TripAdvisor's Revenue Breakdown in 2020:
(1) Hotels, Media & Platform $780 million (58%),
(2) Experiences & Dining $460 million (34%), and
(3) Others $110 million (8%)
WHAT IS BIG?(1) Hotel, Media & Platform $780 million (58%)(2) Experiences & Dining $460 million (34%)(2) Others $110 million (8%)
TOTAL Revenues in 2020 $1350 million
WHAT HAS CHANGED?
From 2017-2020 + Change in Hotels, Media & Platform -$242 million + Change in Experiences and Dining $196 million + Change in Others -$160 million
TOTAL Change 2017-2020 -$206 million
+ TripAdvisor's Revenues in 2017 $1556 million
= TOTAL Revenues in 2020 $1350 million
TripAdvisor Business Model
What Need Does It Serve?
TripAdvisor (NASDAQ:TRIP) is an online travel company that helps users to plan a vacation. The platform enables travelers to share travel experiences by reviewing hotels, travel activities, experiences, and restaurants. This user-generated content then drives more audience and further leads to an increase in travel partners on the platform.
To make the travel experience better, the platform also provides online reservation, price comparison tools, and associated services. TripAdvisor earns a majority of its revenues from online advertising including both click-based and subscription-based offerings.
Has 3 Operating Segments-
1. Hotels, Media & Platform: TripAdvisor’s travel partners are predominantly online travel agencies and hotels. The company enables its partners to advertise their offerings on the platform and in-turn charges a fee on CPC (cost-per-click) or subscription basis. These advertising revenues along-with transaction fees from the hotel booking feature are recorded as income under the Hotels, Media & Platform segment.
2. Experiences & Dining: TripAdvisor enables users to book tours, activities, and experiences on affiliate partner websites such as hotel chains, airlines, and local travel agencies. Moreover, through its restaurant reservation application, TheFork, the company offers users to research and book restaurants in popular travel destinations. The commissions generated for such bookings are recorded under Experiences & Dining segment.
3. Other Revenues: TripAdvisor also offers to book short-term rental properties such as villas, cottages, beach houses, etc. The commissions generated from rental bookings and certain flight/cruise offerings are recognized as other revenues.
What Are The Alternatives?
TripAdvisor competes for advertising revenue with search engines, such as Google and Bing (which offer pay-per-click or pay-per-impression advertising services), as well as social networking websites such as Twitter and Facebook.
Moreover, the company competes with newspapers, magazines and other traditional media companies that provide offline and online advertising opportunities.
In the travel space, it faces competition from prominent online travel agencies, such as Expedia and Booking Holdings. For vacation rental listings, it competes with websites such as HomeAway.
What Is The Basis of Competition?
1. The quality of content
2. Pricing of advertisement placement
3. The breadth of listings from the hotel and other categories
TripAdvisor's Total Revenue has grown at a CAGR of 2.7% from $1.5 billion in 2015 to almost $1.6 billion in 2019, and is expected to decline more than 13% to around $1.4 billion in 2020
% Change In Total Revenue
TripAdvisor stock has suffered as states and countries are on lockdown due to COVID-19. The travel industry has been the worst hit during this pandemic.
TripAdvisor's Revenues to be driven by Experiences & Dining Segment
TripAdvisor's Total Revenue has remained stable over the last couple of years due to a decrease in advertising income under its Hotel, Media & Platform segment.A similar decline is observed in TripAdvisor's other revenues, which includes rental bookings and other offerings.However, the revenue declines have been offset by the Experiences & Dining segment which has been witnessing strong growth due to an increase in listings.
Total Revenue (A + B + C)
Hotels, Media & Platform (A)
Experiences & Dining (B)
(A) Hotels, Media & Platform (HM&P) Revenues are expected to decrease in 2020
Advertising revenues have been declining over the last two years, primarily due to increased competition and downward trending unique shoppers on the website.
HM&P segment revenues came in below $1 billion for 2019 and we expect these to further decline in 2020.
Hotels, Media & Platform (A = D + E)
TripAdvisor-branded display and platform (D)
TripAdvisor-branded hotels (E)
(B) Experiences & Dining Revenues are expected to increase slightly in 2020
This has been the strongest segment for TripAdvisor, where its revenues grew by 23% in 2019.
TripAdvisor leverages user reviews to drive more audience and finally more listings.
Considering the high demand for this category, we expect the Experiences & Dining segment to continue performing at a strong pace in the coming years, once the coronavirus crisis is contained.
Experiences & Dining
(C) Other Revenues Revenues are expected to decrease in 2020
Due to increased competition, we observe the growth in rental listings have been lower than overall accommodation listings and have been a drag on other revenues in 2019.
We expect TripAdvisor’s to continue facing headwinds from rental bookings in 2020 which will hurt revenues.