TripAdvisor Q1 Shows Some Positives Although Core Hotel Business Is Still Tough Going

While TripAdvisor’s core hotel-search business was still under pressure in the first quarter, the company made strides in making its marketing spend more efficient, and its tours and activities, and restaurants businesses drove strong growth in the company’s non-hotel segment.

Investors thus took some positives from TripAdvisor’s first quarter earnings report Tuesday. TripAdvisor’s stock price jumped more than 19 percent in after-hours trading Tuesday, as the company raised its outlook to include some earnings growth for 2018 while in February it had expected its earnings to be flat for the year.

TripAdvisor’s revenue in its hotel segment fell 5 percent to $299 million in the quarter, and profits were flat at $88 million in this core segment. Click-based revenue, which was possibly under pressure from online travel agencies such as Booking Holdings pulling back on their marketing spend in metasearch and seeking greater return on investments, declined 10 percent.

While TripAdvisor’s revenue per hotel shopper — a key metric — dropped 11 percent in the first quarter, that was better than the 14 percent decline a year earlier.

“These results were slightly better than we expected for Q1, and we expect click-based revenue trends to start to improve later in the year when we begin to lap the second half 2017 changes our partners made to their online marketing efficiency targets,” TripAdvisor said in a prepared statement.

Hotel search and booking are the most important part of TripAdvisor’s business, accounting for 79 percent of revenue in the first quarter.

Still, revenue from the non-hotel segment — experiences, restaurants and alternative accommodations — jumped 36 percent to $79 million, although the segment is not profitable. Losses in the segment diminished from $15 million a year ago to an $8 million loss in the first quarter of 2018.

TripAdvisor said that it is capitalizing in experiences and restaurants “on our platform’s distinct supply and demand advantages to enhance the user experience, to drive value for partners and to drive diversified revenue growth.”

Interesting, although there is so much buzz about alternative accommodations and the sharing economy these days, TripAdvisor clearly doesn’t see its business in this sector as strategic for competitive reasons. While TripAdvisor noted that it had 800,000 rental listings at the end of March, the company referred to rentals as “a nice complementary asset” in a competitive segment.

TripAdvisor invested $24 million in brand advertising in the first quarter, adding that it plans on shelling out $100 million to $130 million in the area to spread its “best price” message. Critics might debate that messaging since TripAdvisor’s hotel prices are hardly distinct from that of competitors, and many hotel websites offer lower rates for direct bookings.

The company said it has materially reduced its non-TV direct-marketing costs.

Investors undoubtably like some of the marketing efficiencies TripAdvisor point to in the quarter.

Overall for the quarter, TripAdvisor’s net income fell 61 percent to $5 million, driven by a tax adjustment charge, on total revenue of $378 million, a 2 percent uptick.