Traveler Behavior Is Still the Biggest Impediment to TripAdvisor’s Tours and Activities Business

There’s been so much buzz in the tours and activities business with acquisitions, large funding rounds, and Airbnb getting into the game that it’s easy to lose focus on a fundamental headwind: traveler behavior.

Asked to comment on the competitive landscape, TripAdvisor CEO Steve Kaufer said Wednesday that the largest factor impeding more growth in its experiences segment is travelers continuing to want to buy tours and activities only when they arrive at a destination, and offline.

“And while we certainly have competitors who are selling experiences online, it’s much less us versus them, in my view, than growing the total size of the pie,” Kaufer said, adding that online booking is a huge opportunity over the next few years.

Commenting during TripAdvisor’s first quarter earnings call with analysts, Kaufer said the fact that consumers are getting more used to buying all kinds of things on mobile should help its business.

Expedia’s Unique Approach

Expedia, has a unique approach among major online competitors such as TripAdvisor, Booking.com, GetYourGuide, Klook and Airbnb when it comes to tackling travelers’ offline penchant when buying tickets for tours and attractions. The Expedia Local Expert program has in-destination kiosks staffed by “400 concierges serving guests face-to-face 365 days a year,” according to Expedia.

Mark Okerstrom, the CEO of Expedia, which has been advertising its online tours and activities offerings on U.S. TV in recent months, said last month that the company notched more than $500 million in online and offline tours and activities gross bookings in 2017.

Experiences and Restaurants

TripAdvisor likely isn’t considering going the offline route like Expedia, though, to deal with travelers’ procrastination and offline preferences when it comes to its experiences business. In fact, TripAdvisor CFO Ernst Teunissen said over the long term he expects margins in the mid-to-high 20s for the companies non-hotel businesses, including experiences and restaurants.

Officials said attractions and restaurants were the growth drivers in the first three months of the year in TripAdvisor’s non-hotel segment, which saw revenue jump 36 percent year over year.

TripAdvisor envisions a huge opportunity in tours and activities, especially with its acquisition of tech-integrator Bokun, although officials said that buy won’t have a material impact on the company’s earnings in 2018. Still, Bokun, which provides a software as a service product to attractions’ suppliers, should help TripAdvisor scale up the business and forge more direct relationships with vendors.

Teunissen confirmed that the third piece — apartment and home rentals — of TripAdvisor’s non-hotel business isn’t the priority that experiences and restaurants are given the highly competitive nature of the sector. Still, Kaufer said that having an alternative accommodation to offer a traveler when a hotel may be booked up has value for the consumer, and helps TripAdvisor optimize its offerings.

TripAdvisor May Nearly Double Its TV Spend

TripAdvisor spent $74 million in TV brand advertising in 2017, and officials said the company plans to spend $100 million to $130 million on TV this year as it deemphasizes online marketing.

Still, Teunissen said the TV campaign so far this year is gaining traction, although the return on investment is in the red.

That TV marketing revolves around TripAdvisor having the “best price” for hotels — which is a dubious proposition. Hotels often offer lower rates for direct bookings on their own websites, and other online players often offer the same so-called “best price” that TripAdvisor does.

Kaufer said one of TripAdvisor’s differentiators is the fact that it offers flight comparisons, experiences, dining reservations and lodging, namely products to help travelers with many parts of their trip, and he argued that the “best price” TV campaign does not detract from the comprehensiveness theme about TripAdvisor’s offerings.

“We’re driving increased price awareness of TripAdvisor’s place to find and compare your deals<” Kaufer said. “As you know, we did that last year, using our positive results, we’ve increased our spend. That piece of that strategy is working and we found no indications or we haven’t seen any indications that it’s hurting our brand or consumer awareness as a trusted review site that we started at.”

Kaufer said that best price message is working for now, but that doesn’t mean it would be the only marketing messaging in the future.

He added that TripAdvisor will increase the marketing of its attractions business on TV, for example. “It’s more a matter of when, not if,” Kaufer said.