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TripAdvisor (NASDAQ:TRIP) is a leading online platform for travel-related reviews that helps its users make more informed travel decisions. With more than 74 million unique monthly visitors, the company covers 2 million tourism businesses in over 116,000 destinations around the world. Last week, TripAdvisor became the first company to cross the 100 million reviews and opinions mark, a greater than 50% y-o-y increase. TripAdvisor’s business model is primarily driven by the number of unique visitors to its website, which in turn depends on the quality and quantity of reviews offered on its websites.

TripAdvisor has constantly remained under scrutiny for the authenticity of its reviews, and the majority of the users trust the reviews on its websites, which is backed by the fact that its user base has more than doubled in the last four years. According to a recent study by PhoCusWright, nearly 87% of TripAdvisor’s users agree that its hotel reviews make them feel more confident in making a travel decision and 80% feel that TripAdvisor reviews helped them have a better trip.

Despite being the world’s largest travel review website, TripAdvisor only has a 10% market penetration which leaves tremendous scope for growth.

In our previous article, we listed certain factors that justify our rationale for TripAdvisor’s user base crossing 130 million over our review period. (Read: Here’s Why We Believe TripAdvisor’s User Base Will Continue To Climb) In this article, we discuss certain additional steps taken by the company to solicit higher reviews on its websites and accelerate growth in its user base in the future.


Enhancing User Experience With Meta Display

During Q4 2012, TripAdvisor rolled out the meta display feature across its smartphones offering, and started testing the same on desktops and tablets. In TripAdvisor’s earlier feature, its partner pages appeared behind the main browser window when a user entered a travel query. However, the company has started integrating all the search query results on the main page, known as meta-search. When users execute a query on TripAdvisor, they get the results on the page along with a map, which pinpoints locations in users search results. This enhancement allows users to see hotel pricing options and availability from booking partners on a single page.

Additionally, the company redesigned its page last year by adding filters that make the search function more appealing to users by segmenting results on the basis of price, property type - family, romantic, business - etc. This enhances user experience by enabling them to quickly browse through reviews that are more suitable for their interests.

Currently, only 15% of TripAdvisor’s total traffic is using the meta-display and it claims to be witnessing higher conversion rates using this feature. TripAdvisor plans to roll out the meta display feature to all geographies and devices within the next 3-6 months.

Expanding International Presence And Increasing Hotel Shoppers

TripAdvisor claims that around 50% of the traffic visiting its websites search for hotel deals. An increase in the number of hotel searches on TripAdvisor’s websites and mobile platforms contributed to 20% revenue growth, 18% click-based revenue growth, and 9% adjusted EBITDA growth in 2012. TripAdvisor claims to be witnessing continuous growth in hotel shoppers and better y-o-y pricing. We estimate the trend to continue in 2013 as well.

In addition to robust increase in travel demand from emerging markets (Asia and South America), higher demand from more mature markets (the U.S. and Western Europe) is driving hotel shopper growth on TripAdvisor, though emerging markets are growing at a faster pace. Over 60% of TripAdvisor’s traffic originates from outside its core markets of the U.S. and the U.K., and Asia-Pacific was one of the fastest growing markets for the company in 2012, with more than 75% increase in traffic.

In 2013, TripAdvisor intends to focus on enhancing its brand image in the emerging markets by incorporating more local language content to drive higher user engagement. As TripAdvisor targets growth outside the U.S., we feel that it can witness higher growth in hotel shoppers, as the hotel industry in international markets offer better growth opportunities compared to the U.S. market, which is nearing saturation.

Global Offline Advertising Campaign Will Expand Target Audience

In addition to TripAdvisor’s permanent branding campaign, which includes the awards, certificates, stickers and badges in hotels, restaurants and travel websites across the globe, the company is working towards an aggressive global offline campaign. TripAdvisor feels that a meaningful offline marketing campaign can help further develop its global brand value.

TripAdvisor believes that by helping expand its target audience, the global offline campaign can accelerate its growth rate in the future. It intends to roll out campaign by the start of Q3 2013. TripAdvisor expects its sales and marketing expenditure as a percentage of revenue to increase from mid-30s to low to mid-40s in 2013.

Our price estimate of $38.34 for TripAdvisor, is at a discount of over 10% to the current market price.

Disclosure: No positions.

Source: TripAdvisor's Meta Display Results And Global Expansion Boost User Growth