Tripadvisor Finetunes Its Subscription Travel Bet

Tripadvisor has spent the pandemic changing its tune, metaphorically speaking.

For years, the Massachusetts-based company run by co-founder and CEO Stephen Kaufer sang the praises of a model where consumers could read reviews of travel services and then either click away to book them or else book instantly through its site and app. Now the $5 billion company has moved away from trying to draw the largest audiences possible to instead woo its most loyal fans into coughing up money for exclusive discounts and perks on travel.

On Friday, Tripadvisor used its second quarter earnings call to give analysts an update on its annual subscription-based membership program, Tripadvisor Plus, which it began discussing in late 2020, as Skift was first to report.

“It is very early days but I have to say, I think we’re really on to something here,” said Kaufer. “We have plenty of examples of fantastic subscription businesses in a bunch of other categories, but not yet in travel. So with our traffic, our brand trust, we think Tripadvisor is just the ideal company to create a really affordable plan that lets everyone, as we say, up their travel.”

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Earlier this year, the company began testing the subscriptions, which offer discounts to consumers for hotels and experiences along with other perks in exchange for an annual fee that’s typically $99, with some free trials. It said then that it was offering about 100,000 properties.

On Friday, the company described its subscription program as offering discounts at “more than 100,000 hotels.” In July, the company signed its first hotel chains for direct supply partnerships, as Skift reported. The 850 properties across the four hotel chains — Barceló Hotels, Melia Hotels International, Millennium Hotels and Resorts, and Pestana Hotel Group — have yet to be fully integrated, it said.

Tripadvisor said it had entered into a Plus-related partnership with Trip.com Group to tap the company’s supply of lodging. That represents the first online travel agency group to participate. This move came despite Trip.com Group selling some shares in Tripadvisor, as Skift reported in June.

“We’re working closely with them to bring all of their supply, and they have a lot, into the Plus ecosystem,” Kaufer said. “It’ll make a big difference on the supply equation … with worldwide inventory… not just from China.”

Tripadvisor said it had also “partnered with four hotel technology providers.” That move will give it “the opportunity to potentially sign up an estimated additional 45,000 hotels.”

Some major hotel groups have been resistant to signing up, but Tripadvisor executives said they have been making progress on that front.

“The biggest challenge some properties have had with our current implementation is on the topic of rate parity, where we’re showing a discounted rate,” Kaufer said. “Hotels care a lot about having a standard rate across the Internet. So we’ve heard that loud and clear.”

“We’re making some changes that we think go a long way towards addressing those worries,” Kaufer said. “Hopefully, you’ll see those come to fruition in the next few months, as in live on the site and offering the opportunity for more and more hotel chains to join in.”

In June, the company presented Plus to all U.S. consumers and began marketing the product on its site and app, in email campaigns, and elsewhere. The company is testing merchandising a Plus subscription as an add-on during check-out for an experiences booking, executives said on Friday.

But so far most consumer sign-ups have come mostly from customers who, when clicking to book a hotel on a partner site, see a marketing message that they could save money if they subscribe to Plus. The marketing messaging estimates the savings the consumer could make on this particular booking and how it could outweigh the subscription cost.

Bright Spots for Tripadvisor

In a bright spot, the company’s most critical source of revenue, U.S. hotel metasearch auction revenue, grew in June and nearly achieved 2019 levels in the second quarter. In the U.S. in particular, hotel auction cost-per-click rates regained 2019 levels in early May and have been at or above 2019 levels since.

In July, the rate of growth in the hotel auction slowed somewhat but still progressed.

But not everything appeared to be back to normal. Up until March 2020, Tripadvisor had a “hotel instant booking feature,” which enabled hotel shoppers to book directly with a travel partner, with the latter paying the company a pre-determined contractual commission, without the consumer leaving Tripadvisor’s website. But Tripadvisor removed all language about the hotel instant booking feature from financial filings since then, including its report for the three months ending June 30.

On Friday, the business said it had been leveraging its “instant booking infrastructure” of connections with hotel aggregators such as online travel agencies to speed up the onboarding of Plus hotel supply.

The wait for a return to normal was reflected in the company’s financial results.

In the three months to June 30, Tripadvisor generated $235 million in revenue, down 55 percent from having generated $422 million in the comparable, non-pandemic quarter in 2019. It had a net loss of $40 million, compared to a net income of $34 million in the second quarter of 2019. It generated positive adjusted earnings before interest, tax, depreciation, and amortization of $25 million.

In a surprise, experiences, a category that includes tour and activity bookings, has seen a partial recovery that surpassed executive expectations, given the absence of international travel.

Consumer reservations made through its Viator brand exceeded 2019 levels in June, and they improved further in July. In June, bookings on Viator’s and Tripadvisor’s U.S. sites exceeded June 2019 levels.

Tripadvisor said its brands offered 300,000 bookable experience products on 1.4 million activities and attractions through its own channels and through third-parties such as Booking.com.

It was still too early for the company to break out a revenue contribution from its subscription-based business, executives said.

Richard Clarke, an analyst at Sanford C. Bernstein, noted that Tripadvisor executives seemed to have “softened the language a little bit” about the subscription product’s potential. Executives had once talked about it potentially being a multibillion-dollar product. Now they’re saying they could get a share of a multi-billion-dollar market.

“Did the language soften?” Kaufer responded. “No, not at all. I’m more excited about Plus every week that goes by.”

Kaufer said he still sees “the same longer-term opportunity in the tens of millions” of customers.

On Friday, Kaufer described the company’s audience reach in the following way.

“To put it simply, we literally have millions of travelers looking at hotels on our site every single day,” Kaufer said. “You can call it 100 million a month in normal times, as in 160 million hotel metasearch clicks a month [on average] in 2019 for stays that were of significance, and I called that at $750 or more.”

“So it’s 160 million people interested in clicking to a partner site because they’re interested in buying a hotel room at $750, with $750 being the number that kind of makes this a pretty easy purchase,” Kaufer said.

“Now to add another 100 million travelers a month looking at Experiences, that’s a lot of reach and influence,” Kaufer said. “Tripadvisor overall has even more traffic than that. But that 200 million, they’re looking at a hotel, they’re looking at experience. And those are the two categories that Plus plays in right now.”

Tripadvisor Fun Facts

Here are a few other highlights from Friday’s financial filings:

Tripadvisor’s traffic levels have been recovering. Monthly unique users on its branded websites during the second quarter of 2021 increased to approximately 70 percent of 2019’s comparable period. In the U.S. specifically, monthly unique users in June 2021 were at nearly 85 percent of the June 2019 level, while monthly unique users in France, Italy, Germany, and Spain reached nearly reached 95 percent of the June 2019 level in June 2021. In the UK, monthly unique users were approximately 70 percent of the June 2019 level in June 2021.

The company said its flagship Tripadvisor brand now operates in localized versions in “approximately 50” markets worldwide, which is a higher figure than the “over 40 markets” it cited in May.

The company is continuing to work on initiatives to better leverage its audience, content, and data to open up new media advertising opportunities through a more modern advertising suite spanning native, video, and programmatic solutions.

Notably, in May, the company had said in a financial filing that “it intended to broaden” its solution to a larger set of advertising travel endemic and non-travel endemic advertising partners, including industries such as entertainment, spirits, and finance. In the latest financial filing, it said it had broadened its solution to those partners.

Tripadvisor-branded display-based advertising revenue increased by $18 million during the three months ended June 30, when compared to the same periods in 2020, and 16 percent of that revenue came from display and platform revenue across its websites.

During the quarter, the company rolled out a freshly redesigned Tripadvisor app.

The company also resumed hiring. As of June 30, it had 2,648 employees, up 2.6 percent from May’s figure.

Overall, the company seems to be humming a more upbeat and contemporary theme song, as it heads into the fall, when it expects to report on futher progress with its subscription product.

For more context, see Skift’s July story: Tripadvisor Plus Signs Its First Hotel Chains But Those Missing Are a Bigger Story.

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