DIY Trips Done Right with Trip Advisor
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Peter Lynch, the famed investor, had said that some of his best investments came from products or services he had used and really enjoyed. I thought of this after using Trip Advisor (NASDAQ: TRIP) to plan my entire two week trip to Panama. I was heading down with my recently retired father who on a whim had decided that Panama was where he wanted to live it out. In his 60's he was internet savvy enough to find what general part of the country he wanted to move but deciding where to stay and how to get there he left up to real estate agents he had found online. This is where my Trip Advisor experience started.
I have been an ardent fan of the Fool for almost a decade now and thoroughly enjoy checking out new companies that they discover or suggest. Trip Advisor was not one of them; after reading up on it and quickly checking out the site I felt it was similar to the other major travel companies except you couldn't book trips or hotels directly through the site. I left it at that until I had to plan a trip to Panama. It wasn’t a regular vacation as my father who was retiring had decided to spend his retirement in Panama, a country neither he nor I had ever been to. I was nervous as I had never been to the country, didn't speak Spanish and had never heard of the city my father was certain was where he wanted to spend the rest of his days. I was enlisted to plan the trip, hotels airfare and transportation. I asked some friends who had traveled down to Central America and they suggested Trip Advisor. At this point, I didn't have many alternatives and gave it a whirl. I found reviews on the areas I was looking to go, towns in the area, hotels and stuff to do. Everything seemed very helpful but I wondered what would happen when we actually arrived.
All in all I booked three hotels using the reviews on Trip Advisor, found a car rental place with a GPS and a surf school that I was able to go to between real estate appointments. To be honest, down to how helpful the owner of a bed and breakfast in a small town called El Palmar was the ratings and reviews were 100% accurate. I had a great time, we were able to find a wonderful condo and the trip unraveled very smoothly. After this experience I had to take a second more in depth look at Trip Advisor as a potential investment. Before I did this, I also looked at my previous two trips to Thailand and Brazil and back tracked them on Trip Advisor. I looked for the hotels I stayed at, where I went and what the Trip Advisor reviews had to say. Again I was very surprised with the accuracy and robustness of the information available for these destinations.
After being purchased by InterActive Corp in 2004 the companies travel business was spun off into Expedia (NASDAQ: EXPE). In 2011 Trip Advisor was spun off from Expedia and became its own publicly traded company. Through this corporate reshuffling Trip Advisor has continued to swallow smaller user generated travel sites and extend its reach worldwide. As it is now separated from Expedia, Trip Advisor plays the missing link in the online travel landscape. Before the days of online travel websites, one would go into a travel agent's office and get information on where to stay, where to go, guides and tours. As the industry shifted online, that aspect was generally lost. Though many sites offer a range of reviews by customers on different hotels, the layout of Trip Advisor and the strength of its network keep people coming back. As the company continues to become a trusted online destination for those looking to plan trips, this momentum drives and increases traffic as people come back to plan future trips, research new destinations or review their previous trip.
Expedia has been on fire this year and, though it has suffered some corrections, is up over 100% in a 52 week period. Expedia has proven its business model and has set themselves up for continued success. The issue is there is strong competition in the industry and, as Kayak has gained traction and recently gone public, another entrant into the mix could yield potential hiccups. The beauty of Trip Advisor is that it is a first mover in its market and has little competition and thus has a huge head start in attracting traffic, which is the main barometer for advertisers. Trip Advisor also has released a very easy to use mobile app which helps them make a footprint in the mobile arena which, as many have predicted, will be the future of the net.
Trip Advisor recently released its Q2 earnings and, though the earnings were not bad, the stock price took a plunge. The company's important metrics all showed improvement: International Growth has continued to improve, user reviews hit 75 million in Q2, and though profits were off the company has been following a policy to improve click traffic quality and reduce low converting paid click traffic. These measures will pay dividends in the long run as higher quality traffic yields more long term revenue from advertisers. You could refer to Trip Advisor as the Google (NASDAQ: GOOG) of online travel reviews. It, like Google, generates its revenue from paid advertisers and is the preeminent company in its industry. Google has done very well financially as we all know by being the online gateway to the web. Trip Advisor has positioned itself to be that same gateway for those planning trips. Trip Advisor is off its 52 week high and looks like a company with a lot of upside, especially as the economy slowly rebounds. Keep an eye out for a profit surge in Q3 with the London Olympics potentially providing some good additions to the bottom line.
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