One clear disturbing signal is here, looks like spending is going to be reduced second half of the year
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.