Key Points
As artificial intelligence (AI) starts to revolutionize the way people approach travel planning, TripAdvisor seems to be ahead of the game.
Revenue has increased by 16% year-over-year, driven by growing demand for travel services and significant contributions from Viator, which the company acquired almost ten years ago.
Embracing AI could potentially lead TripAdvisor back to its 2014 peak when its stock was valued at $100.
It appears that TripAdvisor’s AI offerings are being well-received.
In July 2023, the world’s largest internet-based tour guide integrated AI capabilities into its core Trips product, allowing travelers to receive personalized itineraries created by OpenAI’s generative AI technology. Users simply need to input their destination, travel dates, and preferred activities to obtain a day-by-day trip planner based on more than 1 billion TripAdvisor reviews.
The company later introduced new AI features that provide insights on hotel properties and updated its AI-powered Trips tool with fresh recommendations on activities and efficient grouping of nearby destinations to make the most of vacation days.
According to CEO Matt Goldberg, members who create an itinerary are returning to the site at a higher rate than those who do not, indicating greater user engagement. Additionally, itinerary-building members are said to generate three times more revenue than non-users, which bodes well for TripAdvisor’s future financials.
Just like in several other industries, online travel agencies (OTAs) are striving to gain a competitive edge by introducing new tools that provide unique insights and efficiency to customers’ lives. India’s MakeMyTrip was among the first, implementing AI-based voice-assisted booking in May 2023. Following TripAdvisor’s AI debut, Booking.com launched its AI Trip Planner, and other competitors have since followed.
For the third quarter of 2023, TripAdvisor’s revenue increased by 16% year-over-year to $533 million, driven by rising demand for travel services. Viator revenue saw a significant jump of 41% and accounted for 46% of total revenue, reflecting consumers’ strong interest in experiences over goods in the post-pandemic economy.
The core TripAdvisor business grew by only 2%, but the AI offering was only in place for part of the period and was not launched across all platforms and geographies. Based on Mr. Goldberg’s comments, AI tools are likely to be rolled out to a broader audience and have a bigger impact on future financial results.
TripAdvisor’s strong third-quarter performance was rewarded with the stock’s first sell-side upgrade in more than a year. Bernstein upgraded from Market Perform (hold) to Outperform (buy), lauding the momentum in the Viator business and noting the company’s anticipation of full-year profitability in fiscal 2024.
With its improving fundamentals, TripAdvisor could attract more investors in 2024. Additionally, as a promising AI play, the stock is likely to remain on many watch lists — especially at only 12x next year’s earnings.
Since the November 6th earnings release, TripAdvisor shares have risen by 6% and are approximately 20% higher than their 2023 low. However, they are still in the red year-to-date, which puts them at risk of finishing lower for the fifth straight year. Whether this month’s high volume jump can propel the stock above $17.98 at year-end remains to be seen.
Moreover, embracing AI could potentially guide TripAdvisor back to its 2014 peak as a $100 stock — which was when it acquired Viator, an asset that is finally gaining momentum.
