Weekly Online Travel Agency Notes: Priceline, TripAdvisor, Expedia

October 23rd, 2015 by Trefis Team
PCLN: Priceline Group logo
PCLN
Priceline Group

The online travel industry witnessed some important developments in the last few days. TripAdvisor‘s (NASDAQ:TRIP) Instant Booking platform seems to be attracting a lot of heavyweight clients. The world’s largest OTA, Priceline‘s (NASDAQ:PCLN) Booking.com, agreed to feature on TripAdvisor‘s Instant Booking platform and the world’s largest hotel company, Wyndham Hotel Group, has included its inventory on Instant Booking. However, things are not as rosy for all the contenders in the online travel domain. Amazon (NASDAQ:AMZN) for one, has decided to quit the online travel space. Effective October 13, Amazon has shut down its travel booking site, Amazon Destinations, which was introduced in April 2015. The site offered published hotel rates and was a progress from its Amazon Local which only sold discounted hotel deals. Along with the closure of Amazon Destinations, the company has also decided to stop selling hotel reservations through Amazon Local. [1] Finally, Expedia (NASDAQ:EXPE) is eyeing the tours and activities space and had recently spent $6.4 million on TV advertisements in the U.S.

Priceline

The online travel industry was stirred by a major deal over a week back. On October 14th, Priceline‘s Booking.com agreed to display some of its accommodation properties on TripAdvisor‘s Instant Booking platform. In the future, Priceline’s other websites are also expected to participate on Instant Booking. (Read Press Release) For so long, Instant Booking had been able to attract only hotels on its platform. Though the platform included leading hotel chains and 6 out of the top 10 global hotel brands, the presence of the world’s largest OTA speaks volumes about TripAdvisor’s user appeal and its potential for future growth. Also, almost 50% of TripAdvisor’s revenues come from Priceline and Expedia. Hence including the OTAs on its booking platform is definitely a milestone for the travel review website. We will wait and see whether Expedia, which was vocal about its reluctance to feature on Instant Booking, will also follow.

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Priceline’s stock gained around 2% over the week through Friday. We have a  price estimate of $1,282 for Priceline’s stock which is slightly below the current market price. For the year 2015, we estimate revenues of around $10 billion and EPS of $57.80, both in line with the consensus estimate.

TripAdvisor

In related news, TripAdvisor has also included the world’s largest hotel company, Wyndham Hotel Group, into its Instant Booking platform. The resultant addition of over 668,000 hotel rooms across 71 countries to the platform  further strengthens its capability and reach. [2]

On October 22, TripAdvisor has launched its Review Performance Report, an analytics dashboard that is freely available to all the registered businesses on its website. The dashboard has been prepared with the help of its user feedback and it will aid TripAdvisor’s partners with trend data about their reviews, ranking, and competitors in an interactive online display. The businesses can, in turn, monitor their performance and hence work towards maximizing their presence on TripAdvisor. [3]

TripAdvisor’s stock didn’t witness any major movement over the last week. We have a  price estimate of $80 for TripAdvisor’s stock which is slightly below the current market price. For the year 2015, we estimate revenues of around $1.5 billion and EPS of $2.59, both almost in line with the consensus estimate.

Expedia

Expedia is about to get more serious about the tours and activities sector as was evident from its estimated $6.4 million investment on U.S. TV advertisements over the last six weeks. In the said advertisements, the leading OTA has claimed around 11,000 tours that can be booked through its application. The fragmented tours and activities sector was suddenly under focus last year when TripAdvisor acquired Viator for $200 million. Over the last one year, Expedia had introduced tours and activities on its website and mobile application.  It seems that the company wants to give a greater focus to this sector now. [4]

In order to present its users with a more transparent view of the airfare structure, Expedia has decided to reveal the extra fees associated with airlines, along with the regular flight prices. The function known as “Upgrade Options” will allow customers to compare a range of price options including checked baggage fees, seat choice fees, change and cancellation fees, and other previously “hidden” flight fees. The feature was introduced on October 20th and initially Expedia has partnered with Delta in the U.S. and Airberlin in Europe. Expedia expects to include more airlines on this platform with time. [5]

Expedia’s stock didn’t witness any major movement over the last week. We have a  price estimate of $117 for Expedia’s stock which is almost 10% below the current market price. For the year 2015, we estimate revenues of around $7 billion and EPS of $4.29, both in line with the consensus estimate.

 

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Notes:
  1. Amazon Shuts Down Its Hotel Booking Site, Amazon Destinations, Tech Crunch, October 14, 2015 [↩]
  2. Wyndham Joins TripAdvisor’s Instant Booking Platform, Market Realist, October 21, 2015 [↩]
  3. TripAdvisor launches free analytics dashboard for accommodations, Financial express, October 22, 2015 [↩]
  4. Expedia Makes a $6.4 Million Bet on Tours and Activities in New TV Advertising, Skift, October 22, 2015 [↩]
  5. Expedia to reveal airlines’ “hidden fees” in new feature, Fortune, October 20, 2015 [↩]