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Tripadvisor (NASDAQ:TRIP) CEO Steve Kaufer put on a confident game face in the wake of Thursday’s disappointing second-quarter report, but owners of TRIP stock — current or prospective — weren’t buying it.
Indeed, they were selling it — in spades. Tripadvisor shares ended Thursday’s action down by a little more than 11%.
The stock perked up a bit on Friday, though just barely… not nearly enough to lay the groundwork for a rebound. Holding it back more than any other factor is the market’s realization that the company has become a victim of the “new normal” in making travel plans online.
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But it’s complicated.
Second Quarter Was More of the Same
Last quarter’s top and bottom lines weren’t horrifying. Earnings of 41 cents per share of TRIP stock were better than the 39 cents analysts were calling for and though revenue of $436.1 million fell short of estimates, revenue was still up 2% year over year. EBITDA grew 8%.
When one breaks down where that revenue came from, however, eyebrows start to raise. Hotel-booking revenue, which is the company’s (much) bigger business, fell by 4%. Non-hotel (web traffic/advertising sales) revenue grew 22%, but the latter only makes up about one-fourth of its total business.
Were last quarter’s nuances a one-time matter, investors might find them forgivable. They weren’t a one-time thing, though. In the same quarter from a year earlier, its non-hotel business saw revenue grow to the tune of 31%, while its hotel business saw growth of only 3%.
Little has changed in the meantime.
It matters. As was noted, Tripadvisor’s hotel-booking business is by far the bigger arm. If it’s not doing well, the company isn’t doing well. And the future on that front doesn’t look encouraging — and not just for temporary reasons.
Unclear Value to Customers
Tripadvisor makes money a couple of different ways. Primarily it extracts revenue from the likes of Expedia Group (NASDAQ:EXPE) and Booking Holdings (NASDAQ:BKNG) when Tripadvisor’s would-be travelers reserve a hotel room (through the Tripadvisor site) with one of the hotels Booking and Expedia are promoting.
Though it’s often difficult to distinguish who’s offering what, Tripadvisor is just the middleman.
And that’s the crux of the problem.
At one point, Tripadvisor offered clear value to customers like Booking and Expedia. The internet inherently facilitates moves toward greater efficiency and cost-effectiveness, though, and perhaps without even planning on making such a decision, Expedia and Booking (and others) are spending less and less on maintaining a presence at the Tripadvisor site and rival sites like Trivago (NASDAQ:TRVG).