We’re halfway through the year and TripAdvisor Inc (NASDAQ:TRIP) has been a disappointing performer thus far. Virtually every metric indicates a platform of extremely engaged users yet the bottom line is that TripAdvisor has had a tough time monetizing that engaged user base in a meaningful way.
TripAdvisor possesses a great asset in all of the information that travelers continue to enter at an impressive pace (it just hit half a billion reviews recently), but it looks like management may have overestimated how meaningful investments in its recent Instant Booking initiative could be to the bottom line.
It was no surprise that 2016 was going to be a year of no growth as they finished building out the IB platform, but the tradeoff was that IB would pay off in TripAdvisor becoming more like a traditional OTA (online travel agency).
This would mean bookings would help diversify the revenue stream and make TripAdvisor less reliant on partners like Priceline Group Inc (NASDAQ:PCLN) and Expedia Inc (NASDAQ:EXPE) which are responsible for so much of TripAdvisor’s revenue today.
But in the company’s first quarter of the year, management started steering away from Instant Booking just a bit based on customer feedback. Ultimately, customers for the most part are concerned more with getting the best price they can versus where the actual booking takes place.
Bottom Line on TRIP Stock
I still think TripAdvisor is a good business. But it is going to take some time for management to get this business back to the growth rates investors have grown accustomed to over the years.
Part of the strategy for the rest of 2017 and into 2018 will be to reallocate ad dollars from online campaigns to television where many in the travel space are already getting their message out today. Time will ultimately tell if this move pays off but it may pay to be patient with this one as management continues to navigate a competitive but massive market opportunity.
TripAdvisor is still growing, it’s profitable and is free cash flow rich. If the business can get back to its winning ways, today’s price is going to look pretty cheap in the rear view mirror.
As of this writing, Jason Moser owned shares of TRIP.