The Ball is Now in Tripadvisor's Court
Cristina is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The travel industry is giving Tripadvisor (NASDAQ: TRIP) good reasons to put its logo owl eyes to test. Latest movements in the sector include Google's (NASDAQ: GOOG) acquisition of travel content producer Frommer and Priceline.com's (NASDAQ: PCLN) integration of Kayak (NASDAQ: KYAK), which point to a new pattern in which being the best company at being socially engagingand digitally ubiquitous is becoming ever more precious
The question is, with everyone aspiring for going global and engaging with customers, what can I expect as, say, a hotel manager; should I partner with Tipadvisor?
Ace up the Sleeve (Strengths):
One thing you should definitely take care of is your communication strategy, as chances are your message gets to the company´s 57 million monthly unique visitors, and become one of the 75 million qualified reviews and opinions that act as word-of-mouth.
Tripadvisor's business model has turned its competitors' rush for gold into its advantage: as a hotel manager, you can set up your ads as pay per click or per display, or become a subscriber. This seems more engaging than Priceline´s Booking policy of charging high fees to hotel owners and imposing significant price discounts upon them - which ends up with people being driven from one hotel to another without necessarily converting them into loyal clients.
So it may come as no surprise that Tripadvisor has reported increases in all its three forms of revenue results for the 2012 third quarter (compared to the previous year). Rather than an intermediary in the sales chain, Tripadvisor acts as a networking facilitator, driving traffic to the tourism agents´ websites and stimulating direct sales.
With these aces up its sleeve, Tripadvisor is experiencing a pretty golden period, with a net income increase of 12% for this third quarter comparte to 2011.
Caution required (Weaknesses):
Not everything that shines, however, is gold. Tripadvisor encourages a great volume of opinions and reviews on its site, and publishes an average of 16 per minute. One weakness of its system, however, is precisely the difficulty of detecting fraudulent opinions that can affect other Tripadivsor´s partners (tourism actors). Although the company talks about involving a great number of personnel and advanced technologies to support this task, this is certainly problematic due to the quantity of opinions and reviews needing to be checked.
Another thing: as a user, it is not possible to post in real time an opinion on a tourism attraction / hotel etc. that is not yet part of Tripadvisor´s database. This postpones other travelers´ possibility to attend or consume that specific product/service.
Since its divorce with Google Places, Tripadvisor commentaries no longer appear on the users´s searches, and this leads to a decrease of potential clicks or, at least, to a postponement of them.
All in all, Tripadvisor is dependent on audacious engineering solutions; according to declarations by its CEO in other media, Tripadvisor business model requires a certain engineer profile.
Every cloud has a silver lining (Opportunities):
As the forerunner of the social engagement era, Tripadvisor has spotted a great opportunity for its business model: the mobile phone. As a Tripadvisor mobile app user, you can now contribute with content in real time. There is no doubt this can provide a great step forward, especially with competitors such as Booking. The latter does not have an effective strategy in this area.
The increased usage of social networks and apps that can connect the final user with friends is another gold mine for Tripadvisor and a good proximity marketing strategy for the tourism actors. Also, the development of a sound strategy focused on business travel might constitute another interesting opportunity for Tripadvisor.
Watch your back (Threats):
Although showing increasing net benefits in this last quarter, with a somewhat sustainable 52 weeks range between $23.99 - $47.81, Tripadvisor faces particular challenges. The very product in itself – qualified comments and opinions - can be found in a great many places, such as online booking systems, the websites and different online tools of the hotels and other tourism agents.
So the challenge for Tripadvisor will be to keep this a unique and truly added value. It also needs to know how to manage its portfolio of numerous travel brands across 30 countries - which can, in the end, be a source of continual improvement in terms of business models and increases in market share.
Some months ago, Tripadvisor launched Tingo, an online travel agency that pays clients back should the price of the product they had purchased go down. This new product, combined with all the factors in Tripadvisors favor that I've mentioned above, means that the ball is now back in Tripadvisor´s court.
topcattns has no positions in the stocks mentioned above. The Motley Fool owns shares of Google, Priceline.com, and TripAdvisor. Motley Fool newsletter services recommend Google, Priceline.com, and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!