Can TripAdvisor’s Quest To Emerge As A Booking Site Spell Doom For It?

August 25th, 2016 by Trefis Team
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We recently downgraded our stock price estimate for TripAdvisor by around 12% post the company’s Q2 2016 results.  TripAdvisor’s continued investments across its platforms, as well as strategic acquisitions, are keeping the company’s performance dampened currently. In the second quarter, TripAdvisor’s top line declined by 3% and its adjusted EBITDA decline was around 23%.

Ongoing investment in its Instant Booking platform was one of the primary reasons for TripAdvisor’s lackluster performance so far this year and also the last year. Though Instant Booking platform now includes 8 of the top 10 international hotel brands and also the OTA leader, Priceline, and it is expected that Instant Booking might be the major game changer for TripAdvisor, yet, there’s also the looming question whether TripAdvisor might be able to turn around from its current weak state.

TripAdvisor’s revenue per hotel shopper has been an important parameter to measure its growth since  2012 when it began its transition to a metasearch from pop-ups. The metasearch roll-out was completed in mid 2013. TripAdvisor’s Instant Booking platform, introduced in 2014, became globally available across devices in Q2 2016.

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trip rev per shopper skift

(Image Source: Skift)

As is clear from the table, TripAdvisor’s metasearch transition led to the decline in the revenue per hotel shopper metric for 2012 and 2013. While the metric showed improvement in 2014, again similar investments in 2015 and 2016 on the Instant Booking platform had dampened the metric.

Though TripAdvisor’s management had assured investors that the company’s performance will remain dampened in 2016 and then make a turnaround, the question still remains as to whether users will truly warm up to Instant Booking or not. The reasons are several:

  • TripAdvisor’s users are accustomed to making searches and reading reviews on its platform before booking elsewhere, it remains to be seen how far they’ll change that behavior. For example, metasearch site Kayak had also tried introducing a booking feature a few years ago, however, that did not meet with success.
  • TripAdvisor has stiff competition from not only existing OTAs, but also social media platforms such as Facebook and search engines like Google.

On the other hand, if the major hotel brands and Priceline’s booking.com – the top accommodation booking platform in the world – have placed their faith on Instant Booking, it does speak volumes about Instant Booking’s potential growth capability.

In conclusion, it is only a matter of time to see whether TripAdvisor thrives with Instant Booking (given over 80% of the company’s revenues come from the hotel division) or perish and become an acquisition target for a bigger OTA.

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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