TripAdvisor, the world's largest travel reviews platform, has placed a bet on becoming an alternative to online travel agencies for both travelers and suppliers through its recently rolled out instant booking platform.
But the expense of building this business--which lets users book hotels directly without leaving the TripAdvisor interface--has been weighing on its headline financial numbers.
In an earnings call, TripAdvisor reported annual revenue growth in 2014 of $1.24 billion, a spike of 32% from the previous year. (TripAdvisor's five-year compound annual growth rate for revenue is 29%.)
On the bright side, that growth exceeds the pace of Expedia (21%) and it will probably exceed Priceline's, which is expected to be about 26% when it is announced next week.
On the negative side, TripAdvisor's operating expenses also spiked 39%, year-over-year--eating up much of that growth and causing the company to miss its earnings target.
When it comes to instant booking deals with hotel groups, "the sales cycle has been longer than we hoped," Kaufer said.
Expenses include hiring: It increased its headcount 38% to nearly 2,800 employees.
On the marketing front, CEO Steve Kaufer said on the earnings call that his company's goal is to continue to grow its core user reviews community. The company plans to double its spend on TV advertising to $60 million this year, to grow awareness.
Instant booking as route to glory
TripAdvisor, which is 15 years old this month, has been slow to get partners to sign up to its instant booking service. This week, the company rolled out instant booking to more of its US desktop and tablet users logged in to the site.
The company also launched the feature for a small percentage of UK smartphone users.
Kaufer adds:

There are a couple of caveats on the pace of the overall rollout.
We look at a bunch of different factors: is the pricing as good or better than what the other meta options are, where the instant booking message is placed on the screen, the OTA partners themselves and how well they can fulfill the transaction, and the margin.
When we look at the current rollout, we think of it as a steady march forward. We have a lot we need to get right, because we're fundamentally responsible for a chunk of this transaction now than we were under metasearch referral.
We want a broader set of OTA adoption, if we can get it.
Kaufer says it has been measuring the repeat visit effect on visitors who see instant booking and those who only see metasearch on desktop. He says there's "a modest uptick."
But this week it announced it has added Accor, the hotel group with the world's broadest geographical footprint, and Okura, its first Asian hotel group.
It has also been experimenting with ways to better satisfy the concerns of hotel groups interested in participating.
It has recently been experimenting with a new icon that, instead of saying generically "Book with TripAdvisor" includes the name of the hotel--helping to reinforce hotels' branding efforts. See images, here:
Hotels worry that instant booking sales might cannibalize their metasearch distribution. Kaufer says,

"It's progress every quarter, but still no silver bullet."
Five-year plans
Viator will soon open its platform, moving away from a curated model that intensively filtering which tours and activities operators could appear. Added Kaufer:

"Since closing the deal in August, we have more than doubled Viator bookings through TripAdvisor's platform."
TripAdvisor is specifically targeting China as a growth market, too.
Control of the company may change
Since TripAdvisor’s initial public offering, controlling interest has been held by Liberty Interactive.
Last August, these shares with controlling interest were spun off into a company called Liberty TripAdvisor Holdings.
It’s possible that the CEO of the holding company, Greg Maffei, along with his partner and fellow media titan John Malone, will sell the controlling interest to either TripAdvisor or to another bidder, such as Expedia (TripAdvisor’s former parent company) or to Priceline, according to Bloomberg Business.
The market currently values the holding company at $1.8 billion. TripAdvisor or another player would probably have to pay a premium on that to acquire the controlling interest.
For perspective, HomeAway has also been mooted as a possible acquisition target by Priceline or Expedia, such as by analysts at Goldman Sachs a couple of months ago. HomeAway's market capitalization is $2.57 billion--a comparable sum.
TripAdvisor could also make an attractive acquisition not merely because of its rapid annualized growth but also because of its relatively good price-to-sales ratio, which is currently 8.5--meaning investors pay about $8.50 to get $1 in sales.
As context, the price-to-sales ratio of HomeAway is a similar 8. Its annualized revenue growth is also a comparable, approximate 29%.
What makes TripAdvisor attractive
TripAdvisor has a growth story to tell on other fronts, too, besides instant booking.
Its mobile adoption has grown organically during the last few quarters, the company said. About 48% of its traffic now comes from mobile. In the past year, it has doubled the number of downloads of its app to 175 million.
Two-thirds of its growth came on smartphone, which monetizes less well--until instant booking is fully installed, according to CFO Julie Bradley.
Plus, its aggressive acquisition spree, such as of acquisition of tours-and-activities leader Viator and European restaurant reservation companies, has also helped its topline financial numbers.
Kaufer says the companny is expanding restaurant coverage in Turkey, Sweden, and Denmark, but that will be more likely through growth than through acquisition.'
TripAdvisor is not ruling out further acquisitions in tours-and-activities but didn't suggest any deal was imminent or necessary for its growth plan.
At its market close today, the Massachusetts-based company had a market cap of $9.76 billion--nearly the same as Expedia, the company it was spun off from in 2011. It's stock price has more than doubled during that period.
For context, its value is the equivalent of three HomeAways, or nine Orbitzs.
MORE: What TripAdvisor’s instant booking means for hotels