Less than a year ago, a Tripadvisor pitch deck about Tripadvisor Plus touted its "multibillion dollar revenue potential." Despite the company expressing confidence in Plus when it scrapped its business model in September, Tripadvisor admitted last week "we haven't found the product-market fit that we're looking for."
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It was only a little more than a year ago that Tripadvisor co-founder and CEO Steve Kaufer touted the company’s fledgling — and since all but obliterated — Tripadvisor Plus subscription membership program for discounted hotel rooms as potentially a billion dollar business.
“You could think of it (Tripadvisor) as we serve 1 billion travelers a year,” Kaufer told financial analysts in February 2021. “And if — I have to say this carefully — but if it’s only 10 million that sign up for Tripadvisor Plus, that’s still less than 1 percent of our annual traffic. But 10 million sign-ups times $100, and obviously, the math works pretty nicely in a recurring subscription revenue.”
Subscriptions were — and still are — deservedly hot in travel and beyond. Financial analysts jumped on the Tripadvisor Plus bandwagon, and bought into the boasts. In February 2021, Bernstein’s Richard Clarke raised his price target on Tripadvisor stock, in part because of the subscription plan, to $45, from $40, and rated the shares “outperform.”
“Despite being in beta stage, confined to certain areas of the U.S., and without a full basket of direct supply, it is still something to get excited about,” Bloomberg quoted Clarke as saying about Tripadvisor Plus that month.
At the time, big hotel chains were balking at participating in the program, which displayed substantial rate discounts to subscribers and, importantly, sometimes to non-subscribers prior to booking, and clashed with industrywide rate parity rules. Insiders whispered that the chains would eventually join Tripadvisor Plus, but even if they didn’t there were ample numbers of partipating independent hotels and properties brought in by aggregators to get Tripadvisor Plus off the ground.
This is all ancient history. Last week as part of its fourth quarter earnings call, Tripadvisor said it still sees a consumer subscription plan as a “an attractive growth opportunity,” but Kaufer conceded “we have to recognize that, at this point, we haven’t found the product-market fit that we’re looking for.”
One problem, he said, is that when travelers are about to spend a substantial amount of money on reserving a hotel, the prospect of paying to sign up for a Tripadvisor Plus subscription is “more of a load than that customer is ready to decide. And that makes some intuitive sense.”
It was clear as far back as September that Tripadvisor Plus was on life support.
In September, Tripadvisor was forced to scrap the Plus business model because hotels bristled at the rate parity violations, and Tripadvisor then began arguing that it still had complete confidence in a revamped scheme that would give subscribers “vacation funds” to use during their trips or later instead of up-front discounts, and that consumers would see the merit in this supposedly no-brainer value proposition.
At that time, I raised the possibility that the whole program might turn out to be “a flop” because cash back at check-in, when there are so many rewards and rebate programs to compete with, was far less attractive than the original pledge of up-front discounts.
Last November, during Tripadvisor’s third quarter earnings call, Kaufer spoke of the Tripadvisor Plus business model change — and apparent setback — and the ongoing viability of Tripadvisor Plus.
“I couldn’t be more excited about what vacation funds this kind of change in the model can deliver for our travelers and of course, how well it works for our suppliers,” Kaufer said at the time.
Some financial analysts fell in line.
In an investor note in November 2021, Brian Fitzgerald of Wells Fargo wrote of the transformed Tripadvisor Plus business model, and expressed confidence that this would spearhead more bookings.
“TRIP continues to iterate on its PLUS subscription offering as it tests moving from an instant savings model to one that enables travelers to earn cash, called Vacation Funds, that are available for the traveler the day after hotel check-in or tour/activity completion, addressing existing rate parity agreements with hotels to add significant supply and removing the paywall for travelers coming to the site to see savings on hotels,” Fitzgerald wrote. “We expect this to continue to drive conversion as TRIP expands the service.”
But as of last week, Tripadvisor admitted it hadn’t made much progress in Tripadvisor Plus, but will continue to test things out and try to innovate to build the business.
Hey, never say never about the program’s prognosis, but even Tripadvisor admits it hasn’t yet found a viable formula for subscriptions.
All of this is not to place all the blame on Kaufer, who will be stepping down as CEO after the board appoints a replacement, for the failings of Tripadvisor Plus to date. Tripadvisor’s board members are supposed to oversee big initiatives like Tripadvisor Plus, and there were enough people both inside and outside the company that should have counseled its leadership that big hotel chains would go berserk over rate parity violations.
The dilemma was that Tripadvisor needed to show consumers who hadn’t yet signed up for Tripadvisor Plus that once they did they’d be able to book a Hilton for a 5-night stay for $190 per night despite Hilton.com offering the property for $250. The chains abhor such naked trashing of their rate standards in this theoretical example, and wouldn’t play along.
I admire Kaufer on a bunch of levels. He and his team built a global business — the largest travel website by traffic on the planet — that travelers feel in every nook of the world, and that online travel competitors were forced to mimic in many ways. And Kaufer has been a leader in advocating on behalf of refugees, and opposing then-President Trump’s Muslim traveler bans, and anti-foreigner rhetoric when others in the travel industry were afraid to speak out.
Besides all that, there’s no dishonor in trying a bold new program that fell short, and hasn’t yet found its mojo.
But there was too much hype about Tripadvisor Plus, and many financial analysts, just as they do for many of Airbnb’s over-the-top boasts, didn’t exercise enough skepticism.
It will be up to Tripadvisor’s next CEO — and the board — to sort all of this out.
What About Airbnb’s Host Numbers?
Airbnb boasted of having 4 million hosts before its IPO in December 2020, and despite recently talking about successful campaigns to attract new hosts, the company said last week it still has 4 million hosts. Of course, you have to take into account that parts of Asia-Pacific haven’t rebounded. Still, analytics firm AirDNA said Airbnb has gained hosts to meet demand during the fourth quarter in all the right places — Brazil, France, the U.S., and coastal, rural and mountain locations. Airbnb has leaked hosts, however, in Australia, Canada and China, all geographies that had stringent travel restrictions.
Inspirato’s Stock Price Has Been a Yoyo But Is Way Up
Luxury travel subscription service Inspirato opened trading at around $10 per share last week in its stock market debut, and closed at $37.64 per share Tuesday. Benzinga traced how the share price jumped more than 500 percent to more than $87 on Thursday, a few days after going public. The SPAC closed at $9.55 per share the night before the merged companies started trading, and holders of more than 98 percent of its pre-SPAC shares cashed out at $10.20 per share. That’s 98 percent … hmmm.
Tripadvisor Nemesis KwikChex Launches Its Own Review System
A decade ago the UK’s KwikChex complained about allegedly fake user reviews on Tripadvisor to the UK’s Advertising Standards Agency, forcing Tripadvisor to abandon the slogan, “Reviews you can trust.” Now, KwikChex is launching its own hotel review system. The company said the new service, called Veri-Good, will in the first place only allow “businesses with high standards” to be featured on its platform, and it pledged to verify standards and hold “itself and the featured businesses accountable for maintaining them.”
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