertisement Spending
On October 14th, Priceline’s Booking.com agreed to display some of its properties on the Instant Booking platform. Priceline’s other websites such as Agoda.com and Priceline.com might also display properties on Instant Booking in the future. (Read Press Release) Priceline, the world’s largest OTA, featuring on Instant Booking spelled a possible bright future for TripAdvisor. The integration is expected to be completed by early next year.
In the second quarter of 2015, TripAdvisor contained around 235,000 e-commerce enabled properties on its platform. [4] Priceline’s participation has expanded the number of properties to around 400,000. [1] Hence, after almost doubling up the number of inventories on its platform, TripAdvisor’s management has decided to give its television (TV) advertising a rest for 2016. The company will instead spend the money on advertising its brand through other channels. In Q3 2015, TripAdvisor spent around $20 million in TV advertising. TripAdvisor had been continuing with TV advertisement for around two years now. [5]
According to its CEO Stephen Kaufer, TripAdvisor has around 350 million unique visitors every month, implying that TripAdvisor already enjoys strong brand awareness among its users. Additionally, the direct effect of TV ads on the probability of gaining users who can be converted to customers was also a question of speculation. [1]
Instant Booking Is Gearing Up For An Accelerated Global Rollout
Instead the money which would have been spent for TV advertising campaigns would be channeled towards the early global rollout of the Instant Booking platform. Along with the significantly increased inventory base, the presence of Booking.com provides TripAdvisor with added features which would be attractive internationally, such as rich content in non-English languages, competitive rates, and the ability of users to book hotels through local currency or credit cards. [1]
TripAdvisor introduced its Instant Booking platform in the first half of 2014. Expanding on TripAdvisor’s erstwhile features of being a metasearch engine and a review platform, Instant Booking allows users to book trips directly from the TripAdvisor platform. The hotel partners in return pay a commission to TripAdvisor for every completed transaction. This is similar to the mechanism in which OTAs charge their hotel suppliers. [6] Besides Priceline, some of Instant Booking’s notable partners are 7 out of the top 10 global hotel chains. Also, recently, the world’s largest hotel business, Wyndham Group, also joined the Instant Booking bandwagon.
Earlier, Priceline was reluctant on joining Instant Booking because it didn’t provide a branding opportunity for its partners. [7] However, Instant Booking had changed its stance since then, and has allowed Priceline with branding opportunities on its platform. According to TripAdvisor’s CEO, Stephen Kaufer, the Instant Booking consumers, booking Priceline properties, will clearly know that the booking is being handled by Priceline. [1]
It has also been mentioned in the call that Priceline might have to pay a lesser commission than the 12% or 15% commissions that TripAdvisor charges for independent hotels and chains. However, the higher conversions from Priceline will more than make up for the lower commission, according to TripAdvisor. [8]
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- TripAdvisor Q3 2015 Earnings Transcript, Seeking Alpha, Nov 5, 2015 [↩] [↩] [↩] [↩] [↩] [↩] [↩] [↩]
- TripAdvisor Form 10Q For The Period Ended Sep 30, 2015 [↩]
- TripAdvisor Q3 Earnings Fall Short of Wall Street Forecasts, Skift, Nov 5, 2015 [↩]
- TripAdvisor Q2 2015 Earnings Transcript, Seeking Alpha, Jul 24, 2015 [↩]
- TripAdvisor Says It Doesn’t Need TV Ads Now, Thanks to Booking.com Partnership, Skift, Nov 5, 2015 [↩]
- What TripAdvisor’s instant booking means for hotels, tnooz, November 2014 [↩]
- Booking.com Finally Joins Major Hotel Chains in Book on TripAdvisor, Skift, October 14, 2015 [↩]
- ref:1 [↩]