For the second quarter of 2017, TripAdvisor’s (TRIP) revenue rose 8.4% YoY (year-over-year) to $424.0 million. TripAdvisor generates revenues from two major revenue sources: hotel and non-hotel.
Hotel revenues, which make up 77.0% of TRIP’s revenues, rose 3.0% YoY to $326.0 million. Hotel revenues include click-based, display-based, and subscription revenues.
TRIP’s biggest revenue source, click-based advertising (50.0% of revenue), rose 6.0% YoY to $214.0 million. Display-based advertising (17.0% of revenue) rose 3.0% to $74.0 million. Other hotel revenues (9.0% of revenue) continued to fall 12.0% YoY to $38.0 million.
Non-hotel revenues, which make up the remaining 23.0% of TRIP’s revenue, rose a significant 31.0% YoY to $98.0 million. The segment, which includes revenues from vacation rentals, restaurants, and attractions, continues to grow strongly. The increasing pie of non-hotel revenue represents a good diversification for TripAdvisor. As CFO (chief financial officer) Ernst Teunissen said, “We continue to execute well against our stated three-to-five year growth strategy in our non-hotel businesses, and these results highlight our continued growth opportunity and this segment’s attractive longer-term margin potential.”
High advertising spending is helping TripAdvisor raise its revenues. For the long term, the growth story seems to be intact, driven more by industry dynamics. The travel industry is one of the few industries expected to grow exponentially in the next few years. However, slow mobile monetization rates and increasing competition from players such as Google (GOOGL) will act as significant headwinds for the company’s near-term growth.
Revenues for both of its major rivals, Expedia (EXPE) and Priceline (PCLN), have continued to rise in 2017. However, Priceline’s reduced earnings guidance has led to investors’ fear of saturation in the online travel market. Most analysts believe this is far from the truth and attribute Priceline’s slowdown to a difficult 2016 comparison.
Investors can gain exposure to TripAdvisor by investing in the PowerShares NASDAQ Internet (PNQI), which holds 0.80% in TRIP. It also holds 8.2% in Priceline (PCLN), 4.0% in Ctrip International (CTRP), and 3.3% in Expedia.