Author Topic: TRIP - Tripadvisor Inc.  (Read 99621 times)

kab60

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TRIP - Tripadvisor Inc.
« on: February 05, 2016, 11:38:42 AM »
I noticed Allan Mecham took a tiny position last quarter and started looking a bit at Trip since the price started coming down and Cimpress' CFO left for the Company. I'm not in love with the valuation but qualitatively I think it's very interesting. I've been traveling in Africa, Asian, Europe and Latin America, and a lot of nice places have this little Tripadvisor sticker in their window which seems to suggest there's a nice network effect that works as free advertising making it a win-win for hotels, cafés, restaurants as well as Trip and its users.

I only took a very quick look but it seems like they're trying to stay away from head to head competion with booking sites ala Priceline, Expedia etc. and instead work with them through their new instant booking feature which means Trip keeps the customer relationsship and work as a sort of gatekeeper. It seems their marketing spent has increased a lot which is good if its increasning the LTV of their customers and not so much if it's due to more intense competition. Short interest is pretty high, so if anyone have a thesis I'd love to see it.


KJP

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Re: TRIP - Tripadvisor Inc.
« Reply #1 on: February 05, 2016, 12:05:32 PM »
I found this overview of the online travel industry to be very helpful:  http://www.jnvestor.com/otas/

TRIP currently gets its revenue from advertising by Priceline and Expedia.  But it wants ultimately to take their business.  Very interesting strategy issues.

From a qualitative perspective, I like TRIP's position, because it has a network effect driven by free, user-generated content.  But the valuation is high, and it's unclear whether it can grab a large share of bookings away from PCLN and EXPE.

kab60

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Re: TRIP - Tripadvisor Inc.
« Reply #2 on: February 05, 2016, 12:47:59 PM »
Isn't Instant Booking a way for them to not compete directly but instead work as a sort of toll business (seems like Priceline signed up)? That would make sense to me, because they can leave the rest to slug it out, but I don't know much and need to read up. Thanks for the link!

flesh

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Re: TRIP - Tripadvisor Inc.
« Reply #3 on: February 05, 2016, 01:18:39 PM »
They have around 80m in marketing costs coming out from discontinuing tv commercials in 16'.

Priceline signing up will be huge and the new cfo is baller. I have a 1% tracking position and am following closely, also like priceline here.

KJP

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Re: TRIP - Tripadvisor Inc.
« Reply #4 on: February 05, 2016, 01:19:40 PM »
Isn't Instant Booking a way for them to not compete directly but instead work as a sort of toll business (seems like Priceline signed up)? That would make sense to me, because they can leave the rest to slug it out, but I don't know much and need to read up. Thanks for the link!

My understanding is that OTAs get 10-15% of the price of a hotel room booked on their sites.  PCLN and EXPE currently get that money, and TRIP wants a piece of that pie or, better yet, the whole thing.  How much of the economics will TRIP end up with?  That seems to be the key question with all three, with EXPE also having to deal with greater concentration of hotel ownership in the U.S.

Sionnach

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Re: TRIP - Tripadvisor Inc.
« Reply #5 on: February 05, 2016, 02:13:09 PM »
I've only looked at the name briefly, but couple of points -

The ota business is all about cost of customer acquisition. That's the reason why there's been so much consolidation among the otas. its to try to gain a cost advantage by spreading marketing costs across more revenue.

Now all of a sudden people realize that TRIP has by far the lowest cost of customer acquisition. They have 3x the visitors as PCLN with a much smaller marketing spend. Revenue per user is $.50 vs over $3.50 @ PCLN And the UGC flywheel acts as the cost advantage moat. Plus they are at the top of the funnel. You go to TRIP to read reviews then you go to EXPE to book (and spend your money). They call this "plugging the leak".

2. The valuation has bad optics, but if you capitalize the marketing spend. EBITDA margins were 54% in 2010, now their 27%, mainly due to increased marketing spend and R&D.


ratiman

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Re: TRIP - Tripadvisor Inc.
« Reply #6 on: February 05, 2016, 04:17:12 PM »
Why wouldn't PCLN or EXPE start their own user generated content site? A lot of the superusers who like to write the reviews don't want to be the 432nd person reviewing Disneyworld. They would be glad to review for a new site.
Or maybe buy yelp for a couple billion and focus it more on travel.

JBTC

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Re: TRIP - Tripadvisor Inc.
« Reply #7 on: February 05, 2016, 06:18:19 PM »
Why wouldn't PCLN or EXPE start their own user generated content site? A lot of the superusers who like to write the reviews don't want to be the 432nd person reviewing Disneyworld. They would be glad to review for a new site.
Or maybe buy yelp for a couple billion and focus it more on travel.

I don't think there'll be a new review site. PCLN/EXPE have been encouraging users to review on their booking sites for some time now. Hotels.com even gives away coupons for writing a review. Still, it seems unlikely TRIP's role as the top review site will be threatened.

In the perfect world, if TRIP had established backend links with all the hotels in the world, it would no longer need OTAs. It alone would capture all the economic benefits and act as a powerful, one-stop shopping site.

Alas this is not what has occurred. Establishing business/processing relationships with thousands of hotels is no small matter. With TRIP having completely missed the boat over the years, today OTAs are much larger businesses, as both clients and competitors. Before TRIP can make an independent living from Instant Booking, it needs OTAs more than OTAs need TRIP.

Hence an extremely complex set of relationships and it probably takes a visionary to see how they evolve. I am inclined to own TRIP (owned PCLN before) but this lack of clarity has made me hesitant.


rishig

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Re: TRIP - Tripadvisor Inc.
« Reply #8 on: February 05, 2016, 06:50:18 PM »
Why wouldn't PCLN or EXPE start their own user generated content site? A lot of the superusers who like to write the reviews don't want to be the 432nd person reviewing Disneyworld. They would be glad to review for a new site.
Or maybe buy yelp for a couple billion and focus it more on travel.

With TRIP having completely missed the boat over the years, today OTAs are much larger businesses, as both clients and competitors.

Agree with your points. Minor nit: Trip was part of Expedia before it was spun off. It could not have been in the OTA business, that was not its mission.

JBTC

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Re: TRIP - Tripadvisor Inc.
« Reply #9 on: February 06, 2016, 03:29:07 AM »
Why wouldn't PCLN or EXPE start their own user generated content site? A lot of the superusers who like to write the reviews don't want to be the 432nd person reviewing Disneyworld. They would be glad to review for a new site.
Or maybe buy yelp for a couple billion and focus it more on travel.

With TRIP having completely missed the boat over the years, today OTAs are much larger businesses, as both clients and competitors.

Agree with your points. Minor nit: Trip was part of Expedia before it was spun off. It could not have been in the OTA business, that was not its mission.

Good point. Which is why their relationships look so convoluted.

They now want to become each other, even though they were together in the first place, which didn't work out.

Still some brokers suggest TRIP is an acquisition target for OTAs. I wonder which one and what has changed to make the acquisition work.

On the surface, if TRIP and PCLN combine, they should be the ultimate winner. But it'll be a more defensive move for both given the lack of tangible benefits for either of them.