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No. of Recommendations: 1

New Investment – TripAdvisor

Advantaged travel platform, operating in the massive $1.3 trillion travel industry with an asset-light business model that takes no inventory
A variety of competitors also aggregate a supply of hospitality offerings on their platforms but TripAdvisor seems the best at providing customers with information to make informed decisions and driving demand for properties
Today, TripAdvisor receives more than 250 reviews per minute and has more than 500 million reviews in aggregate
Restaurants and hotels that are positively reviewed often proudly display TripAdvisor sticks in their windows or on their doors, effectively serving as free advertising for TripAdvisor
Company also has direct relationships with properties and will allow for direct bookings
Value proposition for the consumer across the platform is quite high – flywheel effect where TripAdvisor offers more products and choice, leading to more bookings, increased usage and repeat usage; all of this results in increased revenue per user, which leads to the ability to grow the user base as well as increased monetization potential and brand loyalty (product gets better with more users and harder to replicate)
Shares of TRIP are near 5-year lows in terms of price – down 65% off of their highs – and short interest has risen
Over the last 5 years, unique monthly usership has increased four-fold and reviews per active user have doubled, indicating that engagement is far healthier than the share price
Unfortunately, currently has a monetization problem or as a positive parent might say – a monetization opportunity
Number of contributing factors to this problem including increased usage of mobile phones, which monetize at lower rates; more significantly, pay-per-click traffic lessened when their Instant Booking option launched; in addition, discounted pricing offered in connection with the kickoff plus user interface issues have led to lower monetization of hotel-related traffic
However, revenue per hotel shopper has been steady improvements as the product has matured, with last quarter’s improvements returning to 2015 levels
Also facing increased competition from Trivago which is aggressively pursuing growth in the hotel shopper segment, spending in excess of 80% of revenue on sales and marketing while TripAdvisor just increased to 55% after spending below 50%
In the intermediate term, monetizing hotel shoppers will be the driving determinant of company economics but there is opportunity in destination attractions
Just 7% of reviewed attractions are bookable on TripAdvisor
Can now purchase TRIP shares for 17x this year’s cash earnings or 3x EV/sales
While revenue dropped with last year’s botched rollout of Instant Booking and under-monetized traffic, company has historically grown revenues at more than 20% per year and Q1 2017 saw revenue growth in excess of 5%
Has a history of growing profitably and ownership group includes Liberty’s John Malone

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