Private equity firm Certares is leveraging its brand assets the way a Booking Holdings might do when Booking.com shares inventory with sister company Priceline. This isn't the usual private equity playbook.
Tripadvisor acknowledges that it is building its new subscription program, Tripadvisor Plus, with wholesale rates from “aggregators” — that it refuses to identify — covering 100,000 hotels. Skift has learned, however, that most of these hotel discounts and perks are coming from an unconventional source — travel agency brands within private equity firm Certares’ portfolio.
Travel agencies within Certares’ wide array of travel holdings are providing Tripadvisor with the bulk of the wholesale hotel inventory, according to a source close to Tripadvisor.
That’s a twist on standard industry practice on several fronts. Hotels regularly give wholesale rates to traditional travel agencies, including discounts and perks, and not with the expectation that these traditional travel agencies will pass the inventory along to online travel companies for use in standalone hotel sales. One would have also thought that Tripadvisor would turn to bed banks to scale its wholesale program, and not offline travel agencies.
In addition, it is atypical in travel for a private equity firm to share its assets in the way Certares is doing it.
Tripadvisor’s sales force has also started to sign direct contracts with hotels for wholesale inventory.
The source close to Tripadvisor did not identify which Certares-affiliated brands are providing the inventory. But Certares owns Internova Travel Group, formerly called Travel Leaders, which counts travel agency brands within its ranks such as Tzell Travel Group, Altour, Protravel International, and more than a dozen more, for example.
Certares also is a leading shareholder and joint venture partner with American Express in American Express Global Business Travel, which acquired Ovation Travel Group in January. It also has airline and cruise investments.
Tripadvisor could also be working with other travel agencies, which commonly strike deals with wholesalers and hotels for net rates and amenities.
Tripadvisor spokesman Brian Hoyt didn’t comment about whether travel agencies were providing the company with wholesale inventory, but said: “We’ve been public that we’ve engaged aggregators and hotels directly to help us scale quickly and test an offering like Tripadvisor Plus. Both groups will continue to have a role in the future of this membership subscription service as they seek to engage high value travelers bookings vacations.”
Tripadvisor Plus is currently available on desktop and mobile Web to a limited number of users. It isn’t yet included in Tripadvisor’s app.
Hotelbeds, the largest global bedbank provider of wholesale rates, is not apparently working with Tripadvisor at this point. Hotelbeds didn’t immediately respond to a request for comment, and a spokesman for another leading bed bank, Webbeds, said: “We don’t make public comment on who we work with, except in some unique circumstances.”
A source at a private equity firm — not at Certares — said it is “atypical” for a private equity firm to leverage its holdings the way Certares is doing with Tripadvisor, although it could have significant upside for Certares’ various holdings.
In March, Certares purchased $325 million of preferred stock in Tripadvisor’s parent company, Liberty Tripadvisor, and became a strategic investor. Certares founder Greg O’Hara became vice chair of Liberty Tripadvisor and a Tripadvisor board member.
Tripadvisor’s use of wholesale inventory to pass along discounts and perks to travelers for hotel stays and experiences could prove controversial. Wholesalers traditionally provide online travel agencies with deeply discounted rates that are used on an opaque basis because they are supposed to be assembled in vacation packages. In that way, the hotelier isn’t revealing that the room it is offering on its website for $300 per night is actually being sold elsewhere for $150.
Tripadvisor, though, is not using the wholesale inventory in packages, but in standalone hotel bookings.
One Tripadvisor rival believes that Tripadvisor’s use of wholesale rates for its subscription program will add confusion to the already wild world of wholesale rates, which often show up without authorization on metasearch sites.
The Tripadvisor competitor believes that Tripadvisor Plus’ use of wholesale rates will be unsustainable.
The source close to Tripadvisor rebuffed that type of thinking, saying the rates will be offered behind a subscription paywall, and they will not be “advertised.” Advertised in this sense, broadly speaking, the source close to Tripadvisor said, means that Web scrapers will not be able to access these wholesale rates on Tripadvisor.
The company touts Tripadvisor Plus, which is in beta and sells for a $99 annual subscription, as offering discounts on unlimited bookings and perks at 100,000 hotels. Many of the Tripadvisor Plus offerings will be for longer stays, and that’s why Tripadvisor can claim that subscribers will be saving at least $200 per booking.
But it is the perk side of the equation in luxury hotels that could become a sweet spot for the program, the source close to Tripadvisor said.
There are numerous types of travel agency wholesale programs that Tripadvisor may be working with. In one type of program, for example, travel agencies and consortia — or agency groups — have private commissionable rates that they offer to their customers.
“Amex Fine Hotels & Resorts or Virtuoso or Signature, all have these at select, super-upscale hotels,” said a former hotelier. “They offer their clients usually an upgrade, free breakfast and/or other amenities and are generally priced at parity with their website but they throw in goodies for these key agency partners. The agency receives the same 10% commission after the stay (sometimes more, sometimes less) and there is often an override or other kicker paid to the consortia.”
The source close to Tripadvisor said ultimately cruise and car rentals may be more scalable for Tripadvisor Plus than hotels. If it’s peak season in Paris, there aren’t an infinite number of upgrades that the program could provide to program members, the source close to Tripadvisor said.
Why would hotels want to join Tripadvisor Plus? Tripadvisor is telling them that in exchange for providing discounts and perks to Tripadvisor, the company will offer them preferred placement on Tripadvisor, and bookings at zero or greatly reduced commission. The bookings would take place on Tripadvisor, but the hotels would service them.
Tripadvisor, if everything works out, would forego its usual commissions, and make its money on the subscription revenue.
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Tags: amex gbt, certares, hotels, internova, loyalty, subscriptions, tripadvisor, vacation packages, wholesalers
Photo credit: Tripadvisor Plus will provide consumers with perks at luxury hotels. Pictured is Accor's Maison Delano in Paris, which may or may not be part of Tripadvisor's new subscription program. Accor