TripAdvisor faces a quandary: It needs to have an alternative accommodations business to round out its hotel offerings, but rentals revenue declined and slowed the otherwise-positive trajectory of its non-hotels segment. While TripAdvisor is a market leader in experiences and restaurants, its rentals business is muddying up the works.
TripAdvisor is prioritizing growth in experiences and restaurants over expanding its alternative accommodations business.
If you are an online travel company running a lodging business, you probably have to offer home and apartment rentals to supplement your hotel offerings, but TripAdvisor’s rentals business is dragging down the results of its otherwise fast-growing non-hotel segment.
In other words, TripAdvisors experiences business where it sells tours and activities, as well as its restaurants reservations business, are showing strength, but its rentals business notched a single-digit percentage revenue decline in the third quarter. Experiences, restaurants and rentals comprise the company’s non-hotel segment.
In the third quarter, TripAdvisor’s non-hotel segment saw its revenue jump 20 percent to $153 million, but its rentals business slowed revenue growth, the company said. The decline in rentals revenue had an out-sized impact in the third quarter, which is traditionally the largest quarter for TripAdvisor’s vacation rentals business.
The non-hotel segment’s adjusted earnings rose a modest 7 percent to $47 million, the company reported Wednesday as it released its third quarter earnings.
TripAdvisor said its rentals business, much of which it inherited as a foundation when it acquired FlipKey in 2008, experienced seasonally high revenue declines, offsetting ongoing strength in experiences and restaurants.
“Rentals remains nicely profitable and rounds out our comprehensive consumer offering and enables us to deliver a larger selection of high-quality accommodations,” the company stated in prepared remarks. “At the same time, we have prioritized growth and investment in experiences and restaurants, where TripAdvisor’s differentiated brand and massive mobile footprint provide ample opportunity for revenue growth, market share gains, and attractive long-term returns.”
In other words, TripAdvisor needs its rentals business to have a well-rounded lodging offering, but the competition in the alternative lodging sector, including that from Airbnb, Booking.com and Expedia’s HomeAway, is intense.
On the other hand, TripAdvisor is the global leader in both tours and activities, as well as dining reservations.
TripAdvisor forecast that in the fourth quarter its experiences and restaurants businesses would post accelerated revenue growth offsetting declining revenue in rentals. For full-year 2018, TripAdvisor forecast revenue growth in its non-hotels business “in the mid-20s percent range.”
In the third quarter, TripAdvisor boasted 140,000 bookable tours and activities, nearly doubling them year-over year. Bookings and gross bookings each jumped more than 30 percent, the company said, “primarily due to our fast-growing TripAdvisor channel.”
On the restaurants front, TripAdvisor’s primary brand, LaFourchette, or The Fork, saw its seated diners numbers leap 28 percent, and its roster of restaurants increased 19 percent to 54,000. Many of them are in Europe, including France, Spain, Switzerland, Belgium, Italy, and Sweden, but also in Brazil and Asia-Pacific.
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Overall in the third quarter, TripAdvisor saw its profits rise 176 percent to $69 million on 4 percent revenue growth to $458 million. The company is emphasizing marketing efficiencies and profits over outsized growth.
It’s hotel segment saw profits rise 94 percent to $99 million as the company decreased direct selling and marketing expenses 23 percent. Hotel revenue declined 2 percent to $305 million, although revenue per hotel shopper increased 5 percent. This was the third consecutive quarter of growth in revenue per hotel shopper.
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Tags: alternative accommodations, earnings, experiences, rentals, restaurants, tours and activities, tripadvisor, vacation rentals
Photo credit: Pictured is a vacation rental in Whistler in British Columbia, Canada. TripAdvisor's vacation rental segment is dragging down growth in experiences and restaurants. Bloomberg