The growth rate of people using TripAdvisor’s hotel metasearch product, Hotel Shopper, has been decelerating. Perhaps TripAdvisor’s next TV ad campaign will provide more of a direct tie-in to Hotel Shopper rather than its current generic bent, “Visit TripAdvisor New York” etc.
Mobile holds promise and is a huge challenge for TripAdvisor, and virtually all online travel companies.
In fact, TripAdvisor states that the monetization it gets from mobile is only 20% of what it gets from desktop users.
TripAdvisor was candid about mobile and other issues in seven data points we gleaned from TripAdvisor’s quarterly Securities and Exchange Commission filing.
1. Mobile Monetization
TripAdvisor monetizes users on smartphones at just 20% of desktop monetization, the company says, while tablet monetization is similar to that of users surfing on desktops.
“We do display graphic advertising on smartphones, however, our smartphone monetization strategies are still developing, as smartphone monetization is currently less than 20% of desktop monetization while tablets monetize more closely to desktops.”
To improve monetization in Hotel Shopper, TripAdvisor’s hotel metasearch offering, the company is furiously trying to increase the number of partners who would facilitate direct booking in TripAdvisor’s apps and on the desktop.
But, big online travel agencies such as Expedia, Booking.com and Orbitz have declined to play so far in TripAdvisor’s direct bookings, which it calls Instant Booking, and this limits their comprehensiveness.
2. The Revenue Challenge of Mobile and International Growth
TripAdvisor’s revenue per user for its Hotel Shopper product grew 11% in the second quarter and 8% for the first six months of the year, but the higher CPCs paid by TripAdvisor’s advertising partners were partially offset by lower monetization on mobile and in emerging markets, where TripAdvisor is focusing its growth.
“Revenue per hotel shopper increased 11% and 8% for the three and six months ended June 30, 2014, respectively, and decreased 13% and 11% for the three and six months ended June 30, 2013, respectively. Revenue per hotel shopper increased 11% and 8% for the three and six months ended June 30, 2014, largely due to our implementation of hotel metasearch in June of 2013, which, to date, has resulted in relatively higher CPC pricing paid by our partners, due to higher quality clicks being delivered, mainly offset by relatively lower rates of user conversion.
“In addition, growth in hotel shoppers on smartphones, which have a lower monetization rate than desktops and tablets, and growth in emerging international markets that are currently monetizing at lower levels than our mature markets continue to provide challenges to our growth rate.”
3. Decelerating Growth in the Number of Hotel Shoppers
TripAdvisor’s visitors to its hotel metasearch product grew much faster in the first quarter and first six months of 2013, when TripAdvisor switched from user-unfriendly pop-under ads to hotel metasearch, than the growth pace has been so far in 2014. Could gains by rivals be playing a role, as well?
“Our number of hotel shoppers increased 17% and 14% for the three and six months ended June 30, 2014, respectively, and increased 38% and 37% for the three and six months ended June 30, 2013. The deceleration of hotel shopper growth for the three and six months ended June 30, 2014 is primarily due to high hotel shopper growth from search engine optimization (“SEO”) in late 2012 and for the three and six months ending June 30, 2013, which provides for a challenging comparative.”
4. Downloads and Massive Growth in Mobile Usage
The number of downloads a company attracts often relates to how strongly the company is advertising for downloads, and isn’t truly meaningful if someone responds to an advertisement, downloads an app, and then doesn’t use it regularly.
TripAdvisor brands’ downloads reached 128 million by the second quarter of 2014, and that was an increase of 28% since the end of March. More importantly, though, TripAdvisor’s average monthly unique visitors on mobile devices climbed 78.5% year-over-year to 141 million in the second quarter, the company says.
As outlined above, that increased mobile usage is a beautiful thing, but it also brings monetization challenges, although users’ surfing habits tend to be multi-device in nature.
“Mobile is an investment area that is geared towards creating a more complete user experience by reinforcing the TripAdvisor brand when users are in-market. In the quarter ended June 30, 2014, we saw strong mobile user uptake, as aggregate downloads of our TripAdvisor, TripAdvisor City Guides, SeatGuru, Jetsetter and GateGuru mobile apps reached more than 128 million downloads and average monthly unique visitors via smartphone and tablet devices grew over 77% year-over-year from 79 million to 141 million, according to company logs. We believe that travelers will increasingly use mobile devices, including smartphones and tablets, to conduct travel research and planning.”
5. Subscriptions For Hotels in Contrast to Vacation Rentals
TripAdvisor discovered the subscription-fee business in 2009 when it launched Business Listings, which enabled hotels to place their contact information and links on the property pages that TripAdvisor created without any input or permission from the hotels.
Some 9% of hotel and other lodging listings on TripAdvisor are now tied to Business Listings’ subscriptions, but this doesn’t seem like a big number when considering that TripAdvisor launched the program nearly five years ago. TripAdvisor, though, plans to expand its sales force to bring in more subscribers.
“Created in early 2010, our Business Listings product enables hotel and accommodation owners to list pertinent property information on TripAdvisor, bringing them closer to potential customers and thereby increasing direct bookings.
“In the year ended December 31, 2013, we grew our Business Listings customer base over 38% to 69,000 subscribers, representing approximately 9% of our current hotel and accommodation listings on TripAdvisor branded sites. We continue to expand our sales force and improve features to grow our subscriber base.”
While TripAdvisor seeks to increase subscription revenue from hotels, it is putting less emphasis on subscriptions for vacation rentals.
6. Vacation Rental Listings’ Rising, But is TripAdvisor Relevant?
In TripAdvisor’s second quarter earnings call July 23, CEO Stephen Kaufer said TripAdvisor’s vacation rental listings have increased 40% year over year to more than 640,000, and that increase was driven by acquisitions and adding the free-to-list model, much as HomeAway has done.
Free to list means vacation rental owners forgo subscription fees, but pay a commission when a booking takes place.
“As of June 30, 2014, we had amassed an inventory of approximately 640,000 properties, up nearly 40% year-over-year, across our TripAdvisor Vacation Rentals, U.S.-based FlipKey (which includes recently acquired Vacation Home Rentals), and European-based Holiday Lettings and Niumba.
“We offer individual property owners and property managers the ability to list using a subscription-based fee structure or a free-to-list, commission-based option and we believe our highly-engaged and motivated user community creates a competitive advantage for us in this market.”
HomeAway CEO Brian Sharples recently dissed TripAdvisor’s clout in the vacation rental market, arguing that its listings haven’t turned into an impactful amount of bookings.
7. Lots of Hiring Going On
TripAdvisor is on a hiring binge as it has increased its employee ranks 16.8% to 2,356 employees in the first six months of 2014. More than half its employees work outside of the U.S.
When a company hires at that clip, it faces the challenge of adequately integrating new employees, and ensuring they work up to the company’s standards.
“As of June 30, 2014, we had 2,356 employees. Of these employees, 1,235 were based in the United States. We believe we have good relationships with our employees, including relationships with employees represented by international works councils or other similar organizations.”