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Understanding TripAdvisor’s Business

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About the company

Founded in 2000, TripAdvisor (TRIP) is one of the largest online travel service providers. The company’s best known for its flagship website, TripAdvisor, which helps people “plan and book the perfect trip.” It does so by aggregating millions of reviews and opinions from users around the world.

The website has grown to become the largest travel site in the world, with 350 million monthly unique users, 290 million reviews and opinions in total, ~30 million candid photos, and over 5.3 million places to stay—including 950,000 hotels, 740,000 vacation rental listings, 3 million restaurant listings, and 590,000 attractions.

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Businesses

Apart from the TripAdvisor brand, the company has 24 other travel media brands across more than 30 countries.

TripAdvisor operates in almost 45 countries, deriving most of its revenues (52.5%) from North America. Europe, the Middle East, and Africa contribute 32.5% of its revenues while Asia-Pacific contributes ~10% and Latin America 4%.

With 28 different languages available for its website, TripAdvisor undoubtedly the most popular travel website around the world.

The company’s website includes links to its travel advertisers’ website to complete travel bookings. However, in June 2014, the company launched its own Instant Booking platform where users can complete their travel plans by booking directly from TRIP’s website.

Who uses TripAdvisor?

Most travelers today want to see recent reviews and pictures of the property they plan to book for their vacation. According to a commissioned survey conducted by PhoCusWright, more than 50% of respondents didn’t want to make a booking until they had read reviews and found out what other travelers thought about a property. The survey found that ~67% of respondents checked TripAdvisor few times a month or more. It also found that hotel guests read about six to 12 reviews before making a reservation.

Competitors in the travel industry

Global travel is a $1.3 trillion industry, according to PhoCusWright, with global spending of $492 billion in 2014. The industry is rapidly growing as well as moving online, which enhances the growth opportunities for online travel agents (OTAs). The United States is the largest market in the online sales segment, which is primarily controlled by the largest players, Expedia (EXPE) and The Priceline Group (PCLN). Other major online travel companies include Ctrip (CTRP), Travelzoo (TZOO), and MakeMyTrip (MMYT).

TripAdvisor forms ~1.4% holdings in the S&P Equal Weight Consumer Discretionary ETF (RCD).

Next in this series, let’s analyze the company’s business model.

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