With 350 million average monthly unique visitors and counting, TripAdvisor (NASDAQ:TRIP) is one of the key players shaping the future of the travel industry. In the second quarter of 2016, TripAdvisor rolled out its Instant Booking feature globally, allowing users anywhere in the world to secure flights and hotel reservations without ever leaving TripAdvisor's site. Now that the successful introduction of Instant Booking is behind it, let's look at a couple of big investments TripAdvisor is making to ensure it continues to play a leading role in the evolution of travel.
Going all-in on attractions
Ever needed ideas for something to do in a new city? Apparently you're not alone. In addition to helping travelers book flights and hotels, TripAdvisor is eyeing a huge opportunity in helping travelers plan activities.
In early September, TripAdvisor redesigned its website, prominently adding "Things to Do" to its primary search capabilities. Coupled with Instant Booking, this functionality allows travelers to quickly discover and book all kinds of local activities -- everything from cooking classes and helicopter rides to theater tickets and guided tours. To help close the sale, TripAdvisor is adding video previews to many attractions to give travelers a better idea of what they can expect for their purchase.
Last month, TripAdvisor also announced the acquisition of Citymaps -- a socially connected guide of map-based activities -- which should further enhance the attractions platform and make it even more mobile-friendly. Commenting on the acquisition, TripAdvisor noted that 81% of U.S. travelers use maps on their phones to find their way around.
Connect the dots above, and it's easy to imagine an incredibly convenient future for, say, a family on vacation who can look up kid-friendly activities within walking distance of their hotel and book tickets on their phone in just a minute or two. Concierges, you've been put on notice.
TripAdvisor is adding tours and attractions at a furious pace, growing its listings by 63% year to date. And it's easy to see why. For the first half of 2016, attractions bookings have risen 150% year over year. With an estimated total market for attractions in the U.S. and U.K. of $80 billion, TripAdvisor believes this can be its next segment to generate a billion dollars in revenue. For context, 2015 revenue for the entire company was $1.5 billion.
Building a better, stickier app
"We believe it will be an app world," stated CEO Stephen Kaufer on the company's second-quarter earnings call. Though TripAdvisor has an important Web presence and is targeting more mobile users as well, the company is betting heavily on its app to fuel future growth. Kaufer was even more blunt later on the call. "For us, the habit of booking and rebooking [...] on the apps specifically, is going to be what we believe drives our future monetization model."
The reason for this is simple: It's all about repeat booking. App users save their credit card details more often than Web users, enabling faster, simpler transactions. That in turn keeps people coming back. So, by driving customers to its apps, the company is building a base of loyal users who generate recurring revenue. In fact, repeat revenue from U.S. app users is currently about double the repeat revenue from other devices.
App revenue is growing quickly, too. App-based hotel shoppers and TripAdvisor-branded click-based and transaction revenue each grew by approximately 50% in the second quarter. The company also stated that app users are more likely to convert to paying customers via Instant Booking.
Based on these measures, it seems safe to assume that, going forward, TripAdvisor will be prioritizing investment in its apps over its desktop and mobile sites. And with the company noting that app users book at 4-5 times the overall rate of mobile web or desktop users, it's obvious why TripAdvisor management is bullish on the almighty app.
Keep in mind, though, that although current app metrics like these look promising, they're coming from a much smaller revenue-per-user base than TripAdvisor's website. But Kaufman also says that's why they launched Instant Booking in the first place, "so that we'd be in a phenomenally strong position in an app world in a few years."
Staying one step ahead in the travel game
TripAdvisor has a solid track record of evolving to meet its customers' changing needs and preferences. While it remains to be seen just how well these strategic investments will pay off, it seems clear that the company continues to make smart moves to align with today's mobile-enabled, digitally savvy travelers.
Andy Gould owns shares of TripAdvisor. Andy Gould has the following options: short March 2017 $55 puts on TripAdvisor. The Motley Fool owns shares of and recommends TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.