The online travel industry is one of the most competitive ones because there are several established players fighting together (Expedia, Travelocity, Orbitz, Priceline, etc) along with some newer ones such as Google and some local players like Facebook, Square, etc. Some of you have doubts about the importance of the “social layer”. As anyone who has read my opinions Facebook (FB) knows, I’m not part of that group. I have a firm belief that players like Facebook bring tremendous value.
At some point, Tripadvisor started leading the way in terms of bringing social to travel. How does it work?
At first, visitors looking to book a hotel probably would have looked to websites such as:
Kayak.com (recently acquired by PCLN)
That behavior has started to change. Instead, users go to Tripadvisor as their starting point. Why? Because they can find great reviews by fellow travelers as well as friends and family (through TRIP’s Facebook integration). Then, they are able to look for a rates at all of those sites at a click of a button. The new model looks something more like this:
In the end, it’s better for users because they have better knowledge of the top hotels that fit what they’re looking for. For TripAdvisor, it’s an amazing business as they can basically auction off the sites that they offer to their users. In a way they are sending visitors away to competitors, making money out of the process. The great thing about it though is that those visitors will go right back to TripAdvisor the next time they’re looking for a trip. I’m actually a good example. In the past few weeks, I’ve booked a few trips and about a dozen hotels. I could have gone directly to Kayak because that is where I usually end up booking my hotels. Instead, every time I went to TripAdvisor, looked through hotels for the perfect hotel (in terms of location, reviews, facilities, etc). Then, I would click on the booking links and get prices for 3 or 4 websites. At each instance, those sites paid out money to TripAdvisor.
In an ideal world, companies like Priceline and Expedia would be able to build a competing service in order to stop paying for visitors over and over and have guys like me start off their booking tours on their websites instead of TripAdvisor’s.
It’s Not That Easy
The fact is that TripAdvisor has the community and it’s something that is incredibly difficult to replicate. Just ask all of those companies, including Google, that have tried competing with Facebook. It might happen at some point but I would put my money on TRIP for now. You won’t be surprised to see that traffic has been growing much faster at TripAdvisor than for its competitors, just look at these charts:
I would argue that because of all of these reasons, and how unique TripAdvisor is, it deserves a premium valuation. Look at these numbers..I personally think TRIP could end up going significantly higher over 1-2 years:
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I’d love to hear your thoughts on TripAdvisor (TRIP)
Disclaimer: Long TripAdvisor