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What Do TripAdvisor’s Key Metrics Trends Suggest?

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TripAdvisor’s unique visitor’s growth flat

TripAdvisor’s (TRIP) average monthly unique visitors in 3Q16 grew 10.5% year-over-year (or YoY) to 388 million users compared to 3Q15. This is much slower than the 23% average growth seen in 2015 and 2Q16. Starting in 3Q15, the company started using its own log files to calculate unique visitors compared to its earlier use of Google Analytics.

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Hotel shoppers grew

Average monthly hotel shoppers grew 3% YoY to 153 million. This is significantly slower than the 13% growth seen in 2015. This slowing growth is a huge concern for TRIP as hotel reservations form almost 80% of its revenue.

Revenue per shopper continues to decline

Revenue per shopper also continued to decline, which is another concerning trend. For 3Q16, revenue per shopper fell 12%. This is slightly better than the 24% decline seen in 1Q16 and the 19% decline seen in 2Q16.

This decline was due to lower monetization on its instant booking and phone revenue streams, as well as a change in its revenue recognition method. TripAdvisor recognizes revenues at the time of the stay rather than at the time of the click.

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Stagnating content

TripAdvisor boasts of having the largest user community in travel, which contributed to its success with ~435 million opinions and reviews on 6.8 million places to stay, places to eat, and things to do. Reviews and opinions continue to grow at a strong pace, while places to stay grow slowly.

Outlook

TripAdvisor’s (TRIP) unique visitors are expected to grow as more users shift to booking travel online and through mobile devices. In 2017, TRIP’s management will focus on growing revenue per hotel shopper—a key business metric. However, this seems to be easier said than done.

However, revenues have started showing some green shoots. Both transaction and click-based revenue per hotel shoppers in the US increased throughout 3Q16.

TripAdvisor indirectly competes with Priceline (PCLN) and Expedia (EXPE). It recently formed a partnership with PCLN and major hotel chains Marriott (MAR) and Wyndham (WYN). TRIP makes up 1.6% of the First Trust NASDAQ-100 Ex-Tech Sect ETF (QQXT).

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