Metasearch is now here to stay as the dream of replacing it with Instant Booking didn’t work out. They do not provide the breakdown of the two in their revenue generation. Trip Advisor’s strategy is to raise the revenue per shopper metric with their largest region being the US. They are also focused on improving customer and travel partner experiences and building out mobile capability which is a growing area but delivers less revenue per shopper. The strategy is a bit, all of everything, the Non-Hotels area has been growing fastest in the last number of years and should be a focus. Their purchase of Bokun is a nod to this but they need to say it out loud that it is a key focus. OTA’s are a growing business in Asia but there is insufficient breakdown from the Trip Advisor accounts to understand how this is growing.
Below is the breakdown of industry regional OTA sales from 2014 to 2020 including estimates as taken from Statista
Industry and Competitors
The OTA Hotels industry is getting squeezed by slowing demand as the market matures and also shifts to gig options such as AirBnb, Couchsurf etc. This is particularly true in the US where the market is more mature. The squeeze is also being driven by increasing supply side entrants such as Alphabet Inc (NASDAQ:GOOGL), Facebook Inc. (NASDAQ: FB), Skyscanner, AirBnb etc.
The consequences of this squeeze can be seen in industry margin levels which have been tightening, marketing spends which have been rising, the increasing amount of competitors entering the market and the decline in the value of CPC auction contracts. No player has a competitive edge really, there is no moat available so it is a race to the bottom as the relatively low barriers to entry increase competition which can only compete by giving away margin. None of the players have a cost advantage or ability to gain custom with less hurdles than the others.
Trip Advisor (NASDAQ:TRIP) describe their 600m reviews and opinions as a strength but all the websites have thousands of reviews and generally people are only interested in the more recent reviews to get an idea of what they are booking. Having one million reviews on a hotel is as good as having a few hundred. No moat exists in this space and those with the infrastructure find they can build in the functionality relatively easily e.g. Google, Facebook and Skyscanner being more recent examples where they have ported existing infrastructure to the purpose of being an OTA.
The Bull Case
The bulls in this stock see major potential returns if the revenue per shopper metric rises from its current level of 43c to be closer to its competitors, Expedia Group Inc (NASDAQ:EXPE) and Booking Holdings Inc (NASDAQ:BKNG).Trip Advisor has the greatest number of unique visitors so if this could be done then it would be substantial. With 1.7 billion annual unique visitors, any increase in revenue per shopper will begin to add value quickly onto the relatively fixed cost base. Some also believe that Trip Advisor is more akin to a tech stock and so growth is going to be extensive, in line with that expected of Facebook Inc (NASDAQ: FB), Netflix, Inc. (NASDAQ: NFLX) etc. Those levels have not materialised, certainly not in the more recent history.
You can find bullish articles from Greenwood Investors or Motley fool for reference.
