TripAdvisor is on AI-powered recovery from record lows

TripAdvisor stock price

Generative artificial intelligence (AI) applications like ChatGPT are quickly having their say in many aspects of our daily lives — and TripAdvisor, Inc. (NASDAQ: TRIP) is making sure the online travel booking experience isn’t left out. 

In July 2023, the world’s largest internet-based tour guide added AI capabilities to its core Trips product, allowing travelers to get personalized itineraries created by OpenAI’s generative AI technology. Users simply enter their destination, travel dates and preferred activities to get a day-by-day trip planner based on more than 1 billion TripAdvisor reviews. 

Last month, the company followed up the launch by introducing new AI features that provide “digestible” insights on hotel properties. It also updated its AI-powered Trips tool with fresh recommendations on activities and how to efficiently group destinations that are close to each to get the most out of vacation days. 

Early indications are that TripAdvisor’s AI offerings are a hit.

Last week, CEO Matt Goldberg said the company is “seeing compelling results.” Members who create an itinerary are returning to the site at a higher rate than those who don’t, which shows greater user engagement. It also bodes well for TripAdvisor’s future financials because itinerary-building members are said to generate three times more revenue than members that don’t use the tool.

As is the case in several other industries, online travel agencies (OTAs) are scrambling to gain a competitive edge by rolling out new tools that bring unique insights and efficiency to customers’ lives. India’s MakeMyTrip was among the first to get the party started, inking a deal with Microsoft to implement AI-based voice-assisted booking in May 2023.

Soon after TripAdvisor’s AI debut, rolled out its AI Trip Planner, and other competitors have since followed. Even travel guide publisher Lonely Planet is in on the AI game after it teamed up with Amazon Web Services to explore the possibilities of generative AI. 

As AI gets set to transform how people think (or don’t think) about travel planning, TripAdvisor appears to have a solid head start. Management’s excitement around the emerging technology was evident in the company’s recent quarterly update.

How were TripAdvisor’s Q3 financial results?

For the third quarter of 2023, TripAdvisor’s revenue increased 16% year-over-year to $533 million thanks to rising demand for travel services. A key contributor to the growth was online tour and attraction marketplace Viator, which the company acquired nearly a decade ago. Viator revenue jumped 41% and accounted for 46% of total revenue, a reflection of consumers' insatiable appetite for experiences over goods in the post-pandemic economy. 

The core Tripadvisor business grew only 2%, but the AI offering was only in place for part of the period and 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.

In terms of profits, third quarter non-GAAP earnings per share (EPS) came in at $0.52, an 86% improvement from the prior year period. The gap between revenue growth and earnings growth shows that TripAdvisor is doing a good job of managing costs in an inflationary environment. Both the top and bottom line numbers topped Wall Street estimates. 

Will $TRIP finish up in 2023?

On Monday, TripAdvisor’s strong third-quarter performance was rewarded with the stock’s first sell-side upgrade in more than a year. Bernstein moved from a Market Perform (hold) to Outperform (buy), calling TripAdvisor “the fastest growing major travel brand” and lauding the momentum in the Viator business. The analyst also noted that the company is anticipating full-year profitability in fiscal 2024.

With its fundamentals on the upswing, TripAdvisor could garner interest from more investors heading into 2024. And with the name also considered a promising AI play, this year’s hottest technology trend is bound to keep the stock on many watch lists — especially at only 12x next year’s earnings.

TripAdvisor shares are up 6% since the November 6th earnings release and approximately 20% from their 2023 low. However, they remain in the red year-to-date, which puts them in danger 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.

More importantly, embracing AI could send TripAdvisor on a lengthy voyage back to its 2014 glory days as a $100 stock — which was, ironically, when it bought a Viator asset that is finally hitting its stride.

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