What’s Going Wrong Between Tripadvisor and Trip.com Group?

Online Travel This Week

Trip.com Group, which has a joint venture with U.S.-based Tripadvisor in China, started  selling a substantial portion of its stake in Tripadvisor.
In a financial filing last week, Trip.com Group disclosed it sold 1.38 million shares of Tripadvisor common stock starting in mid-May, reducing its stake in Tripadvisor to 4.5 percent.

At its height in July 2017, Trip.com Group wielded a 5.7 percent stake in Tripadvisor through ownership of 6.95 million shares. This means Trip.com Group sold around 20 percent of the shares it owned in Tripadvisor.

The two companies announced Tuesday that Trip.com was granted approval under their governance agreement to off-load “a portion of its holdings in Tripadvisor.”

In November 2019, the two companies entered into a strategic partnership, including a joint venture that Trip.com Group operates in China.

Because of the new commercial agreement the two companies revealed Tuesday, Trip.com Group loses its right to name a Tripadvisor board member although the Chinese company’s CEO, Jie Sun, will remain a Tripadvisor director pending an election as part of the routine shareholder election of board members.

The two parties said their joint venture will continue, and positioned the announcement as a “strengthened strategic partnership.” That’s because Trip.com Group agreed to provide preferential pricing on 10,000 properties for use in Tripadvisor’s new Tripadvisor Plus subscription program for consumers. Many of these hotels, which provide discounts to Tripadvisor subscribers, are U.S.-based.

The companies said Trip.com Group would sell shares in Tripadisor throughout 2021, and that the Tripadvisor Plus partnership would be implemented “later this year” and would be “expanded over time.”

Why Did This Happen?

The two companies aren’t saying publicly why Trip.com Group is reducing — or even liquidating — its stake in Tripadvisor.

Could it be that Trip.com Group, which just executed a secondary public listing in Hong Kong to supplement its Nasdaq listing, wants to shore up its U.S. cash position in dollars?

Is it possible that U.S.-China tensions have taken their toll on China’s Trip.com maintaining a stock position in Massachusetts-headquartered Tripadvisor?

Is Trip.com Group no longer bullish on Tripadvisor’s growth prospects?

Whatever the reasoning, and no matter how the two companies position their relationship publicly, the bottom line is that Trip.com Group will have less skin in the game regarding Tripadvisor’s future.

It’s not exactly a vote of confidence.

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