TripAdvisor reveals early impact of hotel metasearch
CEO Steve Kaufer sounded confident in speaking to investors on TripAdvisor’s second quarter 2013 earnings call today.
The introduction of hotel metasearch was a major contributing factor to below-the-annualized-trend in revenue growth. But the long-term impact of the new product would be positive, Kaufer said.
“The most notable new feature is our hotel metasearch functionality. With the launch of meta, TripAdvisor has real-time pricing and availability in place. There hasn’t been a bigger upgrade to our user experience in the history of the company.
It’s in 100% of markets as of early June. In a true ‘speed wins‘ fashion turned around this project ahead of schedule.”
Because hotel metasearch means that users no longer need to click pop-up windows from OTA sites to find out rates for their dates of stay, TripAdvisor is sending notably less traffic to OTA sites, Kaufner noted. But visitors are also converting to bookings at a much higher rate, driving ad bids on TRIP that are “multiples” higher.
The click volume for meta hotel are down, call it 3x, and the conversion rates are up, call it 3x. Those are approximations, but for those priced-hotel clicks, those are the multiples we’re seeing, though that general average isn’t what each client partner is seeing in their particular circumstances. It varies by partner, placement on site.
In the past, users would “generate a paid event” by clicking off to advertisers’ sites to discover rate and availability for specific dates of stay. Clients (OTAs, suppliers) are paying more because of the higher conversion rates, due to users being, in essence, “pre-qualified” as leads via hotel metasearch. Kaufer says:
You shouldn’t see a change in the mix of OTAs vs. suppliers in any meaningful way. We’re always trying to get suppliers to bid into the type. Suppliers with good rate parity enforcement probably do well on metasearch because of the occasional bias toward supplier direct.
Advertisers still aren’t familiar with how to use the new auction platform efficiently, so ad bids have not caught up with the higher conversion rates.
The company expects a net negative impact on click-based advertising revenue until around December — though these projections don’t reflect any possible uplift from its TV ad campaign during the second half of the year, according to CFO Julie Bradley.
“We expect the biggest impact to revenue in Q3, as partners optimize and find equilibrium for bidding under the new system…. We want to improve client-facing tools to spend more effectively on the platform…. We’re looking to generate more on-site clicks through other initiatives.”
Growth in independent hotels
Kaufer said TripAdvisor’s engagement metrics are all heading in the right direction on how metasearch is being adopted by users (page views per session is up north of 10%; bounce rate has gone down on the vast majority of point of sale; site session times are increasing on average).
A growing number of independent hotels are participating in TripAdvisor’s cost-per-click (CPC) program. Traditionally, independents lacked the marketing and technological budgets to practically participate. But Kaufer says they’re increasingly interested in working with the company.
This allows them to provide their independent hotelier clients with the necessary technology connection that will allow them to bid in our metasearch auction.
We expect that many of the largest companies that provide Internet booking engines to independent hotels will be working with us soon….
Later this year, we intend to launch the second part of the TripAdvisor Connect platform, namely, the self-service bidding interface that will allow hoteliers to bid directly for our traffic. For a large number of independents, especially ones not repped by an OTA…. this tool will let small hotels display their rates and availability for the first time in our growing global marketplace.
We’re putting a lot of investment against it….TripAdvisor has increased the percentage of vacation rental listings that are online bookable properties from zero percent last year to more than 20% this year, said Kaufer….
We’re pulling in some new customers who like the free-to-list-transaction model inventory that might have said, “Well, I’m not really sure it’s worth the couple of hundred dollars for the subscription. Oh, you have a free-to-list option now. Great, I’ve got nothing to lose.” We want our incentives in vacation rentals to be wholly aligned with the best user experience….
And to the extent that we get more and more of those folks converting over, that’s great for us…. We want our incentives in Vacation Rental to be wholly aligned with providing the best experience. And the challenge with the subscription model is that the internal dynamics are that “I’m going to want to try to keep a subscription member live on the site.”
But if they’re not getting enough leads because the property isn’t good enough or it’s overpriced, I end up having to feature that property high in the sort order or high on the page.
And therefore asking the consumer, “Hey, you should try this property, by virtue of where I placed it on the page.” Even though it’s the kind of the wrong answer for the consumer. It’s the right answer for my business because I want the renewal, it’s the wrong answer for the consumer because there’s probably a reason why that property didn’t get a lot of clicks.
As we move to a transaction model, poof, all that goes away. I’m hugely incented to put the property first that’s going to get the best conversion rate because, at the end of the day, it’s a transaction, that’s how I get paid.
So… we’re not planning on getting rid of the subscription model, but when we look at the pages on our site, we always want to be showing customers the best possible property that will be a successful transaction for our shoppers.”
On the “transaction funnel”
Kaufer was asked by a bank analyst, “How far down the funnel does TripAdvisor want to go?”
Moving from meta to an assisted book or to some additional help in the booking, well there are some pros and cons. If it’s assisted book, are we helping you to book a hotel that’s a more expensive room than — or a more expensive price than you can book at somewhere else.
Is that helping, really? Well it might be a little bit more convenient, but we don’t want to imply that the room is going to be any different because you’re paying us potentially a higher price than you’re paying someone else who’s advertising on our site.
On the phone side of things, it’s still not a very pleasant experience to go from meta to the supplier site or the OTA site. There’s a lot of friction…. We think some of that fraction is why our phone monetization is much lower than our desktop. We haven’t articulated how we plan to improve it, but… it is a challenge that we look to help our travelers with.
Adding inventory for direct connection for independent hoteliers who may not be represented by OTAs may also helps the user.
On Expedia’s role in generating revenue
Non-Expedia clients produced a lot of growth in click-based revenue, which is positive, because Expedia is pulling back in its spend.
Priceline and Expedia alone make up nearly half of revenues at TripAdvisor.
The roll out for the auction for metasearch was taken advantage of more aggressively by non-Expedia clients….
On the competition for top slots in metasearch
Positions four through whatever in meta get a tiny fraction. The drop in traffic from having a big button placement compared with having text link below those buttons even if you have the best price. The analogy is like Google’s search results where the top three links get the most clicks. So we encourage everyone to bid in to those top three slots.
On the Google threat
I don’t view Google Carousel as a particularly strong shot across the bow across at us. I didn’t see an effect on TripAdvisor’s rankings in its search results.
We’re jaded on the number of things that Google does on the search result pages, and their effect. They rolled out several changes to the algorithms over the quarter, but the changes didn’t have a material impact on us.
On user experience tweaks:
We keep trying to improve the user experience. One example is, say, I’m going to Prince Edward Island, I land you at a page that many not have a lot of hotels, so I want to make sure you see we have B&B and specialty lodging which may help the user and may generate an e-commerce click for us.
On providing suppliers with more data
We provide ranking reports and bidding suggestions by market and by individual properties. TripAdvisor is working on additional API automation, but the onus is on the clients to consume and analyze the information we already give them…. Our larger partners can bid every single day if they want, though I don’t think any of the larger partners are taking advantage of that.
GateGuru got a shout out, but no further information was revealed about the acquisition.
Fascinatingly, analysts had zero questions about the company’s recent acquisitions. Even if the acquisition of Wanderfly might have been an unexplained, $2 million mistake.
Traffic was strong in the quarter. Kaufer noted:
“Our average monthly unique visitors grew 57% in quarter two, with nearly a quarter of a billion unique visitors in the quarter…. The mature markets are hanging in nicely, while some of the newer ones are lagging a bit…. “
That said, the CEO said that during the first few weeks of July, TripAdvisor hadn’t seen as robust a growth in traffic as it saw across the second quarter. But he blamed that on a temporary blip related to news events, such as the plane accident in California and extreme weather in some geographic markets.