Full Video: Tripadvisor CEO Stephen Kaufer at Skift Global Forum 2021

Tripadvisor President and CEO Stephen Kaufer spoke with Skift Senior Research Analyst Seth Borko at Skift Global Forum 2021. The two discussed the theme “A Return to Experience: Building New Models for Travel’s Future.” 

You can watch a full video of their discussion as well as read a transcript of it, below.

Seth Borko: Hello, everybody. Thank you for sticking with us this afternoon. Steve, thank you so much for joining us.

Stephen Kaufer: My pleasure, absolutely.

Borko: I’ll just remind everyone. I think we’re going to try and take some questions with the session. So if you want to submit them online, we’ll try and get some at the end if we have time.

Kaufer: Perfect.

Borko: Steve, I want to start talking a bit about the elephant in the room, which is TripAdvisor Plus. So that is your travel membership subscription club, $99 a year. And you just made some changes to it this week, right?

Kaufer: Yes.

Borko: So it used to be $99 a year, and you would get hotel savings and now you’re kind of… instead of kind of getting the savings, you’re going to sell hotels at the best available rate and consumers are going to get funds. Is you what you’re calling it, right? Can you tell us a little bit more about that?

Kaufer: Sure. I would say consumers are actually likely to be getting the same savings just at a slightly different time. So we did a bunch of research on how we could make our product better. This is what we do all the time with all products. And over the past few months, we figured out a few things. One, choice is really important. We want to be able to offer as many hotels with as much savings as we can. Two, we want to extend the engagement with our travelers so that they appreciate — not kind of just a bit of money savings here — but also kind of expand the imagination. What can they do with this money that they save? How can they … our mission is how can we help them make them a better traveler? And we still think we’re absolutely convinced this program is a fantastic way to do that.

So the changes in a nutshell is instead of the instant discount up front, we’re putting that same discount back at the end of the stay. So after you get checked in — again, this is a vision for the product after you get… it’s not launched yet. After you get the… after you check in Vacation Funds get deposited to your online wallet — Tripadvisor — and then you get to spend them in any way you want. Great if you want to spend it on extending your hotel stay, if you want to spend it on taking a private tour, if you want to use the hotel spa, if you want to eat at a great restaurant — all wonderful things. Some of those things you can kind of buy and do on Tripadvisor, but it’s also an open program so that you could take that money that are marketing dollars that we’ve given to you and pull them out as cash at any point after check-in. So the savings instead of being upfront are the same savings but at the end. It’s real money that you’re going to use on this trip or your next trip.

Borko: So the prior savings (that) have been provided by you are not charging a commission, and effectively you’re taking the wholesale rates and pass them through your membership club. Now you are actually going to be charging a 15 percent commission as Tripadvisor and effectively you rebate in that commission back.

Kaufer: Yeah, it comes out of a marketing fund budget from our perspective. From the hotel’s perspective, they’re paying a commission to somebody or they’re discounting their room rates to that same traveler. It’s like literally the same economics from the hotelier’s perspective. A number of hoteliers shared with us that as a rate parity issue, offering a discount room in front of our audience was problematic for them. I can appreciate that. Our belief was that because the rate was shown behind a $99 pay wall, that that wasn’t going to be as big of an issue.

But that turned out to be like, it wasn’t a problem for some. We have a ton of Marriotts and Hiltons and all these properties live on the site today in the current Plus implementation. But in order to increase the choice, increase supply for the travelers, increase that real benefit of being able to find any hotel you want to go on, you want to stay at, to be able to achieve that savings, we needed to flip the model a little bit and say, “Hey, the retail rates are what we’re selling at and the rebate comes at the end.”

Borko: The Wall Street reaction was not super positive. I think the stock was down a little bit. And I think part of that was that Wall Street was a little bit surprised at the shift and the strategy. And I think, at least, I was surprised a bit because I think the rate parity concerns had been raised from the very beginning. And so if there was always rate parity concerns, kind of what caused the change to happen now? Like was … did some supplier really kind of get really loud or upset or was there an intermediary that was going to shut you off? Like why … rate parity has been a concern in the industry for decades, so why is this week the change?

Kaufer: Sure. We knew rate parity — because we’ve been in the business a long time — is an issue. You also know that suppliers have agreements that allow them to do whatever they want when our different rate is shown behind a closed user group. So we had a closed user group aspect. Very closed, not just a free membership. But a $99 pay wall that would work. And it did work for a number. We announced a number of signed partnerships. We have wholesaler … like lots of things work quite well. But to be clear, we’re in the travel internet space. We’re moving as fast as we can. I am never going to apologize for making a shift to a better product quickly.

Borko: Yeah.

Kaufer: So yeah, we were out in beta earlier this year. We launched formally to all of our traffic in June, and now like we’re being reasonably transparent.

I think we’re telling people, even before we’ve launched it, that we’re moving the model forward because we have a better way to do it. We’re going to be able to get more supply onto the system. We’re going to be able to deliver essentially the same savings in a slightly different form. And now, you’re going to have a wallet on Tripadvisor that hopefully will be bringing you back to say, “Hey, how can I spend this?” And it’s totally different (from) the other types of reward programs, which are locked to the particular supply or a particular platform. And frankly aren’t worth nearly as much as what we’re doing with Vacation Funds.

Borko: Yeah. Well, I’m certainly not asking you for an apology. I’m trying to, I guess, stick into the thought process because you did have another option to maybe make the platform even more opaque, right? To gate the rates even further and continue with the current model. And I think one of the criticisms that I’ve heard is you’re right that the discounts doesn’t change, but the timing of the cash flow does. Americans are not known to be like the most patient people in the world, right? Like people like instant gratification where you had a choice to turn off the instant gratification. Maybe go more opaque. I guess I want to dig into that.

Kaufer: Yes. So great question. We had some of the same issues or concerns or question marks ourselves. So what do you do as an internet company? You go do your research. You go talk to a bunch of different travelers — (with) different walks of life, different styles — and say, “Hey, what do you think about this instant? What do you think about saving for rainy day or saving for sunny day, the next vacation?” And it was a near universal reaction — again, very early research — but near universal that said, “Look, I can often find discounts in lots of places.” This is aspirational.

This is like, “I get to save to do more for my trip. I trust Tripadvisor that the money is going to be real.” And it’s not sort of points that I might accumulate and not know what to do with. These Vacation Funds (are) real dollars that you can pull out and put into your bank account at any point if you want. Great. But it turns out, and what we believe is that people will often think of that as, “Hey, I’m keeping that money aside so that I can either have a fantastic meal and know that my smartness in using Tripadvisor Plus is paying for this delicious dinner or save it up for the next trip.”

Borko: What you’re saying about kind of like points and the cash. The analogy that comes (to mind is) I immediately kind of thought about like a cash back credit card or a travel credit card. It kind of starts to feel similar to that. And I have a ton of Chase points, which frankly I’ve been sitting on for the entire pandemic. It’s a little frustrating. Are you … I guess do you see a credit card company as your competitor now in this new space? Or is it eDreams or who’s … how does this change your competitive landscape for Plus?

Kaufer: I don’t really think of myself as having a big competitor in the space at the moment because all of the other programs — look, they’re good programs. I am a member of probably all of these programs and I’m accumulating little points. And they’re sitting there with the balance, and sometimes I use it. Cash back on a credit card is great. I’m sure everyone gets a percent maybe to cash back. I think a 15 percent vacation fund that you can … 15 percent off what the cost of this hotel is going to be as a vacation fund that you can turn into cash is meaningfully different than a 2 percent cashback on your credit card. And by the way, you can double dip, go charge it on that 2 percent cashback card and you’re all set.

Borko: There’s a new churn in strategy for all the FlyerTalk forums out there. All right. OK. Is this all a fintech move or is it just a part of the Plus program ?

Kaufer: Part of the Plus program.

Borko: OK.

Kaufer: Again. And it’s just a piece. We announce some other side benefits meaningful benefits to a Plus membership, but we have the vision to create a extremely affordable way for folks — everyone in the room, everyone watching, everyone around the world who can afford a $99 to save way more than that. And it’s aimed at folks who are actually … who do travel more than the once a year. But of course, all comers are welcome. If you have a $2,000 trip plan and you look at this and you’re going to save $250 and pay $99, it does still be (and) it is still a no-brainer moment to buy Plus for that year. We think the renewal rates will be super high because it is so inexpensive for the savings and all the benefits we’ll provide.

Borko: Anything you can share on renewal rates? I (have) to ask anything good?

Kaufer: It’s too early.

Borko: It’s too early. And any new suppliers, maybe something that rhymes with like a Harriott or a Milton, or…

Kaufer: You see if you think of … if you have looked at the site, you will see I did myself in New York.

Borko: But those are coming from (global distribution systems), right?

Kaufer: Customers don’t care where the supply comes from. I was looking in New York yesterday — a stay in November, there’s a Hilton, there’s a Marriott, there’s everyone. And the customer’s getting a meaningful discount on those properties.

Borko: But I guess if the customer doesn’t care and you had Marriots already via the GDS. But you’re making this change to be more friendly to suppliers. Isn’t the point to get direct connections?

Kaufer: Yes, we have through our older instant book technology. It comes back to life, and it really helps us now because we already have connectivity with about a hundred different connectivity suppliers. I don’t want to go too much in the weeds, but we have a program that enables us to bring thousands of more independent hotels online instantly — not through the GDS [global distribution system]. And all of the small brands, the bigger brands, the independence, they’ll use the GDS if they want to. Great — they have a connection. But they often prefer other connectivity providers, of which we now have working again. Probably close to a hundred.

Borko: All right, let’s shift gears about via tourism experiences. You guys are probably the biggest online booking site in tourism experiences. And I heard on your earnings call you’re back to 2019 levels. What’s driving the recovery in tourism activities for you?

Kaufer: I mean, the Viator as a standalone site, Tripadvisor experiences, the third party business we have with Viator, it’s an amazing kind of gem inside of the Tripadvisor portfolio. Not only does it power an incredibly important part of the Tripadvisor experience, as a standalone part of the business, it kind roared back to life. It beat our own expectations. The shift … there’s certainly a big shift. We used to do a lot more business — Americans going to European destinations.

But as the Covid restrictions eased this past summer May, June, July, wow, people wanted to get out and do stuff. And they said, “All right, I can’t go to Paris. I’m going to Miami. I’m going to Yellowstone. I’m going wherever.” And Viator already has that inventory. And so we picked up a lot of that kind of pent-up travel demand. This is a business that was growing very nicely for us pre-pandemic, took a huge hit as people had to stay home, and now has kind of roared back to life and we’re excited.

Borko: And I was speaking with Google yesterday. They are really constantly — just like you were iterating — they’re constantly iterating tourist activities. And I think actually you’re one of their pilot partners in their advertising program. Google and tourist activities is that exciting, or is it scary?

Kaufer: I guess it’s a little of both. It depends what they choose to do to the degree that they’re sending traffic our way because a lot of people start on Google for a lot of things. That’s awesome. They’re a great partner to the degree that they want to own the entire experience of shopping for an attraction. I don’t think they’ll be successful at it. It’s not a really easy problem. There’s a ton of different dimensions to the degree that they’re selling a commodity ticket that’s not our sweet spot as a business. That’s not why people are coming to Viator or Tripadvisor. They’re planning the memorable things and that’s probably not a single museum ticket.

Borko: Yeah. So I want to talk about up your kind of multi-product strategy. We’ve been talking for almost 15 minutes. We’ve barely even mentioned hotels. How do you run a business with so many different products and maintain … how do you prioritize them all properly?

Kaufer: It’s a challenge, right? I will share that with you. Certainly when we always start with kind of what do we want consumers to be the most successful at doing on our site? They’re coming to plan the trip. Hotels is a really important part of that decision. It is absolutely core to the benefit that so many travelers get from Tripadvisor. It’s the reviews, it’s the photos, it’s the meta auction. It’s the ability to discover whether this is the right hotel for you, whether I can afford it, and whether it has kind of the right room combination.

And to know whether I have to go spend the next half hour shopping around the web or whether “Thank you, Tripadvisor.” You brought all the prices together for me. So like we’re extending that model and say, “Hey, and now another option to purchase this hotel is through Tripadvisor Plus.” This is another way you can kind of up your travel, but hotels are core when you think of the other things that everybody does. It’s that things to do — they do stuff on their trip. And so attractions has to be super important. Dining — we have one of the best restaurant databases around the planet. We’re the leading restaurant review site in so many countries. So those have been our three major kind of pillars, and they’ve served us pretty well.

Borko: Yeah. Is there anyone that you’re most excited about, or I mean I’m not (going) to ask you to pick your favorite child.

Kaufer: Exactly. You can’t do that.

Borko: OK, can’t do it. Tripadvisor (has access to) a lot of consumer sentiment data: 460 million-plus monthly users, something like that maybe.

Kaufer: More than that, yeah.

Borko: More than that. What are you seeing in sentiment wise in terms of the reopening of American borders? Is that a big boost? What are you … are you seeing anything exciting to tell?

Kaufer: Yeah, so we have kind of like data from what people are actually doing on our site now. And we have survey data because we’re always asking very various segments of our audience. And the great news is that as the restrictions have eased over the summer — boom, there was so much pent-up demand. We saw our kind of hotel revenue and click levels above 2019. Yay. Attractions climbed above 2019 … again looking at our U.S. travelers as Europe was more in a tougher lockdown state earlier part of the summer — much less there. As those restrictions have eased (and) as vaccine rates have climbed, we’ve seen Europe shoot back to life. It’s been really good. Those are… we are geographically kind of U.S. biggest part of our North America, biggest part Europe, secondary, far east or Asia, tertiary. And so like, that hasn’t recovered as much. Those big international trips aren’t happening from those source markets at the moment.

Covid will be over at some point, and we expect that that will certainly recover. A sentiment … how (are) vacations kind of changing? What (are we) hearing? Again, this is as much from survey as from … two other points. During the pandemic, there was a lot of activity — going out for outdoor activities. It was camping, it was smaller cities, it was beach and places like New York and Chicago weren’t on the top 10 list of where people are going. That’s now flipped. New York (and) Chicago are super popular again, back up into the top five or top 10 in terms of destinations. And then, you have what are people doing on vacations? And here’s where some of the sentiment research comes in — where people are caring more about the type of thing they are actually doing in a destination. It’s not about visiting Paris. It’s about visiting Paris and the tour and the activity. And kind of … we all know that, but we can start to see that by way of actually booking capabilities. And when we ask people, they talk more about booking tours and booking activities.

Borko: That theme of purposeful travel that we’ve heard a lot this conference. I don’t know if you remember, (but) we spoke in August of 2020. I was sheltering in place. And your quote to me … you were very optimistic at the time you said, “Nobody’s going on a Zoom vacation.” That’s what you told me in August of 2020. And I think in retrospect it was pretty prescient that you were very big believer in travel’s recovery. We’re starting to see the recovery kick in. What do you think? How’s travel going to change post-pandemic? Like as it fades, what’s going to be different? Big predictions.

Kaufer: Clearly people are coming back. The notion that anyone would switch over to a virtual travel experience or cooking classes by Zoom instead of travel, I think is utter baloney. I’ve seen the helicopter tour (and) the Grand Canyon on my screen (in) 3D. It’s really interesting. I now want to go do the real thing. So if anything, it will and I believe it will spur demand to get out there and actually do it. So hugely bullish on recovery — especially leisure travel. I do think the experiential part of it is going to be gangbusters in terms of new options. People will be really caring about what they are exploring, seeking great guidance for what to do — provided by us and others, of course.

Borko: Well, of course by you.

Kaufer: But … it’s going to happen.

Borko: Great. I’m glad to hear. I’m sure everyone in the room is glad to hear it. Steve, thank you so much. We’re out of time, but I really appreciate you coming to join us.

Kaufer: My pleasure. Thank you for having me here.