TripAdvisor Is All Smiles: Instant Booking Just Had A Major Win With Priceline’s Booking.com

October 14th was a happy day for TripAdvisor (NASDAQ:TRIP) when Priceline‘s (NASDAQ:PCLN) Booking.com finally decided to display some of its accommodation properties on TripAdvisor’s Instant Booking platform. Priceline’s other websites such as Agoda.com and Priceline.com are also expected to participate on Instant Booking in the near future. (Read Press Release) Consequently, TripAdvisor’s share price rose by over 25% in a single day. This deal was important to TripAdvisor because, so far, only hotels have been participating on its Instant Booking platform. The presence of the world’s largest OTA does expand TripAdvisor’s hotel offerings significantly. TripAdvisor’s impressive reach to travelers is also evident from the fact that Priceline, the entity which was earlier reluctant to feature on the website, finally felt it was profitable for the OTA to feature on Instant Booking. The question now remains about Expedia (NASDAQ:EXPE) – the world’s second largest OTA’s course of action.

Our price estimate of $80 for TripAdvisor is slightly lower than the current market price.

See Our Complete Analysis for TripAdvisor Here

Instant Booking Is Growing And How!

TripAdvisor’s metasearch engine was complemented with an Instant Booking platform in the first half of 2014. Instant Booking  gives users the freedom to book directly from the TripAdvisor platform, instead of being directed to the hotel website. It requires partners to pay a commission for each completed transaction. This commission-based model is similar to most of the OTAs’ pricing process of a fee per transaction, charged after the completion of a stay. ^[1]

After the initial lukewarm response, Instant Booking had been gradually growing. In Q2 2015, it partnered with 10 leading hotel chains, the most prominent among them being Marriott International. It presently has 6 out of the top 10 global hotel brands on its platform. Prior to its Booking.com deal, Instant Booking was available for almost one-third of the e-commerce enabled properties (roughly, 235,000 properties) on the TripAdvisor platform. ^[2] In September, Instant Booking became available across all platforms in the UK and the U.S. ^[3].

Chains such as Marriott have entered into agreements with TripAdvisor where some of their rooms can only be booked through Instant Booking. The attraction for the hotels was the lower commission that TripAdvisor charges, which is almost half of what its OTA peers such as Expedia or Priceline charge. ^[4] 

The growing influence of Instant Booking is also evident from the fact that the Department of Justice felt that TripAdvisor was a significant competitor in the OTA space and hence it gave a go-ahead to the Expedia-Orbitz merger abating fears of the U.S. online travel market consolidation. ^[5]

Why Was Priceline Important For TripAdvisor?

Earlier, Priceline and Expedia had expressed their reluctance to join the Instant Booking platform because the platform undermines the functionalities of a regular OTA. Instant Booking helps complete every step of the booking process on TripAdvisor’s website. The customers, in turn, are not directed to the OTAs for the final booking completion step. Consequently, OTAs lose out on the chance to build a loyal customer base. Additionally, with Instant Booking, TripAdvisor acts as a direct competitor to the OTAs.

However, Instant Booking’s success was largely dependent on the inclusion of inventories from the two online travel behemoths as a large part of TripAdvisor’s revenue comes from these two entities. For December 31, 2014, the two companies combined contributed to around 46% of TripAdvisor’s revenues and each of these companies individually accounted for over 10% of TripAdvisor’s total revenues. ^[6]

The Booking.com participation implies significantly higher hotel participation on the TripAdvisor platform, including big names such as InterContinental Hotels Group, Hilton Worldwide, and Starwood, which so far had refrained from featuring on Instant Booking. It is estimated that the total number of hotel properties on TripAdvisor after the Booking.com integration can amount to around 436,000. ^[7]

Why Did Priceline Finally Agree? And What About Expedia…??

The marketing reach of TripAdvisor becomes evident when we see that an entity like Priceline finally adopted the platform. Currently, the agreement is only for hotel accommodation not including apartments and homestays. It might be possible that Booking.com agreed to participate on the TripAdvisor platform after it offered some branding and economic concessions to Priceline. Priceline’s CEO Darren Huston had previously stated that Instant Booking’s lack of branding for its partners was a primary roadblock to Priceline Group’s participation on Instant Booking. ^[6]

Recently, Expedia has started strengthening the reach and capabilities of its metasearch site, Trivago. However, it is a much smaller platform than TripAdvisor, and only time will tell whether Expedia, too, adopts the TripAdvisor platform.

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1. What TripAdvisor’s instant booking means for hotels, tnooz, November 2014 [↩]
2. TripAdvisor’s Q2 2015 earnings Call Transcript, Seeking Alpha, July 23, 2015 [↩]
3. TripAdvisor’s Instant Booking Now on All US & UK Platforms, NASDAQ, September 15, 2015 [↩]
4. Hotels Fight Back Against Sites Like Expedia and Priceline, The New York Times, August 31, 2015 [↩]
5. TripAdvisor Is a Key Focus of the Expedia-Orbitz Merger Investigation, Skift, September 15, 2015 [↩]
6. TripAdvisor’s 10-K Filing for year ended December 31, 2014 [↩] [↩]
7. Booking.com Finally Joins Major Hotel Chains in Book on TripAdvisor, Skift, October 14, 2015 [↩]