There’s a debate under way among investors — and quietly within the travel industry, too — on whether TripAdvisor can make its booking feature, TripAdvisor Instant Booking, work from a financial standpoint and get back on course after a disappointing second quarter in which Instant Booking and other factors dragged down results and the company missed earnings and revenue expectations.

Anyone who tells you they definitively know the answer as to whether TripAdvisor has made a mistake in its quest to become a booking site to supplement its metasearch, or lead-referral, business might also try to sell you the Chesapeake Bay Bridge-Tunnel. [It’s not for sale.]

However, if you consider TripAdvisor’s track record when it transitioned in 2012 to 2014  from reliance on browser windows popping up in hotel search to side-by-side comparison-shopping, or metasearch, on TripAdvisor, then there is some cause for guarded optimism.

TripAdvisor CFO Ernst Teunissen said in February that he expected TripAdvisor’s growth in revenue per hotel shopper, which takes into account both metasearch and Instant booking, to decelerate later in 2016, as it subsequently has done, but the company expected “growth will improve similar to what we saw in our metasearch rollout in 2013.”

So let’s take a look at TripAdvisor’s revenue per hotel shopper, which it has identified as a key metric to track the company’s performance, since 2012. These numbers trace the beginning in 2012 of its transition from pop-ups to metasearch, which was fully rolled out in June 2013, and now to Instant Booking plus metasearch. TripAdvisor Instant Booking became globally available on all devices as of the second quarter of 2016.

TripAdvisor Changes In Revenue Per Hotel Shopper 2012-2016

2012201320142015Q1 2016Q2 2016YTD 2016
Revenue Per Hotel Shopper N/A N/A$0.56$0.54$0.46$0.48$0.47
Percentage Change Y/Y-8%-13%7%-4%-21%-19%-19%

Source: TripAdvisor, SEC filings

You can see see that revenue per hotel shopper declined 8 percent in 2012 when TripAdvisor introduced metasearch and fell 13 percent year over year in 2013, when metasearch was ramping up, but notched a 7 percent increase in 2014 as advertisers adjusted to the then-new feature and TripAdvisor did tons of experimentation to ensure that the product monetized at a higher rate.

TripAdvisor began rolling out its book on TripAdvisor — or Instant Booking — feature in the U.S. in June 2014, placed it on all platforms in the U.S. and UK in 2015, and as of the end of the second quarter of 2016, Instant Booking was fully rolled out globally.

There are some parallels to how TripAdvisor officials talk today about the current Instant Booking transition and the way they referred to the metasearch introduction in 2013-2014: In both cases they cautioned that things would be tough before they got better.

For example, in July 2013, TripAdvisor CEO Stephen Kaufer said of the move to metasearch: “From a meta monetization standpoint, as we predicted, the number of paid clicks is down multiples and conversion CPCs (cost per clicks) are up multiples relative to our classic bidding model. We continue to expect to see the biggest negative impact to revenue during Q3 [2013] as this will be the first full quarter at 100 percent meta rollout and as partners optimize and find equilibrium within our new meta bidding landscape.”

So by 2014 the metasearch transition in terms of revenue per hotel shopper had reversed its earlier deceleration and was moving in a positive direction with 7 percent growth.

You can see from the chart above that TripAdvisor’s revenue per hotel shopper then decelerated 4 percent in 2015, fell 21 percent in the first quarter of 2016, and declined 19 percent in the second quarter of 2016, with plenty — but not all — of the slump tied to the transition to Instant Booking plus metasearch.

As it did in the earlier transition to metasearch, TripAdvisor is betting that its move to becoming a booking site means short-term pain in exchange for long-term gain and that it will reverse the deceleration that has taken place so far in 2016 in revenue per hotel shopper.

TripAdvisor generated 81 percent of its revenue from its hotel business in the second quarter of 2016 so the health of the overall business is tied to the Instant Booking transition.

In TripAdvisor’s prepared remarks for the second quarter of 2016, the company stated: “Our chosen path in 2016 continues to dampen near-term financial results. In the third quarter, we begin to lap the Instant Booking rollout and the tough metasearch auction comp eases, though recent softness and the frequency of recent macro events make us more cautious about the balance of the year.”

TripAdvisor opted not to give formal guidance for 2016, which it labels a “transition year,” because of the Instant Booking rollout. But the company clearly believes that having Booking.com and major hotel chains as Instant Booking partners, coupled with TripAdvisor’s focus on optimizing the Instant Booking customer experience and conversion metrics will lead to making itself whole again in a revenue equilibrium — just as it did during the metasearch transition a couple of years ago.

Big Questions Loom

Still, the two features — metasearch, which has users navigating from TripAdvisor to online travel agency or hotel sites for booking, and Instant Booking, where consumers book on TripAdvisor — are two different creatures. Just because TripAdvisor successfully made the transition from pop-ups to metasearch a couple of years ago doesn’t mean it can necessarily repeat the pattern in the next few quarters or years as it redefines itself as a hotel-booking site with lots of metasearch on the side.

TripAdvisor has user traffic and content numbers to-die-for as 350 million average monthly unique visitors peruse 385 million reviews in their trip-planning endeavors. But do these consumers want to stick around and book hotels on TripAdvisor instead of clicking  over to Marriott.com, Hilton.com, Expedia.com, Hotel Mademoiselle or another independent hotel site? That’s a key issue, and some observers question whether TripAdvisor can execute that dramatic change in user behavior.

Some of TripAdvisor’s competitors are betting that the king of user-generated hotel reviews won’t be able to make that smooth transition into a booking site.

Instant Booking’s progress or lack thereof, depending on your perspective, has been met with a lot of skepticism on Wall Street. Financial analysts overwhelmingly rate the stock a “hold” rather than a buy or sell.

And TripAdvisor’s future is the subject of much debate.

The financial firm PiperJaffray conducted a “Bull/Bear Debate” about TripAdvisor in Manhattan last week with more than 30 investors and found that their opinions “skewed somewhat negatively.”

PiperJaffray found “a fairly high level of skepticism around potential for TripAdvisor to improve monetization of traffic through Instant Book or otherwise. While concern around Instant Book is high, specific evidence of an inability for TripAdvisor to eventually drive improved conversion and monetization from Instant Book is as elusive as evidence suggesting it will be successful.”

Among the bearish reasons, investors expressed the opinion that it will be hard to change consumer behavior from doing research on TripAdvisor to booking on TripAdvisor; that the competition from Google and Facebook will be acute, and that TripAdvisor will likely reinvest incremental revenue from Instant Booking back into tours and activities, restaurants and vacation rentals, hurting earnings.

“While the rollout of Instant Book has not been seamless for the company (or investors), the trajectory of Instant Book is improving and we continue to believe it will lead to higher shopper monetization and create stronger long-term economics for the company,” a PiperJaffray research note stated.

Skift spoke with an investment firm’s portfolio manager, who declined to be identified, and while he expressed concerns about the quality depth of the management team at TripAdvisor beyond CEO Kaufer and the protracted effort to change consumer behavior, the portfolio manager argued that investors need to take a longer-term view about TripAdvisor.

He said there are several trends about TripAdvisor that are very positive, including high customer satisfaction, strong repeat booking rates through the TripAdvisor app, and significant growth in hotels shoppers and monetization on mobile.

Referring to TripAdvisor’s content, the portfolio manager said, “TripAdvisor has the most valuable part of the travel ecosystem but investors are too-short-term focused.”

He added that he believes the rest of the year will be better for TripAdvisor than was the first half.

But, as with much about TripAdvisor Instant Booking, that’s a leap of faith until the third and fourth quarter financials come in.

The Kayak Precedent

Metasearch site Kayak actually pioneered an Instant Booking-like feature several years ago, and in the second quarter of 2012 the company reported that 11 percent of its revenue came from bookings on Kayak, compared with 3 percent of revenue in the second quarter of 2011.

Still, Kayak CEO Steve Hafner has been saying in recent months that TripAdvisor will find out — like Kayak did earlier — that these facilitated bookings aren’t a game-changer. In fact, Hafner said several weeks ago that he thinks TripAdvisor will eventually abandon the effort.

On the other hand, with Booking.com and major hotel chains as partners, TripAdvisor has implemented Instant Booking in a more rigorous way than Kayak ever did. A high percentage of hotels on TripAdvisor can now be booked without leaving the site.

Dan Wasiolek, senior equity analyst at Morningstar Equity Research, says he thinks Kayak today uses direct bookings mostly for marketing purposes.

“They don’t collect commission but have direct bookings because it improves conversion and therefore makes Kayak a more complete platform that others want to use,” Wasiolek says.”TripAdvisor also does Instant Booking to make it a more complete platform and help conversion, but is collecting a piece of the commission.”

“I think the Q2 2012 Kayak commentary offers a data point that highlights the value consumers find in direct booking on meta sites,” he says. “Further, I think the added convenience for the traveler to … stay on one booking site (as is the case with Instant Booking) can provide some incremental opportunity for TripAdvisor.”

However, Wasiolek, adds: “But the amount that it can add is a large uncertainty at this point.”

Is Instant Booking a game-changer or a nice add-on for TripAdvisor? The jury is out.

Photo Credit: Tripadvisor is pushing users to book their trips on TripAdvisor via mobile phones. Pictured are vacationers in Cartagena, Colombia. TripAdvisor