TripAdvisor earnings
274 days ago
 

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.

Kaufer had lots of happy top-line revenue numbers to report, such as second quarter revenue growth of 25%. The company reported a profit of $67 million, up from $53 million a year earlier.

Meta debut

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.

Earlier this month, we launched the Tripadvisor Connect platform, which enables Internet booking engine providers to connect directly to our commerce platform.

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.

Vacation rentals

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.”

TripAdvisor earnings

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.

Says Kaufer:

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
Says Kaufer:

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.

On GateGuru
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 report

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.

 
 
Sean O'Neill

About the Writer :: Sean O'Neill

Sean O’Neill is a London-based reporter for Tnooz. He's also a regular contributor to BBC Travel.

Follow him on Twitter, Google+, and his personal site .

 

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  1. Cesar

    Hi, I would like to ask you about your thoughts on the impact of meta-search and social media on the travel industry and what should GDS providers do to face competition. Thanks.

     
  2. Michael Kaye

    John Pope’s “hungry applicants” striving to ” achieve “validation” supremacy have a high bar called critical mass. No matter how much ” grit and guile” the validation pretenders have, if users don’t find a critical mass of product and reviews per product on their first visit, it is going to be hard to get them to come back.

    The only chink I can see in the TA armor is tour operators, travel consultants and the like–not nearly as much as a core product as beds, but still an open door into the travel validation world. I’d hate to start out competing with TA in the hotel space.

    In any case, John Pope can sure turn a phrase.

     
    • John Pope

      I agree wholeheartedly, Mr Kaye.

      New entrants will have a Herculean task gaining any traction, let alone critical mass. Most would say it’s a foolish endeavor to even attempt it. But as Mark Twain said: “The fool didn’t know it was impossible, so he did it.”

      On the other hand, my golf coach used to say to me: “Well boy, the Lord hates a coward…. but, he ain’t fond of a fool either.”

      Sometimes I’m not sure who to believe; so I’ll just go with my own foolhardy instincts.

      Indeed, it will take some kind of solution to overcome the dominance that TripAdvisor has grown to enjoy, and you’ve certainly provided some good strategic insight into the vacuum or space to be filled in the review market. I wonder if there are any other ways to overcome such insumountable dominance…. I just wonder… ;-)

      I guess you could say, and most would agree, it would take a real genius to come up with, and then execute a plan that could possibly knock Kaufer & Co. off their perch.

      Thankfully, I do enjoy a good challenge.

      Just to be clear, Michael, we’re not only looking to take on TripAdvisor, we want Google’s hide, too. :-D

      I read a great quote from an anonymous source on Quora the other day, that goes like this:

      “Your dream is not a dream unless people start laughing at it.”

      http://www.quora.com/Education/Whats-the-most-powerful-inspirational-quote-youve-ever-heard/answer/Saad-Vakil?__snids__=152873254&__nsrc__=4

      I say, the funnier, the better.

      To the moon, Alice.

       
  3. Jaclyn

    Some compelling points that I will share with clients. A great article, thanks Sean.

     
  4. John Pope

    Expedia down over 20% in after hours trading.

    Kaufer looking like more of a genius now than ever, for breaking away when they did.

    $PCLN & $TRIP stealing market share double time.

    $EXPE loses $1.75B in Market Cap in less than two hours.

     
  5. Adam H.

    Seems like the “free to list” model is an attempt to replicate/ copy the recent success Zaranga has had (Zaranga was the first to use this model). Only after closer inspection it is not nearly as aligned with the hosts as it might seem and looks more like they copied AirBnB. A little late to the game and not too well thought out, just my 2 cents.

     
    • Guillaume

      Zaranga? Never heard of it.

      The “free to list” model has been used by our company HouseTrip.com since day 1 in 2010!

       
      • Adam H.

        That’s interesting considering how similar your site is to there’s aesthetically. They do have much more listings in the US than yours ( I took a peak) and they also allow instant bookings which is a HUGE plus because there is no lag time waiting around for property owners to respond, (my biggest gripe with AirBnB). I mainly use Zaranga for my rural family weekend trips. I do like some of your New York listings though as Zaranga seems not to list Metro Areas and I travel to New York quite often. Like AirBnB your site does not seem to offer instant bookings?

         
        • Roshan Dsilva

          Why do you say that Zaranga has more properties that Housetrip in the U.S.? From what I can see they seem to have very limited inventory!!

           
        • Guillaume

          Indeed, we have been focusing in Europe since 2009 so it is right that you will find very limited inventory in the US for the time being.

           
  6. John Reiss

    Interesting that the 4th reference to Kaufer in the article was misspelled, “Kaufner.” A subconscious mixing of Steve Kaufer and Steve Hafner (both key meta-search players).

     
  7. Guillaume

    I am surprised that the call doesn’t give any indications on the acquisition price of Niumba and JetSetter. Any idea?

     
  8. RobertKCole

    Impressive. I challenge anybody to contest my suggestion that Steve Kaufer is the smartest guy in the travel industry. Jeff Boyd has done amazing things with Priceline, but Kaufer started TripAdvisor from scratch, then pivoted it and grew it into what it is today.

    A lot of hoteliers admit they are not thrilled with what they perceive as the high cost of a TripAdvisor business listing, but normally in the same breath, also admit it offers one of the most compelling, measurable ROIs available compared to other digital advertising options.

    I’ve suggested for close to a decade that travel is a 7-step process, with the stem immediately preceding booking being the “validation” phase. That’s exactly where TripAdvisor plays- a very smart and potentially highly defensible position.

    My guess is that future meta-search results will be very compelling.

     
    • Sean O'Neill

      Sean O'Neill

      Thanks, Robert!

       
    • John Pope

      Robert,

      Here I was thinking you were the smartest guy in travel – shouldn’t sell yourself short, there might be something to my assertion.

      Clearly Steve is a smart guy – Junior Olympian, Harvard Fencing Captain, degree in Computer Science, founded and exited from a software company by his mid-thirties, and built the original TripAdvisor under his own guile – but for me, his most resoundingly positive attribute is his determination to look after his children after his wife passed away.

      That takes character, and certainly can’t be measured by any amount of grey matter or one’s Intelligent Quotient. Only a positive spirit and will to do what’s best for others makes one achieve that level of personal success under difficult conditions.

      Also, I’m not sure if there’s actual empirical evidence to suggest a correlation between commercial success and smarts.

      Opportunity, desire, perseverance and savvy, on the other hand, are certainly key indicators to authentically measure the likelihood for prosperity – opportunity, being the key variable.

      For those metrics, Mr. Kaufer also passes with flying colors.

      All those niceties being said about their faithful leader, TripAdvisor will still need to keep on their toes going forward, if they want to retain there recent growth trajectories, public company financial results and King of the Review status, as there are other hungry applicants out there who will surely come up with strategies to achieve “validation” supremacy in the travel and hospitality game, in future.

      Complacency can be a killer – so can other player’s grit and guile.

       
    • Dorian

      You’re very generous. Tripadvisor grew as much by luck as by judgement.

      It was always a wonder to me just how long it was going to take those guys to work out how to monetise the site.

       
 
 

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