TripAdvisor's New Math for Hotel Listings Brings Properties Cost Surprises

TripAdvisor has changed its revenue model for Business Listings and now charges hotels an annual flat fee based on estimated page views and potential return on investment.

In some cases, this has meant sticker shock when hotels renew their subscriptions, according to 4Hoteliers.

TripAdvisor Business Listings enables hotels to put their direct contract information and links on TripAdvisor websites and apps so the properties can attract direct bookings from consumers, access analytics about their listing, and offer consumers discounts or perks.

TripAdvisor spokesperson Kevin Carter tells Skift that the company has "improved its pricing structure for Business Listings in a move towards property-specific pricing."

When TripAdvisor debuted Business Listings in 2010 -- and discovered a new revenue stream in subscriptions in the process -- the fee started at $600 and was based on the property's size, including the number of rooms.

But now the pricing structure is a lot more sophisticated, and presumably more expensive for most subscribers, in that it there is a pricing algorithm in place that calculates an annual rate for each property that is based in part on expected performance.

The algorithm bases the price on static factors such as location and property size, but now also considers dynamic measures, including the average daily room rate (and factors in seasonality), anticipated page views and "the potential return on investment the property will receive from the Business Listing," Carter says.

"Obviously, these factors all vary considerably depending on the hotel or bed & breakfast," Carter adds.

What it means for TripAdvisor is that Business Listings subscription fees have become a material portion of its business. In the third quarter of 2014, subscription, transaction and other fees (with a substantial portion coming from Business Listings and also some from TripAdvisor Hotel Shopper direct bookings) increased 106 percent year-over-year to $72 million.

These type of fees accounted for 20 percent of TripAdvisor's total revenue on the third quarter of 2014, up from 14 percent a year earlier.

"We have developed property-pecific pricing to ensure fairness, which is a key priority for TripAdvisor," Carter says. "The annual subscription cost is designed to be a true reflection of the value that Business Listings delivers to each individual property. The benefits of Business Listings are numerous and significant, offering properties of all sizes the opportunity to expand their marketing reach on a global scale."

Business Listings pricing is undoubtedly is on the rise in many cases and it will be up to hoteliers to figure out if the new pricing algorithm is working in their favor.