Deutsche Bank: TripAdvisor Playing Long Ball

According to a recent report by Deutsche Bank analyst Lloyd Walmsley and his team, while the analysts do not envision Instant Book monetization lift-off as “imminent,” they see “more hotel participation and improving content quality boosting conversion over the next few years.”

They noted, however, that “shares have an overhang until 2016 estimates become more realistic.” Having said this, the firm sees some support at 18x EV/EBITDA on its “Street-low estimates and given sour sentiment.”

Below are some takeaway points from the meeting with management.

Related Link: RLHC Joint Venture Acquires Atlanta Airport Hotel

Instant Book: The Positives

The complete rollout of Instant Book in the United States and the UK suggests that management is comfortable with the UX. However, the analysts noted, the launch was “made with a 3-5 year view, not based on short-term monetization.”

Management did not say if Instant Book was accretive or dilutive for near-term revenue; however, “it noted a brand halo where consumers seeing an IB option powered by a hotel brand convert at higher rates.” As the company continues to improve the product and its marketing, the analysts see a substantial opportunity to further increase conversion rates.

Instant Book: Items To Monitor

On the other hand, the company’s shift from the media segment to a transactional business means it has to move “from a mindset where a healthy auction drives monetization to one where hotel-by-hotel conversion drives optimization.”

TripAdvisor is currently building tools to help hotels increase conversion on a property by property basis, the report explained. The tools are also aimed at improving conversion on an overall product basis “with smooth booking flows, credit card handoff that works consistently well, and making sure IB offers all key room types.”

The analysts pointed out one of the company’s biggest flaws in Instant Book right now: “mixed content quality around room descriptions.” They assured, “This is the biggest focal point to improve conversion and sounds likely to take time.”

Disclosure: Javier Hasse holds no stakes in any of the securities mentioned.

Image Credit: Public Domain