What Do TripAdvisor’s Key Metric Trends Suggest?
TripAdvisor's 1Q16 Earnings Overview: Can It Grow in 2016?
Unique visitors’ growth flat
TripAdvisor’s (TRIP) average monthly unique visitors grew by 21% year-over-year (or YoY) to 340 million users as compared to 1Q15. Unique monthly visitors grew by 14% quarter-over-quarter.
In 3Q15, the company started using its own log files to calculate unique visitors as compared to its previous practice of using Google Analytics.
Hotel shoppers grew
Average monthly hotel shoppers grew by 13% YoY to 143 million. This strong growth came as a result of the huge volume content and information maintained by the company. Its reviews, tips, photos, and guides that can be accessed through its mobile app also contributed to its growth.
It is important to look at the growth of unique visitors in an online business—the higher the growth in visitors, the greater the potential for future sales and increased word-of-mouth publicity.
Revenue per shopper continues to decline
However, TripAdvisor’s revenue per shopper continued to decline at a higher pace than earlier. For 1Q16, the company’s revenue per shopper fell by 24%, as opposed to 4Q15’s 12% decline. This was mainly due to two factors.
The first factor is lower monetization on the Instant Booking platform. The second factor is the change in revenue recognition method, which includes recognizing revenues at the time of the stay rather than the earlier method of recognizing revenue at the time of the click. Other factors included currency headwinds and lower phone monetization rates
Growing content
TripAdvisor (TRIP) states that it has the largest user community in the travel industry. The company noted that this contributed to its success, with about 350 million opinions and reviews on 6.5 million places to stay, places to eat, and things to do.
The website features about 10.2 million hotels and accommodations, as well as 775,000 vacation rentals, 4 million restaurants, and 655,000 attractions around the globe. The company’s reach and popularity can also be judged from the fact that its website adds user-submitted content at a rate of more than 190 contributions per minute.
TripAdvisor’s partnerships with Priceline (PCLN), Marriott (MAR), and Wyndham (WYN) should help further its growth. TRIP makes up 1.5% of the First Trust NASDAQ-100 Ex-Tech Sect ETF (QQXT).
Outlook
TripAdvisor’s (TRIP) unique visitors are expected to continue to grow as more users shift to booking travel online and through mobile devices. In 2016, its management plans to focus on the growing revenue per hotel shopper, which is TripAdvisor’s key metric. Revenue per hotel shopper is also expected to increase due to the rollout of Instant Booking in 2016.
It is important for TripAdvisor to be able to translate these improving metrics to revenue growth. We’ll discuss this in the next part.
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