VALUATION HIGHLIGHTS
- Viator constitutes 43% of the Trefis price estimate for TripAdvisor's stock.
- Tripadvisor Core constitutes 37% of the Trefis price estimate for TripAdvisor's stock.
- TheFork constitutes 9% of the Trefis price estimate for TripAdvisor's stock.
WHAT HAS CHANGED?
- Tripadvisor Q4 Snapshot
In Q4, Tripadvisor's revenue grew 5% year-over-year (y-o-y) to $411 million and its non-GAAP earnings per share came in at $0.30 - down 21% y-o-y. Also, the company's GAAP earnings per share came in at 1 cent compared to 22 cents in the year-ago quarter. The company spent aggressively on marketing and technology development - especially in the Viator and core Tripadvisor platforms. The company's strategic focus on the experiences category paid off, as Viator and TheFork segments reported significant revenue growth of 16% and 18%, respectively. However, the Brand Tripadvisor segment saw a 6% decline in revenue, highlighting challenges in its traditional business model. Its adjusted Q4 EBITDA of $73 million, or 18% of revenue, came in better than expected due to a favorable channel mix and disciplined marketing spending.
Viator allows third parties to list bookable experiences on its platform. It then collects the payment through travelers' bookings, pays the experience organizer, and keeps a cut for itself - similar to how Airbnb does business. Viator and TheFork are now responsible for 56% of the company's revenues.
Note: Tripadvisor's FY'24 ended on December 31, 2024.
- Outlook
Looking ahead, Tripadvisor projects a consolidated revenue growth of 5-7% for 2025, with an adjusted EBITDA margin of 16-18%. The company expects continued strong performance in the Viator segment, with mid to high teens booking volume growth, while Brand Tripadvisor is anticipated to experience a low single-digit revenue decline. TheFork is expected to achieve low double-digit revenue growth.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
- Tripadvisor EBITDA Margin: EBITDA Margins declined to 18.7% in 2024 from 18.5% in 2023 - driven by increased costs - largely due to an increase in personnel costs as a percent of revenue. We expect the margins to fall in 2025 due to expected lower margins in the Tripadvisor Core segment. Going forward, we expect margins to stabilize at 18% by the end of our forecast period. There could be an upside of 10% if the margins improve to around 19%.
BUSINESS SUMMARY
Tripadvisor is a leading online platform for travel-related reviews, aggregating 1 billion reviews and opinions about 9 million hotels and other accommodations, destinations, restaurants, and activities. 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 40 markets and 20 languages worldwide. 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, and content licensing. 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 U.S. operations declining from 82% in 2008 to to 67% in 2024. 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 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 decline in this segment.
During Q2 2022, management realigned its business segments into TripAdvisor Core, Viator, and TheFork, the last two of which are wholly owned brands.
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 40 countries in 20 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 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.
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.
KEY TRENDS
Core Business Seeing Weakness
Revenue for Tripadvisor’s flagship brand and largest business is declining at an increasingly fast rate - mostly its legacy hotel metasearch product, which saw an 8% year-over-year decline in revenue in the FY 2024 to $949 million. The decline is driven by ongoing pressure on the metasearch businesses, paired with recent changes in Google’s travel search results pages.
The company is transitioning from its historical reliance on legacy offerings such as hotel meta, which has experienced ongoing pressure over time to a more diverse and sustainable model. While Brand Tripadvisor saw a decline, Tripadvisor’s other two businesses are growing.
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 smartphones and other devices continue to proliferate, and 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 68% globally (~97% in North America, ~91% in Europe, ~81% in Latin America, and ~ 68% in Asia), BKNG has the potential to grow in all markets.
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
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.
AI Trip Planner Performing Well
The company is seeing early positive signs with its AI-powered trip planner. Travelers who have used the tool have generated an average of 15 times more revenue than TripAdvisor’s platform-wide average. Tripadvisor added 20 new languages to the tool and 30 new regions. The company has updated its app recently, including a new home screen to encourage trip planning and emphasize the experiences business. The company also scaled AI-powered review summaries for restaurants and experiences.
