Is Tripadvisor Really the Best Ticket to Ride the Recovery?

Online Travel This Week

Bold words from Richard Clarke, managing director of financial firm AllianceBernstein, who argues in an investment report that Tripadvisor is “both the best stock to play the release of pent-up demand but also an attractive long-term business transformation story as it diversifies away from under-pressure Metasearch.”

Based largely on Tripadvisors’ experiences, dining reservations, display advertising, Plus subscription service, and new trip-planning Reco features, Clarke argued that while the analyst consensus forecasts that Tripadvisor revenue in 2023 will fall below 2019 levels, he believes it will be around 9 percent greater.

“We increase our Target Price to $40, 14% potential upside and rate it Outperform,” Clarke wrote.

Tripadvisor is certainly transforming itself in a process that has been under way for several years. But I’m skeptical about whether Tripadvisor has the mettle to make Clarke’s forecast come true.

He notes that Tripadvisor is shifting away from its reliance on hotel metasearch, which has been under pressure from Google Hotels for several years, and that Booking Holdings and Expedia Group are now contributing just around 33 percent of Tripadvisor revenue, a significant diminution of historic levels, and a healthy sign of diversification.

The AllianceBernstein chart below depicts how Tripadvisor’s business evolved over the years and pre-pandemic.

“We see diversification into experiences (where Trip’s 1.3m existing reviewable experiences makes it a natural winner), dining (it is number one in most of Europe), and within hotels with the display advertising, B2B, subscription and RECO product. Having seen revenues decline in 2019, we expect this diversification would see it inflect to revenue growth,” Clarke wrote.

Kudos to Tripadvisor for trying to remake its business but several of the products and services that Clarke is pinning his forecast on are challenged or a gamble.

Tours and activities, or experiences, is traditionally not a market that generates high ticket prices. Tripadvisor/Viator is the leading player but it is a highly competitive landcape. Tripadvisor’s new Plus subscription service offering hotel and experiences’ perks has to compete with numerous loyalty programs of all kinds offering similar types of discounts. And are Tripadvisor’s price-conscious customers really the ideal target market for charging fees to connect them with travel agents, who often cater these days to the luxury market?

And given that Tripadvisor’s hotel metasearch business and booking services are waning, aren’t there a bevy of other companies and stocks, from online travel agencies and short-term rental companies and even airlines, better-positioned to capture travelers’ pent-up demand?

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