TRIP TripAdvisor Inc

By Chris Kirkham 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 10, 2017).

Shares of Priceline Group Inc. fell Wednesday after the online travel company cut forecasts for growth in hotel bookings.

TripAdvisor Inc. shares initially swooned after that company, too, said revenue growth would slow, but rebounded by the end of the trading day.

The reasons behind the reduced forecasts were very different for the two companies as are the long-term implications, according to analysts.

TripAdvisor was briefly down more than 4% and Priceline Group fell by nearly 8% in midday trading. Priceline closed 6.9% lower and TripAdvisor rose 2.5% on Wednesday.

Both companies make money in online travel, but TripAdvisor is largely reliant on online advertising revenue associated with its hotel listings and reviews. Priceline makes money through customers booking on its sites.

TripAdvisor's revenue per hotel shopper was down 2% from a year earlier, according to its earnings release Tuesday, and the company cut revenue-growth expectations for the year. Executives pointed to a faster-than-expected shift toward mobile devices, where advertising generates less revenue than on desktop and laptop computers.

Priceline Group is projecting slower growth in gross bookings for the third quarter, about 9% to 14%, which compares to 15% to 20% growth for the same quarter last year. The decline Wednesday was the largest for the company's shares in more than a year.

Analysts said Priceline's dip is likely a one-time blip driven by the slower growth forecast, and the company has historically been conservative in its estimates. For TripAdvisor, however, they see a longer-term challenge as more customers shift to mobile devices for shopping.

"A mobile shopper monetizes at less than a third of a desktop shopper," said Shyam Patil, an analyst with Susquehanna Financial Group. "More of your traffic is going to a channel where you're making less money off the eyeballs."

The company said mobile accounted for more than 40% of its hotel shoppers last quarter, which is up from about a third a year ago. In prepared remarks, the company said the acceleration in mobile hotel shoppers is a short-term challenge, though it may become a benefit in the long run as people are likely to have more opportunities to shop online.

"On the one hand, it highlights our increasing engagement on this strategic platform," the company said. But less revenue per shopper "exacerbates the near-term revenue growth headwind." The company declined to elaborate on comments it made in the earnings call.

TripAdvisor had been trying to shift more toward a booking model in recent years where customers would find hotels, read reviews and book through the site. Executives earlier this year said they were de-emphasizing the approach after it failed to meet growth expectations.

"The solution they had clearly didn't work and now they're kind of left without a new solution," said Mr. Patil. "They're still in the early stages of figuring this out."

On its earnings call Wednesday, executives pointed to the non-hotel attractions segment of its business as a bright spot. Stephen Kaufer, TripAdvisor's president and chief executive, said the attractions space has "the biggest short-, medium- and long-term upside for us."

Priceline Group said it is still seeing healthy demand for global travel. On an earnings call Tuesday, Chief Executive Glenn Fogel said the slower growth projections were "consistent with our long-term trends and expectation for the business given our size now."

TripAdvisor shares are down 14% since the beginning of the year, while Priceline is up more than 28% over the same period.

Analysts said the slower projected growth for the third quarter compares to a particularly strong quarter a year before. Mike Olson, an analyst with Piper Jaffray & Co., said some of the slower growth may be because the company has reduced some of its ad spending through third-party channels to grow more direct business.

He doesn't expect the company's slide to be a long-term one.

"Some people will take a wait-and-see approach to how well Priceline does with [third-quarter growth]," Mr. Olson said. "If they're able to see upside in bookings and room night growth, then that will show this was kind of just a blip on the radar."

Write to Chris Kirkham at chris.kirkham@wsj.com

(END) Dow Jones Newswires

August 10, 2017 02:47 ET (06:47 GMT)

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