Tripadvisor Inc (TRIP): How Mobile Will Impact Online Travel Companies

A few months ago, I penned an article, 4 Top Internet Stock Picks.  In that article, I highlighted a company that I feel has a very solid business model, TripAdvisor Inc (NASDAQ:TRIP).

A few days ago, Tripadvisor Inc (NASDAQ:TRIP)’s stock price soared, breaking out and reaching a new high, after a very strong earnings release.  So let’s take a closer look at TripAdvisor, its competition, the travel industry, and the impact that mobile migration will have on online travel companies.

TripAdvisor’s results

Tripadvisor Inc (NASDAQ:TRIP)’s results were awesome.  Revenue from “click based advertising” increased by 21% to $183 million and revenue from display ads also rose 21%.  Furthermore, unique monthly visits increased by more than 50% — to more than 220 million.  Of those 220 million visits, approximately 80 million came from mobile devices, which is an increase of more than 200%.  All in all, the data made it clear that online travel companies need to carefully develop strategies to court and capture mobile users if they want to continue to grow at high rates.

The competitive landscape

Online travel companies are benefiting from several trends such as increased travel spending, consumers shifting to online bookings, and migration towards mobile.  Tripadvisor Inc (NASDAQ:TRIP) and Priceline.com Inc (NASDAQ:PCLN) are in the best position to benefit from those trends and increase their market share.

And that’s because Tripadvisor Inc (NASDAQ:TRIP) and Priceline.com Inc (NASDAQ:PCLN) are two companies that do the best job creating an engaging, enjoyable experience on their sites.  For that reason and many others, they will continue to enjoy more growth in unique visits, visits, and number of pages per visit, than Hotwire, Expedia Inc (NASDAQ:EXPE), Orbitz Worldwide, Inc. (NYSE:OWW), Travelzoo Inc. (NASDAQ:TZOO), and the rest of the competition.

A growing market?

Analysts appear to believe that the market has significant room to grow.  After all, online sales only represent a fraction of the overall U.S. travel market — around 40%.  And the travel market is growing at around 5%.  So online travel companies will benefit from both a growing market and increased penetration.  To accomplish this, many of the online travel companies are betting that the majority of the growth is going to come from consumers’ shifting to mobile.

The strategies

A lot of these companies are making significant investments in building a mobile infrastructure by investing in mobile websites, search technology, and apps.  Yet it will take some time for consumers’ to change their habits and start booking more through mobile devices.  Plus beta versions of these apps will need to be improved and made more user-friendly before users can realize tangible benefits such as time savings.

What’s more, many of these companies are also making increasing investments in content and marketing spend.  That’s because they not only have to get users to download the apps but also become comfortable booking flights and hotels online.  They also have to get them to provide feedback so that they can improve the product.

Future threats

The largest competitive threat in this industry is Google Inc (NASDAQ:GOOG).  In fact, Google has acquired a few small travel companies and has made investments in both flight and hotel-finding search features. Pretty amazing stuff considering its breadth of product offerings.

Still, it is yet to sell travel products and merely serves as a “middle man”, directing users to various sites.  This remains a very small part of its business and there appears to be no immediate danger from Google Inc (NASDAQ:GOOG). The other major threat facing the industry is that significant security-related concerns will hinder usage of various apps.

My Foolish take

First, Wall Street has become very bullish on the sector — some of these companies are exhibiting Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) tendencies.  Second, the U.S. will continue to lead the trend in mobile and online booking. Third, it will take some time for the investments that online travel companies are making to pay off.  Fourth, similar to Facebook Inc (NASDAQ:FB), and LinkedIn Corp (NYSE:LNKD), those companies that engage their customers and build a loyal customer base will benefit in the long run.

Tripadvisor Inc (NASDAQ:TRIP) and Priceline.com Inc (NASDAQ:PCLN) are in the best position to do that.

The article How Mobile Will Impact Online Travel Companies originally appeared on Fool.com.

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