TripAdvisor Is Expected To Deliver A Successful Q3 2015, Excluding Macroeconomic Problems

TripAdvisor (NASDAQ:TRIP) is about to release its Q3 2015 results on November 5th. The company had demonstrated strong growth in the second quarter boosted by the growth of its attraction, restaurant, and vacation rental business. Tripadvisor’s Instant booking is the cynosure of all eyes, currently. After gaining 6 out of the top 10 global hotel chains in Q2, the company had acquired the world’s largest hotel company, Wyndham Hotel Group, into its Instant Booking platform in October. An even bigger success was acquiring Priceline’s (NASDAQ:PCLN) Booking.com into the Instant Booking platform and the possibility of adding Priceline’s other websites in the future. With the world’s largest OTA on its platform, TripAdvisor surely gained huge leverage for its Instant Booking platfotm, which will help the company’s growth in the hotel booking segment even further. Also, TripAdvisor’s restaurant platform, TheFork, has built a presence in 12 countries in Q2, and its attraction listings via Viator has more than doubled, post 2014. In Q2, TripAdvisor’s business listings witnessed a 23% growth to 5.2 million businesses. The company’s monthly unique visitors grew by 30% to 375 million.

The only setback experienced by the company was the lowering of international travel spending due to weak  exchange rates in many nations across the globe. Hence, TripAdvsior had lowered its guidance for 2015, despite the traffic growth on its platforms, because most people in regions like Asia and Europe are preferring local attractions, and consequently lowering the average order value for the company. However, we feel this is a temporary setback and the company is on track for long-term growth. In the third quarter, we expect the average order value to  remain dampened, but the fundamental growth of the company is expected to continue at a steady pace. The company has guided to around 20% revenue growth and around the low to mid-single digits EBITDA growth, for the full year 2015. ^[1]

We will update our price estimate of $80 for TripAdvisor after the earnings.

See Our Complete Analysis for TripAdvisor Here

Instant Booking Is Expected To Be The Star Performer

In October, 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) This deal is significant 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 massive reach to travelers is evident from the fact that Priceline, who was earlier reluctant to feature on the website, finally felt it was profitable to feature on Instant Booking. Also, since Priceline and Expedia contribute to almost 50% of TripAdvisor’s revenues (as of 2014), having these OTAs on its platform was important for the company. In September, Instant Booking was made available across all platforms in the UK and the U.S. ^[2].

Certain hotel chains like Marriott have entered into agreements with TripAdvisor where some of their rooms can exclusively be booked through Instant Booking. Instant booking’s lower commission (almost half of what its OTA peers such as Expedia and Priceline charge) might have given it a competitive advantage in the OTA space. ^[3] It is estimated that the total number of hotel properties on TripAdvisor after the Booking.com integration can amount to around 436,000 from TripAdvisor’s earlier 235,000 e-commerce enabled properties. ^[4] Finally, Instant Booking’s success has been so impressive that in its recently held third quarter earnings call, even Expedia’s management stated that subject to better brand visibility, they might consider featuring on the platform in the future.

Viator Is Flying High

In November, shortly after TripAdvisor acquired Viator, it leveraged Viator’s tour inventory and pricing information to introduce a new feature on its platform. The feature helps to compare and book tours and tickets for over 7,900 attractions worldwide. ^[5] In February 2015, TripAdvisor and Viator launched a tours and activities supplier platform called Marketplace. Marketplace lets more partners list their business on Viator and enables more users to book tours and activities through the Viator platform. In Q2, Viator’s listing of attractions almost doubled as compared to all of 2014. ^[1]

The Fork Is Expanding Across The Globe

TripAdvisor acquired a host of restaurant reservation websites in the last few quarters, namely LaFourchette, the leading online restaurant reservation website in France and Spain, mytable and restopolis in Italy, Iens in The Netherlands, Portugal-based Best Tables, and Australia’s largest restaurant booking website, Dimmi. Consequently, the company has expanded the restaurant booking business into 12 countries, in less than a year’s time. TripAdvisor has been re-branding its restaurant platform as TheFork with its reach having expanded from Europe to Portugal and Australia, in Q2 2015. TheFork now caters to reservations in over 28,000 restaurants. ^[1]

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1. TripAdvisor’s Q2 2015 earnings Call Transcript, Seeking Alpha, July 23, 2015 [↩] [↩] [↩]
2. TripAdvisor’s Instant Booking Now on All US & UK Platforms, NASDAQ, September 15, 2015 [↩]
3. Hotels Fight Back Against Sites Like Expedia and Priceline, The New York Times, August 31, 2015 [↩]
4. Booking.com Finally Joins Major Hotel Chains in Book on TripAdvisor, Skift, October 14, 2015 [↩]
5. TripAdvisor Introduces New Feature to Help Travelers Research, Compare and Book Tours, TripAdvisor.com, Nov 2014 [↩]