Tripadvisor (NASDAQ:TRIP) has once again become the focus of acquisition discussions, with recent filings revealing strategic interest from an unnamed party to acquire both Tripadvisor and its parent company, Liberty TripAdvisor Holdings (OTCQB:LTRPA). The proposed deal values Tripadvisor at $18-$19 per share, a notable premium over its last closing price of $15.74. This marks the second approach by party in just three months, underscoring Tripadvisor's attractiveness to potential buyers. These developments come amid Tripadvisor’s transition to growth-driven strategies, as evidenced by its latest earnings report highlighting stable revenue at $532 million and a growing emphasis on its Viator and TheFork segments. The broader market’s rising interest in Tripadvisor is not without reason. Let us look at the biggest drivers fueling this repeated acquisition interest.
Strong Position In The Experiences Market
Tripadvisor has emerged as a dominant player in the experiences market, with its Viator segment contributing significantly to its financial performance. In Q3 2024, Viator reported $270 million in revenue, up 10% year-over-year, and gross booking value of $1.1 billion. Experiences are a rapidly growing sector in travel, projected to outpace overall travel industry growth due to low online penetration and increasing consumer demand for unique activities. Tripadvisor’s dual-brand strategy leverages its wide audience reach through Tripadvisor and its high-intent traffic through Viator. The company’s app bookings have nearly doubled since 2022, supported by advancements in generative AI to improve user experience and conversion rates. With a vast supply base and increasing direct bookings, Viator is poised for long-term growth. Strategic acquirers recognize Tripadvisor’s leadership in this lucrative market as a key asset.
Global Leadership In Dining Reservations
TheFork, Tripadvisor’s dining reservations platform, posted its best-ever quarterly performance in Q3 2024, with revenue of $49 million, growing 17% year-over-year. As the largest dining reservations platform in Europe, TheFork has demonstrated strong unit economics and growth potential, driven by marketing efficiency and product improvements. Recent partnerships, including with Vodafone and Mastercard, are expanding its consumer base and offering unique value propositions like premium dining experiences for Mastercard users. AI-powered tools and enhanced revenue management solutions are further strengthening its B2B offering for restaurant operators. TheFork’s ability to sustain profitability while achieving high growth rates makes it an attractive asset for strategic investors seeking to diversify their portfolios into dining and hospitality.
Brand Power & High-Intent User Base
Tripadvisor is one of the most recognized travel brands globally, with an extensive repository of reviews, forum posts, and other user-generated content. Its platform attracts high-intent users who begin their travel planning journey on Tripadvisor, offering significant opportunities for cross-selling and upselling. The company’s transition from a legacy hotel meta business to a focus on app-based bookings and AI-enhanced trip planning is showing results, with increased engagement and repeat booking rates. The U.S. market, where these innovations were first introduced, has seen a notable uptick in user activity, with similar growth expected in international markets. Strategic buyers value Tripadvisor’s strong brand equity and its ability to attract and retain a loyal customer base.
Consistent Profitability Across Segments
Despite challenges in its legacy hotel meta offering, Tripadvisor has maintained profitability across its segments. Adjusted EBITDA for Q3 2024 came in at $122 million, with contributions from all three major segments: Brand Tripadvisor, Viator, and TheFork. The company’s cost discipline and operational focus have enabled it to balance growth investments with profitability. Additionally, Tripadvisor holds a cash reserve of nearly $1.1 billion, providing financial flexibility to fund strategic initiatives or weather market volatility. This consistent financial performance, combined with strategic shifts towards high-growth areas, makes Tripadvisor an attractive acquisition target for companies looking to strengthen their position in travel and hospitality.
Final Thoughts
Source: Yahoo Finance
Tripadvisor’s stock price has been volatile over the past 6 months and has recently climbed close to its 6-month highs but its valuation has become much cheaper than last year. The company’s LTM EV/ EBITDA multiple is down from 22.03x in January 2024 to hardly 12.83x today and its LTM EV/ EBIT multiple has fallen from 27.75x in January 2024 to a meagre 15.68x today. This makes it a significantly cheaper acquisition target than what it was last year. We believe that Tripadvisor’s repeated appearance in acquisition discussions highlights its strategic value in the travel industry. Its leadership in the experiences and dining markets, combined with its strong brand equity and consistent profitability, make it a compelling target for strategic and financial buyers and it is only a matter of time before the company gets lapped up at a higher valuation.
