Capitalizing on the News
In an environment where the global market is growing, all companies should prosper, right? No. While Priceline.com Inc (NASDAQ:PCLN) has maintained a dominant market-leading position across the globe, all other competitors have struggled to maintain their slice of the market, especially as Priceline has accelerated its advertising campaigns. The increasing costs of maintaining market share will gradually place more and more pressure on competitors’ profits, as Expedia’s quarter demonstrated.
Combined, the market caps of Orbitz, Tripadvisor Inc (NASDAQ:TRIP), and Expedia only account for 40% of Priceline.com Inc (NASDAQ:PCLN)’s, displaying the lead Priceline has over its competitors. The scale and capital Priceline possesses should allow the company to strategically acquire faster-growing competitors in emerging markets and dominate the market in most respects.
Tripadvisor Inc (NASDAQ:TRIP) should also prosper in the future, as their service offers a more review based platform, allowing consumers to compare prices. With growth in the travel industry will come growth in traffic on Tripadvisor Inc (NASDAQ:TRIP)’s websites as well growth in advertising revenue.
The Foolish Bottom Line
The online travel booking industry is sending mixed signals. After TripAdvisor reported a tremendous quarter that sent its stock soaring, Expedia Inc (NASDAQ:EXPE) reported one of the worst quarter so far this earnings season, sending shares plummeting.
However, the overall global travel market is strong, and will only strengthen further with improvements in consumer confidence numbers. These conditions position Priceline.com Inc (NASDAQ:PCLN) and Tripadvisor Inc (NASDAQ:TRIP) to grow and prosper in the future, providing attractive long-term investment opportunities.
Looking forward, investors should monitor the car rental industry and its effect on the online travel companies. Global consumer confidence statistics can also give you a read on the overall health of the travel industry.
All in all, TripAdvisor’s financial report appears to be the more accurate portrayal of the condition of the global travel market. That thesis should be reaffirmed by a strong report from Priceline in August.
The article Who Should Investors Trust in the Scattered Online Travel Booking Industry? originally appeared on Fool.com and is written by Ryan Guenette.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Priceline.com and TripAdvisor. The Motley Fool owns shares of Priceline.com and TripAdvisor. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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