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Troubled businesses don’t exist — at least not if you take company earnings reports at face value. But sometimes growing businesses are trapped inside of sluggish ones. Exhibit A: TripAdvisor, which has done some spin on its financial reporting to highlight its fast-growing businesses and downplay its weaker segments.
In the first three months of the year, TripAdvisor’s revenue declined 1 percent year-over-year, to $376 million. However, during the same quarter, revenue from TripAdvisor’s restaurants and experiences units grew by 29 percent, to $80 million.
That latter figure is significant. Beginning with this quarter, TripAdvisor has a new way of reporting its earnings. TripAdvisor has more transparently split out its weak units (flights and vacation rentals) from its okay ones (advertising sales and hotel price-comparison search) and its strong ones (tours and activities and restaurants).
The move provides more clarity than the company previously offered on the growth in its new units. Up until now, it merely broke out total revenue into “hotel” and “non-hotel” segments.
As of Tuesday, the non-hotel line of the business has been broken up. The company now reports revenue from TripAdvisor’s experiences (think: the online booking of tours and activities) and dining businesses under a new separate, joint segment.
Why provide additional clarity? Analysts said the company wants to downplay its weaker-than-desirable parts, such as its hotels business, which represents a substantial part of the company’s total revenue.
Parsing the Numbers
Since 2014, TripAdvisor’s revenue growth machine has stuttered, broadly speaking.
In 2014, revenue grew 31.9 percent, year-over-year. In 2015, it grew 19.7 percent. The next year, revenue shrunk slightly. In 2017, it grew 5.1 percent. In 2018, it grew merely 3.8 percent.
Since 2014, net income divided by total revenue has shrunk year over year from 18.1 percent to 7 percent last year.
The number of average monthly unique users visiting TripAdvisor during the first quarter was 5 percent lower year-over-year, to 411 million.
However, since 2014, annualized sales from TripAdvisor’s restaurants and experiences units have grown at breakneck paces.
Greater Insight Into TripAdvisor’s Financials
TripAdvisor is also reporting other segments of its business with greater clarity. Its business of offering price-comparison search for hotel booking has flat-lined according to the new figures, with zero growth year-over-year in the first quarter, to $216 million.
In a prepared statement, the company said of its hotel business, “We’re hitting our internal marketing efficiency profit targets and delivering higher quality leads for our partners. We observed softer than expected international demand in the first quarter, and ongoing trends make us cautious about second quarter auction growth, though we continue to believe auction trends will improve in the second half of the year as we lap currency impacts and our marketing optimizations.”
TripAdvisor has recently made key hires to help with its hotels and overall company-wide effort. Kanika Soni became president of the hotels business unit on April 15. Soni oversees product, engineering, sales, and marketing for the company’s hotels business, which represents a substantial part of the company’s total revenue.
The company last fall appointed Lindsay Nelson as president of its new Core Experience team, which now coordinates product, engineering, partner advertising solutions, and brand marketing across TripAdvisor’s segments.
The new hires and support of new units may boost total revenue. The new insights into the company’s finances will also help people understand what’s working well.