2017 Results and Key Takeaways — Priceline, Expedia, Ctrip, Tripadvisor, eDreams Odigeo, Despegar, On The Beach, Lastminute, Trivago, MakeMyTrip
The first section looks at some key financials and the second section looks at the key takeaways for each of the 8 online travel agencies (OTAs) and 2 metasearches.
- All 10 companies had revenue growth in 2017, with a 20% combined revenue growth. Growth ranged from 2% (Lastminute) to 46% (Ctrip).
- Priceline and Expedia continue to dominate, with 75% of the combined revenue.
- Strongest growth is coming from outside of Europe and the US.
- Competitors, with few exceptions, continue to invest aggressively in marketing and growth.
- Priceline and Expedia growing their alternative accommodations inventory to compete with Airbnb and adapt to this emerging consumer trend.
- Non-core revenue categories such as advertising and ancillaries are growing faster than traditional ones.
- The strong push by Tripadvisor to get in the direct booking business and compete head on with OTAs did not produce the desired results and has been deprioritized.
1. 2017 Results
The 10 online travel companies in this analysis all had revenue growth from 2016 to 2017. Ctrip (China’s largest OTA), MakeMyTrip (India’s largest OTA), Trivago and Despegar (Latin America’s largest OTA) had the largest year on year revenue growth rates at 46%, 42%, 37% and 27% respectively . Three saw revenue growth below 5%: Tripadvisor (5%), eDreams Odigeo (4%), Lastminute (2%).
Priceline and Expedia (including Trivago) concentrate 75% of the combined $31.8 billion revenue of these 10 online travel companies.
Three companies had EBITDA decrease from 2016 to 2017: Tripadvisor (-6%), Trivago (-76%) and MakeMyTrip (-91%). Ctrip had the largest increase, going from EBIDTA of -$124 million in 2016 to $563 million in 2017. Despegar and On The Beach also had healthy EBITDA growth of 84% and 30% respectively.
MakeMyTrip is the only company with a negative EBIDTA in 2017. MakeMyTrip has not had positive EBITDA for any of the periods reflected in the table.
Priceline and OnTheBeach show the healthiest EBITDA/Revenue ratios, while MakeMyTrip and Trivago have the most deficient ones.
With the exception of eDreams Odigeo and Lastminute, the other online travel companies continue to invest heavily in marketing to drive short term growth (mostly through performance marketing) and longer term revenue potential (brand marketing). Largest year over year increases in marketing spend come from regional leaders MakeMyTrip (+95%), Ctrip (54%) and Despegar (32%), as well as metasearch company Trivago (42%).
Marketing to Revenue Ratio (Marketing÷Revenues) — effectiveness and efficiency of marketing spend
Among the 9 companies with 2017 data, 7 of them had higher marketing costs as % of revenue in 2017 vs 2016. Only OnTheBeach and eDreams lowered this ratio in 2017. At 60% or higher, MakeMyTrip, eDreams Odigeo and Trivago have the highest marketing cost as % revenues. Despegar, Ctrip and Priceline are on the lower end.
2. Key Takeaways
2.1. Booking Holdings (previously named The Priceline Group)
- Priceline = Booking = Accommodations. On March 2018, Priceline Group renamed itself to Booking Holdings Inc. to highlight booking.com, the underlying driver of its business. Priceline’s 2017 results further highlight its strong focus on hotels and alternative accommodations, which has traditionally fueled its growth.
- To compete with Airbnb and the growing relevance of alternative accommodations, Booking increased its focus on growing the number of non-traditional properties. As of December 2017, 75% of Booking properties are homes, apartments and other non-traditional places to stay. This category grew 53% from December 2016 to December 2017, while hotels, motels and resorts grew 17%.
- Priceline’s business is driven primarily and increasingly by its international (outside the US) results, which consist of Booking.com, agoda.com and Rentalcars.com, and the international businesses of KAYAK and OpenTable.
Share of International (non-US) Revenues*
(*This classification is independent of where the consumer resides or is physically located).
- Priceline’s marketing continues to heavily be focused on performance marketing (search, metasearch, affiliate marketing). At the end of 2017, Priceline announced their plan to shift more of its marketing spend towards brand advertising (TV, online video, online display) in order to build longer term loyalty and reach a different audience. As the largest online marketing advertiser in the travel industry, Priceline’s decision to move to TV and other brand building media could negatively impact Priceline’s biggest performance marketing partners, in particular metasearches TripAdvisor and Trivago. For the full year 2017, the share of brand marketing slightly increased to 8.7%.
2.2. Expedia Group (previously named Expedia Inc)
Expedia includes Expedia.com, Hotels.com, Expedia Affiliate Network, trivago, HomeAway, Egencia, Orbitz, Travelocity, Hotwire.com, Wotif Group, CheapTickets, ebookers, CarRentals.com, Classic Vacations, Expedia Local
Expert, Expedia CruiseShipCenters, SilverRail, ALICE and AirAsia Expedia.
- The bulk of Expedia’s bookings continues to be driven by its OTA operations.
- Total gross bookings grew 13% in 2017. HomeAway had the strongest growth (46%), while core OTA and Egencia grew at 10% and 9% respectively.
- Expedia grew revenue by 15% in 2017. International revenue continued to grow at a faster rate (21%) than domestic revenue (10%). International revenue represented 45% of worldwide revenue in 2017, up from 43% in 2016.
- OTA revenues represented 78% of total Expedia revenues in 2017, down from 81% in 2016. Trivago’s share of revenues went from 9.5% in 2016 to 11.6% in 2017, while HomeAway’s went from 7.8% in 2016 to 9% in 2017.
- 2017 revenue growth by segment:
– Core OTA: 11%
– Trivago: 32%
– Homeaway: 40%
– Egencia: 13%
– Expedia Total: 15%
- Product wise, lodging brings the bulk of Expedia revenues, but the strongest growth is coming from Advertising and other revenues.
Share of total revenue 2017
– Lodging: 65%
– Advertising and Media: 11%
– Air: 8%
– Other Revenues (travel insurance, car rental): 13%
Revenue Growth 2017 vs 2016
– Lodging: 14%
– Advertising and Media: 33%
– Air: 1%
– Other Revenues (travel insurance, car rental): 33%
- EBITDA 2017 vs 2016 growth by segment:
– Core OTA: 5%
– Trivago: -84%
– Homeaway: 15%
– Egencia: 17%
– Expedia Total: 6%
- 2017 year on year revenue share and growth by main product segments:
– Transportation ticketing: 45% share; 38% growth
– Accommodation: 35% share of total revenues; 30% growth
– Packaged tours: 11% share; 29% growth
– Corporate travel: 3% share; 24% growth
– Other (advertising…): 6% share; 101% growth
- In 2017, mobile transactions accounted for 80% of Ctrip’s transaction orders. Ctrip has had more than 1 billion of cumulative downloads of their mobile app by the end of 2017.
- On November 2017, Ctrip acquired San Francisco based travel recommendation startup Trip.com and relaunched it a few days later as Ctrip’s english language OTA.
- Hotel segment revenue has lost important ground. Hotel revenue went from 80.4% in 2016 to 76.8% of total revenue in 2017. Non-hotels revenue (tours, activities, restaurants, vacation rentals) grew 24% in 2017, while hotel revenue saw a 1% growth.
- Total EBITDA decreased by 6% in 2017, mainly driven by a hotel segment EBITDA decrease of 25%. Non-hotel EBITDA grew 261% in 2017 and now represents 13.6% of total EBITDA in 2017.
- Tripadvisor’s Viator launched a multi currency B2B booking platform for travel agents around the world to access and book over 70.000 tours and activities. Travel agents earn a 8% commission.
- TripAdvisor was active on the restaurant front as well. In addition to now having the biggest online restaurant reservation platform in Europe (The Fork), it has also partnered with food delivery providers Deliveroo and Takeaway, integrating tens of thousands of restaurants across many European countries.
- Tripadvisor’s direct and instant booking results is well below the high expectations the company had when they launched this initiative. TripAdvisor-branded click-based and transaction revenue grew only by 1% in 2017, and ended the year with a negative momentum with an 11% decrease in Q4 2017. The profitability of this program had an even worse performance. Revenue per hotel shopper declined 14% in Q4 2017 and 7% for the full year 2017.
2.5. eDreams Odigeo
Includes 4 OTAs brands: eDreams, GoVoyages, Opodo, Travellink. And one metasearch: Liligo.com
- Mobile share of bookings grew from 30% in Q4 2016 to 36% in Q4 2017.
- Q2-Q4 2017, flight bookings were flat year on year, while non-flight bookings fell by 13%. In terms of revenues, flight revenues grew by 7% year on year while non-flights revenue decreased by 2%. The non-flight performance seems discouraging given the company’s stated emphasis of reducing its flights dependency.
- Q2-Q4 2017 bookings fell by 6% in eDreams Odigeo’s core markets and grew 3% in expansion markets, which points to a significant market share loss globally and particularly in its strongest markets. Its revenue continues to be flat or growing at low single digits, significantly below the world’s leading players (Expedia and Priceline), and below regional and local players like Ctrip, Despegar, MakeMyTrip, and On The Beach.
- eDreams Odigeo has had a relatively healthy EBITDA / Revenue ratio, and its EBITDA is growing at 12% year on year. Its marketing remains flat (+1%) in 2017, which added to a 4% revenue growth and a 12% EBIDTA growth signals a greater focus on improving its performance and bottom line than in investing for longer term top line growth and market share gains.
- Despegar continued to invest aggressively in marketing in 2017 (+37%) with positive results in gross bookings (+37%), revenue (+27%) and EBITDA (+84%).
- Number of mobile transactions up 45% in 2017, with a 30% share of total transactions
- Despegar has a strong transaction growth and its strategy to shift its mix towards higher margin products (hotels, packages) is showing clear signs of success. Its non-air segment grew in 2017 at a faster rate than air, and generated more than half of the company’s revenues.
- Brazil and Argentina remain the largest markets by transactions for Despegar accounting for 41% and 25% of total transactions in Q4 2017.
- Online travel in Latin America is in the early stages of development. Despegar seems well positioned to reap the benefits of being a leading player in this fast growth region.
2.7. On The Beach
The smallest in revenues among the 10 companies, but with a larger EBITDA than Lastminute, MakeMyTrip and Trivago. On The Beach is a UK online retailer specialized in short haul beach holidays which has recently expanded into Sweden and Norway with plans to enter Denmark in 2018.
Includes 5 OTAs: Lastminute.com, Bravofly, Volagratis, Rumbo, Crocierissime.it, Weg.de. And 2 metasearch: Jetcost and Hotelscan.
- Flights remains their largest product, but the group sees the most promising opportunities in vacation packages.
- Revenues increased by only 2% in 2017. The OTA flight product revenue was responsible for 43% revenues, followed by OTA Hotels and Packages (31% of revenues). More than a quarter of their 2017 revenue came from non-transactional activities: metasearch (18% of revenues) and advertising sales (8%).
- From 2016 to 2017, there has been a drastic change in Lastminute’s revenue mix. The group’s flight revenues decreased by 30%, and their share of total revenues went from 59% in 2017 to 43% in 2017. Non-Flights revenue (hotels, packages, meta, ancillaries, advertising…) grew by 41%, and their share grew from 41% in 2016 to 57%. Ancillary revenues saw the sharpest increase in 2017, growing 67% in 2017 and now representing 8% of revenues.
- The geographic distribution of revenues from 2016 to 2017 saw decreasing volumes in the largest 5 countries (France, UK, Italy, Spain).
- Marketing costs increased by 3% in 2017, with all the growth coming from offline marketing (due to TV marketing campaigns), which grew 51% and now represents almost 15% of Lastminute’s total marketing expenses.
- Revenue grew 37% in 2017 and surpassed €1 billion for the first time. The highest growth region was “Rest of the World” at 84%, followed by the Americas at 37% and Developed Europe at 22%. Developed Europe generated 42% of revenue in 2017 (down from 47% in 2016), the Americas 38% and Rest of the World 20% (up from 15% in 2016)
- If we look at Q4, the trends do not look favorable for Trivago, evidencing the impact of Priceline’s decision to decrease their metasearch marketing pressure in favor of TV. Q4 revenues grew 7% year on year (vs 37% for 2017), EBITDA fell from €11.9 bn in Q4 2016 to -€8.7 bn in Q4.
- The revenue share mix of Trivago’s advertisers was stable for the full year 2017 compared to the full year 2016. Here again, however, Q4 tells a different story. The share coming from Priceline strongly dropped from Q3 to Q4. Expedia (both Expedia and Trivago are companies of Expedia Inc.) and other advertisers took over a greater share from Q3 to Q4.
- In November 2017, trivago launched the integration of HomeAway’s vacation rental inventory on its platform to diversify its advertiser base, with over 70,000 properties listed as of December 31, 2017.
- Trivago continues to have a fragile EBITDA, with just 7 million euros EBITDA in 2017, and a very low EBITDA to revenues ratio of 1% (lowest of all competitors in this analysis).
- 46% revenue growth rate in 2017 comes at a high price:
– Highest marketing costs growth (95%) among the 10 companies.
– Highest marketing over revenues ratio (69%) among the 8 OTAs in this report
– Worse EBITDA of all companies in this report: -$205 billion.
- MakeMyTrip has not had a positive EBITDA in any of the years included in this report (2012–2017). And EBITDA gets consistently worse year by year.
- Troubling growth-profitability trade-off, particularly for a company that has been operating for 17 years.
–Expedia: Data for Marketing Costs field is Direct Selling and Marketing (adjusted selling and marketing). Not including Indirect Selling and Marketing. Adjusted EBITDA
–Priceline: Data for Marketing Costs field is Performance Advertising + Brand Advertising. Not including Indirect Sales and Marketing Costs. Data for EBITDA field is Adjusted EBITDA.
–eDreams: Fiscal year ends March of the following year. eDreams data shown for 2017 is calendar year (adding the 4 calendar year quarters). Data for Revenues = Revenue Margin. Data for Marketing Costs = Variable Costs. Adjusted EBITDA.
–Lastminute: Data for Marketing Costs = Online + Offline Marketing. Revenue reported in 2014 and 2015 are Group Revenue, in 2016 and 2017 it is Core Business Revenue. For 2014–2015 Adjusted EBITDA figures. For 2016–2017 Business EBITDA figures.
–Tripadvisor: Data for Marketing Costs = Selling & Marketing Direct Costs (includes stock based compensation expenses). Data for Ebitda is Total Adjusted Ebitda
–Trivago: Data for Marketing Costs = Advertising expense for annual data. For quarterly data, it is total Sales and Marketing Costs (Advertising costs is approx 95% of it). Revenue is total revenue: related parties + third parties.
–MakeMyTrip: Fiscal year ends march of the following year. Annual 2017 is calendar year (adding the 4 quarters).
–Ctrip. Marketing = Sales and marketing
–Despegar. Selling and marketing
–On The Beach: Fiscal year ends September.