For 4Q16, TripAdvisor’s (TRIP) revenues rose 2.7% year-over-year (or YoY) to $316 million. TripAdvisor generates revenues from two major revenue sources: Hotel and Non-Hotel revenues.
Hotel revenues are further classified into three categories: click-based and transaction, display-based advertising and subscription, and other revenues.
After seeing a downward trend for the past three quarters, TRIP’s biggest revenue source (49% of revenue) at $154 million was flat in 4Q16. Display-based advertising, however, fell 3% to $69 million—the first time since 2014. Other hotel revenues also fell for the first time since 2014, down 17% to $29 million.
Non-hotel revenues helped offset most of this decline with 30.6% growth to $64 million.
Travel industry growth could help
The travel industry has shown good growth this year. eMarketer anticipates that travel could continue growing through 2017, driven by growth in online spending. Online travel spending is also expected to grow.
What’s more worrying is that competitors Priceline (PCLN) and Expedia (EXPE) have been able to capitalize on this growth. Increasing competition from sites like Kayak and Airbnb are also acting as headwinds.
TripAdvisor’s (TRIP) management had expected revenues to decline after the rollout of Instant Booking. What has investors worried is the weak recovery in 2H16, which was slower than TRIP’s management’s estimates. It seems as if TripAdvisor underestimated the challenge of product change, and investors could be unsure whether this change could work to its potential.
Meanwhile, revenues at competitors Expedia (EXPE), Priceline (PCLN), and Ctrip (CTRP) have grown at a good pace given the huge marketing space. For 2017, TripAdvisor has decided to jump on the bandwagon and increase its advertising spending to create brand awareness.
With management’s focus shifting to revenue growth in 2017, we can anticipate growth in the top line. TRIP’s status as the leader in travel research and planning works in its favor.
TRIP makes up 1.5% of the NASDAQ-100 Ex-Technology Sector ETF (QQXT).