TripAdvisor (TRIP, Financial) reported earnings earlier this month, the key points are as follows:
- Revenues fell 3.5%
- Expenses rose 5.2%
- Net Income fell 41.4%
- Hotel Revenue fell 7.9%
- Non-Hotel rose 21%
Revenue per hotel shopper fell 19%, which led the decline in Hotel Revenue. Two other important metrics are worth noting:
- Unique hotel shopper growth rose just 3% after rising 22% and 17% for the second quarter of 2015 and 2014.
- The number of unique visitors fell from 375 million to 350 million, or a 5.4% decline quarter-over-quarter.
Revenues per hotel shopper continues to decline as Expedia's (EXPE, Financial) 'revenue per room night' is also declining at a slightly slower pace. Expedia's revenue per room night growth for the second quarter and fiscal year 2015 netting out the eLong acquisition was -5% and -14%. Since TripAdvisor derives a significant portion of revenues from Expedia, this decline is passed down to Trip.
According to TripAdvisor's management team:
We've also called out that we did see some softness particularly in June and into July, which we think might be impacted by the macro environment, by the various events that we've seen around the world, be it terror-related or economic events like Brexit, and we believe that has made an impact on us as well, on the volume side, on the number of shoppers side, and perhaps also on the revenue per shopper side.
The points made in the above statement are moot because these issues preceded Brexit and the European terrorist attacks. Priceline (PCLN, Financial) also had a fantastic quarter. The growing 'Non-hotel' segment is basically a roll-up of acquisitions the company made over the past few years. The acquisitions have no competitive advantages and they are diving head-first into saturated markets with inevitable razor-thin margins. One example is Viator, which offers tours and activities using the Groupon (GRPN, Financial) business model of selling coupons for activities. The segment is burning cash and destroying value, while Trip's core business continues to struggle.
- Revenues are declining
- Expenses are still rising
- Investors expect growth in 2017
Management also evaded a question about fiscal year 2017 revenues, as they did with fiscal year 2016 when they said they would no longer give guidance right before the top-line issues came to light. The question came from Robert Peck of SunTrust:
And then, Ernst, as we think about 2017 and what could be more of a normalized growth rate on the top line or stabilized margins, that would be helpful as well. Thanks so much.
Ernst, Trip's CFO answered:
Your second part of the question about 2017, in February we made some statements painting a picture for the shape of 2016, but also into 2017. We have no reason to update that today, but I also don't want to put a finer point to that. The teams here internally will start to shift over the next month, a more detailed planning for 2017, and when the time is right, we'll provide you some appropriate comments about 2017.
Instant Booking is out, there are no more excuses. At 61x earnings, expenses growing faster than revenues, and revenues actually declining, 50% downside is a fairly conservative forecast. So, 2017 should prove to be a pivotal year for the company. I'm looking to refinance the puts through 2019, so whenever the January 2019 puts become available, I will buy more. If I do get the portfolio cash down to the 20-25% range before that period, then I'll most likely just add more January 2018's $40 puts.
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