Behind TripAdvisor’s Surprise Acquisition of Viator

In many respects, TripAdvisor’s $200 million acquisition of Viator is a shocker, rivaled in that regard only by the Priceline Group’s twin stunners, namely its 2013 acquisition of Kayak for $1.9 billion, and its acquisition of OpenTable for $2.6 billion.

Not for the price, but for the timing.

Just about 30 hours or so before the Viator acquisition went down, financial analyst Michael Olson of Piper Jaffray put the following question [abridged] to TripAdvisor CEO Stephen Kaufer during the company’s second quarter earnings call:

“What other categories [beyond hotels] do you look at to further monetize your existing kind of review content and visitors, for example, events and attractions bookings or other categories?

After waxing on about the “phenomenal” opportunity in restaurants, Kaufer said:

“Yes, we see other opportunities to help travelers because we have travelers coming to TripAdvisor doing things other than just hotels and restaurants and certainly attractions of tours, or guides, or other travel related things are on the site. But there’s only so much folks can do it at one time and we have some great partners in that space, and our focus at the moment is restaurants and how we can monetize, in general, our non-hotel traffic.”

“So it’s a great question and we got starting in hotels, and then flights, and then vacation rentals, and then restaurants, and it’s safe to say, that we will be going beyond where we are now. But that’s all we can say for now,” Kaufer added.

Whether it was deception or just the overwhelming need to not tip his hand about the acquisition of the tours and activities aggregator, Kaufer seemed to be saying that restaurants was the top priority for now, and tours and activities would take a back seat.

TripAdvisor CFO Julie Bradley seemed to punctuate that scenario when she was asked which investments in addition to advertising spend led to a trimming of TripAdvisor’s guidance on EBITDA growth.

Bradley replied that TripAdvisor’s investments in the second half of 2014 would focus on the goals of increasing “international expansion, getting [restaurant reservations platform] LaFourchette into new countries and really taking advantage of all of the TripAdvisor restaurants’ page views that we have on our site.”

Why Viator?

If TripAdvisor was to make a big acquisition in tours and activities, the choosing of Viator, which has built scale since its founding in 1995 but has been critiqued as having relatively small margins due to all of its affiliate deals, wasn’t a slam dunk.

TripAdvisor actually has two current tours and activities partners, including startup GetYourGuide, which has partnered with TripAdvisor since 2011, and Viator, which teamed with TripAdvisor in 2013.

Of the two, Berlin-based GetYourGuide, founded in 2009, about 14 years after Viator debuted, is viewed by many as more of an upstart as it focuses on comprehensiveness in tours and activities’ aggregation while Viator favors curation.

Both offer tours and activities’ bookings through TripAdvisor, and you can now expect that Viator will definitely get the upper hand with tight integration, ending that competition.

In other respects, TripAdvisor’s acquisition of Viator highlights the changing nature of travel booking, with the advent of mobile, as there will be a burgeoning emphasis on in-destination bookings with real-time availability.

Many hotel bookings already take place through mobile devices on the same day of the stay, and restaurants and tours and activities are the next sectors to check off.

In a Skift interview in 2013, Kaufer emphasized that TripAdvisor intends to go beyond its core focus on hotels and intends to be the solution of choice throughout the entire travel cycle, including in-destination activities such as restaurants and tours.

Many had wondered, though, whether Viator had viable exit prospects given what appeared to be the large amount of funding, at least $20 million and possibly more, that it had raised.

But, the $200 million that TripAdvisor is paying, mostly in cash, to acquire Viator lays that argument to rest. But it doesn’t end the debate about whether tours and activities will ever reach the lofty heights some industry leaders have been claiming for years.

Special Report: Tours and Activities

• Why the Tours and Activities Market is More Hype Than the Next Big Thing
• Tours and Activities Market is Looking for a Big Star to Match Big Investments
• Investors Boycott Tours and Activities as Peer-to-Peer Shakeout Looms

Where does that leave tours and activities?

TripAdvisor’s acquisition of Viator could be a game-changer for the sector, depending on TripAdvisor’s priorities. TripAdvisor has made a few large acquisitions before, such as its acquisition of Flipkey in the vacation rental sector, but Flipkey’s progress has taken a back seat to TripAdvisor’s hotel business, and at times Flipkey seems to be a relative non-factor in the vacation rentals market.

The acquisition of Viator is indeed is a departure from TripAdvisor’s usual modus operandi of relatively small acquisitions, such as this year’s pick-ups of Tripbod, VacationHomeRentals, and LaFourchette, all of which were so relatively small that TripAdvisor hasn’t had to immediately disclose their acquisition prices.

So many tours and activities providers, especially of the peer-to-peer type, have withered and died, but TripAdvisor’s acquisition of Viator puts GetYourGuide and a smattering of others in play.

“I think it’s actually an amazing day for the travel activities space,” says GetYourGuide co-founder and CEO Johannes Reck. “We’re finally getting the recognition we deserve and it is fair to say that this is the next multi-billion dollar opportunity in online travel.”

“GetYourGuide has done a phenomenal job in the past years,” Reck says. “I’m really proud of our team. In roughly 4 years, we have grown from a start-up with a few Swiss-German college grads to the fastest growing player in the space with an extensive global inventory. We are confident and very determined to continue our success story.”

In terms of potential acquirers, Expedia has fumbled around with tours and activities for years, and could be interested in an acquisition unless it intends to follow the crowd and get into the restaurant reservations business first.

And, for conspiracy theorists, former Booking.com CEO Kees Koolen is a member of GetYourGuide’s board.

Related: Viator Says Real-Time Booking of Tours and Activities Has Arrived