Tripadvisor has no easy path to better growth rates and profit. But in good news, consumers are returning to its brands to plan trips, and revenue will likely follow over time.
Tripadvisor represents a tale of two recoveries. Customers dreaming of travel during the pandemic restrictions have been coming back to its brands to research trips and outings. But a lack of confidence has been preventing the Needham, Massachusetts-based company from driving revenue from that recovery in the short-term.
In July, monthly unique users improved to 67 percent of last year’s comparable period, the company said during an earnings call Friday. That was way up from 30 percent levels, year-over-year, in May. But revenue has not grown in lockstep. The company guided investors to expect that July’s revenue performance would be about 30 percent of last year’s comparable period.
“As the pandemic hit, it’s pretty obvious to everyone that cancellation rates for downstream bookings that we’re providing to our partners spiked,” said CEO Steve Kaufer. “While bookings are recovering, our clients are not sure whether the cancellations will happen, so clients are nervous about paying top dollar [in the company’s cost-per-click advertising auctions] right now if a user is going to cancel.”
Kaufer said that once cancellation rates go down, hoteliers and other travel suppliers will regain confidence and pay more to advertise on Tripadvisor’s brands.
Another factor holding back Tripadvisor’s revenue recovery has been an uneven willingness to book by consumers. The company’s restaurant reservations brands, such as The Fork/lafourchette, have seen a reservation rebound in Europe. Still, the company’s sightseeing and attractions brands like Viator have seen searches surge but not reservations, said Ernst Teunissen, chief financial officer.
Tripadvisor has long said it’s the world’s largest travel site, though its traffic claims have plateaued at about 400 million monthly visits since 2017 and the company expects traffic to decline overall as it focuses on driving repeat visits from its most loyal users instead.
The company saw its margins peak in 2009 and fall every year since. Consumers didn’t engage in the same way with Tripadvisor’s brands on mobile devices as they had on desktop browsers. The company has tried many tactics to adapt, such as a 2018 rollout of a new homepage with more social-like features.
Kaufer said early signs suggest the redesign has prompted more repeat usage by its users.
Rout of Passage
Tripadvisor reported its results Thursday. For the three months ended June 30, Tripadvisor generated $59 million in revenue, down from $422 million in the same quarter a year ago. The company swung to a loss of $153 million, compared to a net income of $34 million a year ago.
The company saw its costs were $104 million lower in the second quarter in line with management’s expectations and partly driven from about $51 million cost-savings that included a mix of furloughs and layoffs. Cost-cutting measures included the company closing its Smarter Travel media unit earlier this year and sold off eight of its media brands in mid-July.
Tripadvisor expects its annualized cost savings for the year to end at about $200 million. It said it has adequate liquidity equal to $698 million. That will let it come out the other side of the crisis even if demand worsens in some markets later in 2020, executives said. Know that Skift Pro members can read Dennis Schaal’s exclusive briefing every week for context on the global landscape for online travel.
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Photo credit: Viroth's Hotel in Siem Reap, Cambodia, won in the "world's number-one op hotel" category in Tripadvisor's annual Travelers' Choice Awards announced in July. Tripadvisor announced its financial results for the second quarter ended June 30, 2020, and they reflected the historic impact of the pandemic. Viroth's Hotel