What Will Tripadvisor Look for In Its Next CEO?

A deal with Trivago? A CEO who’s a better storyteller? A company that isn’t changing strategies willy nilly?

As Tripadvisor began what it said is an internal and external search to find a successor to CEO Steve Kaufer, who will be leaving his post next year after a 22-year run, Skift asked analysts and online travel veterans what’s next for Tripadvisor, and what should the board look for in his replacement.

A couple of people pointed to the potential for, and the logic of, some kind of deal with lodging search company Trivago.

Citing his view that there are too many travel metasearch companies already, Bernstein analyst Richard Clarke argued that a “soft consolidation” between U.S.-headquartered Tripadvisor and Germany-based Trivago, both of which offer lodging advertising auctions for hotels and online travel agencies as part of their businesses, would make sense. 

As a case in point, Trivago now powers Chinese smartphone company Huawei’s hotel search business, obviating the need for Huawei to hire staff and deploy resources to sign up hotels. 

There’s a school of thought that a Tripadvisor-Trivago alliance, if not an even deeper transaction, could have Trivago focusing on its back-end auction technology and conversion capabilities at the bottom of the proverbial travel funnel when consumers are ready to transact, while Tripadvisor, one of the largest travel sites in the world, could concentrate on its more upper-funnel travel inspiration and trip-planning acumen.

In this way, according to an online travel source, Tripadvisor could improve its commercialization by outsourcing its back-end technology. Trivago could take advantage of Tripadvisor’s immense audience of people researching hotels at an earlier stage of trip-planning.

One investor noted that the prospects for such a Tripadvisor-Trivago deal might hinge on how much costs Tripadvisor could eliminate by outsourcing the back end of its core Hotels, Media & Platform business to Trivago, and milking the cash flow over the next 5-10 years. On the other hand, if Tripadvisor believes that its hotel advertising business has longer-term potential then it might retain it, and fully operate it on its own.

Big Wins, Many Failures

Tripadvisor had many wins over the years. It practically invented hotel user reviews, and this set it up on a global growth trajectory for many years until Google more than a decade ago started siphoning off a chunk of Tripadvisor’s free traffic, and diverted it toward Google’s various travel advertising products.

“Tripadvisor might be the poster child for a major Google casualty,” said another travel industry veteran. “Meaning they are in such a tough position that they are alive but a shell of what they were — or could have been.”

In addition to user reviews, Tripadvisor benefited over the years from its 2014 acquisitions of Viator, a global leader in tours and activities, and TheFork, the mostly Europe-based and leading dining reservations platform in the region.

But Tripadvisor suffered from a series of setbacks over the years, and has yet to adequately turn things around, although it is profitable. On the negative side of the ledger:

• Tripadvisor acquired FlipKey in 2008, but despite the revolution in alternative accommodations, vacation rentals are an afterthought for Tripadvisor today, and not a material part of its business.
• Tripadvisor tried to transform itself into a hotel booking site to supplement its search features but had to abandon the effort in 2017.
• The company conducted a New York City press briefing in 2018 to herald revamping its homepage, anchoring it with a social/inspiration feed, and quietly dropped the effort when it failed to change the business dynamic.
• After launching its Tripadvisor Plus subscription program several months ago with the pledge of large up-front hotel and tour discounts to subscribers for a $99 annual fee, the company faced stiff opposition from major hotels over rate parity issues, and recently announced it will offer what some believe is a less attractive perk of cash back at check-in instead. Before the about-face, Tripadvisor held out hope that Tripadvisor Plus could attract “tens of millions of subscribers and a multi-billion dollar recurring revenue stream.”

The revamped Tripadvisor Plus, which is being tested, looks like it will be more complicated and lack the instant gratification that was part of its original vision. But let’s be clear: If it turns out to be a failure, the blame doesn’t rest entirely with Kaufer — the board of directors of the Liberty Tripadvisor-controlled company was enthusiastic about the plan, as well. 

“I think the most important thing in the new Tripadvisor CEO will be vision and ability to execute,” said Skift Research’s Seth Borko. “It feels like Tripadvisor has been in a reactive mode, constantly launching new products to respond to changes that their competitors or peers were making.”

Borko said none of these product launches were necessarily bad but “the lack of focus detracted from making any one of them truly great — outside of the original product in hotel meta and the acquisition of Viator. 

“I think the next CEO needs to have a vision of what Tripadvisor can be in a post-Google metasearch world,” Borko said. “Rather than react, an incoming Tripadvisor CEO should be proactive in deciding what to build and then execute aggressively.”

One online travel veteran argued along the same lines, saying Tripadvisor changed strategy too often, and in the case of the travel inspiration feed, for instance, didn’t give it enough time to see how it might do.

Part of its Tripadvisor’s issue from a stock market perspective is that the company believes it is under-valued, as investors don’t have enough clarity about its largely transaction-based businesses, Viator and TheFork, versus Tripadvisor’s advertising businesses.

For these reasons the company announced during its third quarter earnings call last week that it will explore various way of increasing shareholder value, including breaking out the financials, which are currently lumped together, of Viator and TheFork. Tripadvisor said it doesn’t intend to sell these businesses in the near term. However, spinoffs could be under consideration at some point.

Clark of Bernstein said the next Tripadvisor CEO “mainly needs to tell the story better.” 

In other words, Clarke agreed with Tripadvisor officials that they aren’t getting enough credit for TheFork and Viator, and the company’s different business models may muddle things for investors. Changes in the way Tripadvisor reports those businesses’ financials, such as a line item for gross bookings in experiences, as well as selling perhaps a 25 percent stake in Viator in exchange for a supply agreement, could be helpful.

He said the Tripadvisor’s stock is basically flat compared to pre-Covid levels and it isn’t getting the credit from Wall Street for trimming $100 million in overhead. Those savings are “a similar percentage of market cap as Expedia and they get huge credit,” Clarke said.

Several online travel executives we contacted said Tripadvisor is indeed in a “tough” position.

Said one travel industry veteran: “It’s hard to out-search Google, and I think the successor is going to have a tough job. I think Kaufer was a very bright leader who fought a good fight, and I’m not surprised he can’t take it anymore.”

For his part, Kaufer said during the company’s third quarter earnings call last week that the board would likely be looking for a successor who has experience in travel, subscriptions, and e-commerce.

Said Kaufer: “I’ve been at the helm for, by the time I depart, it will be 22 years. It’s a good opportunity. Tons of potential in front of the company. And so this isn’t a question of needing change. This isn’t a question of looking to do something dramatically different. And that’s — but I wanted to give the board plenty of time to select truly the best leader because it’s a gem of a company with a ton of upside in front of us.”