The number of prominent global hotels TripAdvisor added
to its Instant Booking feature appears to have jumped more than 20% during the
fourth quarter of 2015 after the world’s largest travel-review site reached a
distribution agreement with Priceline Group, according to a recent study by
Piper Jaffray, an investment bank and asset management firm.
Of a sample of 500 global hotels — defined by Piper
Jaffray as the first five hotels that appear in Internet searches of the top
100 global destinations — TripAdvisor enabled 92% of them to be directly booked
through Instant Booking by the end of the year, according to Piper Jaffray’s
Jan. 5 note. That number was up from 76% on Sept. 15.
The catalyst was Priceline Group, No. 2 on the 2015 Travel Weekly Power List,
which last fall reached an agreement for inventory on its Booking.com unit to
be directly bookable on TripAdvisor. With Booking.com’s hotel room inventory
fully integrated, TripAdvisor will have more than 400,000 hotels bookable via
Instant Booking, according to TripAdvisor spokesman Kevin Carter.
Piper Jaffray analysts Michael Olson and Samuel Kemp
wrote, “We are confident that travelers will begin to use TripAdvisor as a
booking service rather than just a window-shopping service. TripAdvisor has
heavily promoted its ‘Book on TripAdvisor’ message through TV and other forms
of advertising. We find the Instant Booking process to be equal or even higher
quality than comparable OTA processes.”
TripAdvisor, which was spun off by Expedia in late 2011,
debuted its Instant Booking feature in June 2014 with inventory from Choice
Hotels International and other online retail sources as another entrant in a
travel-intermediary sector dominated by OTAs and, to a lesser extent, by
The feature is notable because it allows potential
travelers visiting the travel-review site to book rooms without leaving
Piper Jaffray analysts Michael Olson and Samuel Kemp wrote, “We are confident that travelers will begin to use TripAdvisor as a booking service rather than just a window-shopping service."
With that in mind, the company accelerated the growth of
its Instant Booking inventory last year, adding Marriott International as a
distribution partner last spring and bringing in Wyndham Hotel Group later in
Booking.com was an especially valuable partner because
its presence outside of the U.S. enables TripAdvisor to gain both viewers and
potential booking commissions in regions where the site is less of a presence
than it is in the U.S., according to Chris Anderson, associate professor at the
Cornell School of Hotel Administration.
Anderson added that TripAdvisor’s content makes it a
superior draw to potential travelers than metasearch engines.
That, in turn, makes TripAdvisor a growing presence in an
online hotel-room distribution market where suppliers and OTAs continue to
battle for share of online sales.
Phocuswright predicted in a report earlier this month
that between 2012 and 2017, OTAs will have gained five percentage points in
their share of online hotel bookings, bringing it to 51%, compared with 49% for
hoteliers’ own sites.
That battle has spurred consolidation in both the hotel
industry, where Marriott International is slated to acquire Starwood Hotels
& Resorts this year, and the OTA sector, where Expedia and Priceline
continue to snap up smaller companies.
The financial impact of Instant Booking’s broader
inventory remains to be seen, as full-year 2015 results won’t be available until
next month. Through Sept. 30, TripAdvisor’s net income rose 2.6% from a year
earlier on a 23% jump in revenue, as marketing and administrative costs surged.
Carter did not disclose details on how much revenue and
income are being generated through Instant Booking.
Still, TripAdvisor’s popularity, especially among
Americans, gives Instant Booking the potential to substantially improve
financial results. Last fall, TripAdvisor was attracting about 69 million
unique visitors a month, placing it 31st among U.S. entities, according to the
Internet analytics company ComScore. Neither Priceline nor Expedia made
ComScore’s top 50 list.
As a result, even with TripAdvisor’s estimated 8%
commission (according to Piper Jaffray) being less than half the typical commission
taken by an OTA, Instant Booking will rapidly boost TripAdvisor’s results.
Olson and Kemp estimated that the company’s annual
revenue will rise 48% between 2015 and 2017, while annual net income could
surge as much as 84%.
“TripAdvisor has always had the content,” Anderson said.
“They have added prices, and invested heavily in the speed and efficiency