Sentiment appears in the nearer term (courtesy of yahoo finance) to be between hold and sell, albeit, with the price estimates considerably upwards of a few months ago (no comment on the rational consistency of analysts, I am trying to find a job at the moment).
There are enough holders who are not necessarily long term institutional holdings or passive investors that a sudden change in sentiment could really move the stock price.
Trip Advisor was about at the $49/50 mark when I made my call to leave it be in December 2016. Today it is $57 and in that time it has done a round trip as low as $29 (-40% return) and back up to $64 and now it has come down again to $57. The takeaway to me from this is that it can and has gone down, a lot, based on very little relatively different information to where we are today. It has also jumped nearly 60% (April-May 2018) on an earnings beat. It is very sensitive to results changes and if anything, the landscape is tougher now for OTAs than ever. So, if we are on the north side of the fair valuation then any negative sentiment will swing it south again.
Large Customers/Partners – It is also worth noting that Expedia and Booking Holdings makeup over 40% of Trip Advisor’s revenues whereas Trip Advisor accounts for, at most, between just 2% and 5% of Expedia and Booking Holdings’ revenues respectively. These two are far more important to Trip Advisor than it is to them. What could this mean? It’s unclear and the likelihood is everyone is happy with the status quo but with competition increasing, times getting tougher and the landscape shifting it could be a recipe for a merger, an acquisition or aggressive competitive behaviours. Whatever the situation is, Trip Advisor is in a weak position. The auction system used by providers to bid on Trip Advisor space protects Trip Advisor to some degree. Trip Advisor auctionsits traffic to the highest bidder. If either Expedia or Booking pulled out of the process then it would effectively hand over that market share to the other player so that dynamic maintains competition in the auction for Trip Advisor which is a comfort as it keeps the process clean.
Strategy Going Forward
A couple of years ago part of the strategy for Trip Advisor was to expand ‘Instant Booking’ focus on Hotels and focus on the US and UK for this. For Instant Booking this was where they opened a channel for visitors to their sites to book direct with suppliers. This has been dialled back recently though as it did not convert into revenue gains. I believe the approach was flawed because when I reviewed it, Trip Advisor was displaying its offering but at the same time it also maintained the other OTA prices alongside it so a shopper knew immediately who the lowest offer was and it was not always Trip Advisor. By showing the other providers’ prices alongside their own they, at best, reminded shoppers to look elsewhere and at worst they showed them that there was in fact a better price elsewhere. This was a flawed strategy but I could see the logic as they could not remove the metasearch element as that would have killed those revenues. They needed to go the whole way though and remove the comparators to truly see the effect of ‘Instant Booking’. This could have been done in a controlled way by using regional sub-sites.
