TRIP - Tripadvisor Inc.

[saltybit]

https://skift.com/2015/03/09/interview-expedias-comeback-ceo-on-what-it-will-take-to-win/

 

(2015) Interview: Expedia’s Comeback CEO on What It Will Take To Win

 

Thanks to TripAdvisor and Steve Kaufer

 

“Listen, any time you’re the CEO of a public company, especially in a field as competitive as the travel field, your job is on the line every day,” Khosrowshahi said. “My job is on the line now.”

 

Khosrowshahi, who was appointed CEO of IAC Travel, which included Expedia, in 2004, talked candidly last week about one of the factors that contributed to Expedia Inc.’s viability during a rough period and Khosrowshahi’s tenure as CEO during that time.

 

“You know, having TripAdvisor as part of fold in those years really helped,” Khosrowshahi said. “We had this incredible rocket ship of a business in our fold and TripAdvisor’s growth allowed us, to some extent, to reinvest in the other parts of the business.”

 

IAC acquired TripAdvisor in 2004 and Expedia Inc. spun off TripAdvisor into a public company in late 2011.

 

“I guess I have [TripAdvisor CEO] Steve Kaufer to thank,” Khosrowshahi said. “Maybe he saved me my job. But having a portfolio, having different brands, allows you to invest in different parts of the business and TripAdvisor being a part of the family in those early years was a big part of where we are today.”

 

Expedia Inc. — and the Priceline Group — are now TripAdvisor’s largest customers, although the two online travel agencies compete with TripAdvisor, as well.

[bbarberayr]

Booking a trip recently and noticed that booking on the hotel/B&B website is now cheaper than the booking engines.  In the past, the PCLN, EXPE, etc. and now TRIP would have lower prices, but if this changes, then you wonder how much pressure will be on all these business models.  You'll recall when airfares paid commissions and now don't and packaged vacations used to pay a 10% - 15% commission and now it is down in the 3% - 5% range.  The commission hotels pay is still high, generally over 10%, so there is room for this to be squeezed.

[fareastwarriors]

TripAdvisor removed warnings about rapes and injuries at Mexico resorts, tourists say

 

https://www.usatoday.com/story/news/nation-now/2017/11/01/tripadvisor-removed-warnings-rapes-and-injuries-mexico-resorts-tourists-say/820094001/

[Jurgis]

~20% drop today on results https://www.sec.gov/cgi-bin/viewer?action=view&cik=1526520&accession_number=0001564590-17-021789&xbrl_type=v#

 

All the hedge funds that promoted this as great position bailing out?

[KCLarkin]

~20% drop today on results https://www.sec.gov/cgi-bin/viewer?action=view&cik=1526520&accession_number=0001564590-17-021789&xbrl_type=v#

 

All the hedge funds that promoted this as great position bailing out?

 

I haven't listened to the PCLN/TRIP calls yet, but it seems like PCLN is declaring war on TRIP and Trivago. They are cutting spending on Trip/Trivago and shifting ad dollars to brand advertising. Considering that OTA market is a duopoly, if PCLN doesn't bid aggressively on your platform you lose all pricing power. Revenue per hotel shopper was -12% YoY. So, this is a rare case where a 20% drop doesn't necessarily mean it is cheaper than it was yesterday.

 

Priceline is also down 12%, since they will lose traffic by not bidding aggressively on Trip and Trivago. I'm not sure how sustainable this is. Presumably, PCLN will start losing market share to EXPE.

 

The bullish case on Trip's non-hotel business continues to play out. Non-hotel was 46% of adj EBITDA this quarter.

 

--

I think the bullishness of two shareholders I respect, Greenwood and Greenhaven, made me miss the obvious risk here. Consolidation in the OTA space has tipped the balance of power dramatically in favor of Priceline. The obvious move here is to buy Priceline.

 

Still, the combination of the non-hotel business and the likelihood of an acquisition should limit the downside.

 

 

 

 

[Jurgis]

Yeah, buyout is possible, though it's not clear if anyone will offer enough to satisfy Liberty/Maffei. Unless it's buyout from Liberty universe, but then I'd be gaining from buyout, but losing from the buyer (whose stock would likely drop).

 

I am not optimistic about non-hotel business. They are advertising it as a huge opportunity, but I'm really not sure it's gonna work out the way they expect. We'll have to see. Edit: I see that they include Vacation Rentals into non-hotel; I am most skeptical about Attractions, a bit less skeptical about Restaurants (depends on competition there though), probably less skeptical about Vacation Rentals (depends on competition too). Edit2: Yeah, I know that they say that Attractions are growing a lot. ;)

 

I watched the TRIP CEO interview/speech at recent Skift Global Forum 2017 and he seemed weakest out of TRIP/EXPE/PCLN.

[gary17]

I think CEO presentation is not as critical

but more importantly the business itself

 

did anyone understand why they need to spend so much on TV advertising.  is that to help hotel revenue? 

 

i’ve been trying to read up on tbis story. are they now rid of instant book and so back to pay per click or is it still pay per transaction ?

 

thx

[Jurgis]

I think CEO presentation is not as critical

but more importantly the business itself

 

did anyone understand why they need to spend so much on TV advertising.  is that to help hotel revenue? 

 

Well, most of CEO presentation was about TV ads and how good they are.  ;)

 

I was not convinced. Maybe my attitude is simplistic, but if top well known travel (review) online brand needs to advertise itself on TV, then something is wrong. Yeah, yeah it's about attracting the people who never used the brand (percentages? ROI?) and about showing additional capabilities beyond reviews (just show these capabilities on website, no?).

 

 

 

I changed my mind about Attractions a bit. I still think that the market is limited. I'd have to estimate how limited: the optimistic ceiling is probably something like 1/3 total hotel revenues (not TRIPs hotel revenues but total across platforms), but likely the real ceiling is much lower. Of course even if we are talking about 1/20 of total hotel revenues, but TRIP gets >80% of attraction marketshare (unlike their hotel marketshare), that's still a good contribution. And probably why a lot of people are gaga about TRIP Attractions segment.

It's possible that it does not cost much (incrementally), and growth from near-zero would be high, and it might provide convenience especially in international markets. Though getting (smaller) merchants on platform might not be simple.

[kab60]

I bought at 39.5 and doubled at 31. I understand Priceline wants to wrestle, but I think Trip is in a unique spot. Let's say Hotel stabilizes (pressure on rates but increased traffic) and you take out tv ads and you might have some 300-400m adj Ebitda from hotel. Then you have 49m from non-hotel this Q - how much annualized is difficult but say 150m growing at 20-30 pct. On an EV of 3,8b I think it is too cheap and then you have M&A optionality. I think non-hotel is a huge opportunity. It's a crazy fragmented marketplace that is well suited for mobile and I don't see who'll stop them. They just need to keep investing massively in supply.

[peterHK]

There's a few things the market seems to miss:

 

Non-Hotel segment performance was excellent, and it's a fragmented market with lots of room for TRIP to expand and differentiate themselves. Yes it's a smaller market than hotels, but lets say TRIP gets significant market share and scales this to where hotels is now, that's a lot of EBITDA/Earnings upside from here.

 

Mobile monetizes at around 45-50% of the rate of desktop. Desktop is shrinking and mobile is growing. So at some point we start seeing growth in absolute dollar terms in hotels.

 

The ad spending is not mainly to try and drive traffic to TRIP, in my view. It's to get the public to realize that Instant Book is not as terrible as it used to be, and can really add value to customers. TRIP is coupling this with low ROI ad spend, and so the net increase in ad spending will be less, and in ROI terms, should be decent. Having seen the TRIP ads, I find it hard to believe that over time you'll see better conversion metrics from InstantBook at a higher revenue per customer rate as the revenue contribution from a booking is much higher than a researcher who only clicks.

 

I'm surprised the sell side focuses so much on this marketing spend and they see it as the worst thing ever and as waster dollars. These are the same sell siders who said that TRVG's TV ad spending was fantastic. I think the truth is in the middle: it's okay, it's not cheap, and TRIP is just going to have to spend more to compete. But that's priced into the stock, and there's a lot of levers for management to increase revenue (as semi-incompetent as they are).

 

 

[oddballstocks]

Booking a trip recently and noticed that booking on the hotel/B&B website is now cheaper than the booking engines.  In the past, the PCLN, EXPE, etc. and now TRIP would have lower prices, but if this changes, then you wonder how much pressure will be on all these business models.  You'll recall when airfares paid commissions and now don't and packaged vacations used to pay a 10% - 15% commission and now it is down in the 3% - 5% range.  The commission hotels pay is still high, generally over 10%, so there is room for this to be squeezed.

 

I stopped using middle-man sites when I realized this as well.  Another change is hotels have a more lenient policy on cancellations compared to the aggregators.

 

A few years ago I was at the airport and watched as a woman desperately tried to change their reservation made via Expedia and the airline employee said "sorry, if you purchased through us I could do a lot, but I'd recommend you call Expedia and work it out with them."  She tried and without luck couldn't get anyone on the phone and purchased a new ticket.  That ticket alone destroyed decades of savings she could have had from a site like that.  I've paid a few dollars more per reservation since and haven't ever had an issue with cancellations or changes.

[KCLarkin]

I changed my mind about Attractions a bit. I still think that the market is limited. I'd have to estimate how limited: the optimistic ceiling is probably something like 1/3 total hotel revenues (not TRIPs hotel revenues but total across platforms), but likely the real ceiling is much lower.

 

First, TRIP only has an EV of 3.8B. So, even a niche market can move the needle. 2nd, Trip will be able to monetize accommodations fairly well since they don't need to share commission with OTA. 3rd, attractions should be high margin since the customer acquisition cost for Trip is near zero.

 

As for acquirers, Priceline would be obvious choice. But this would also be a cheap acquisition for Google, Amazon, Facebook, or an Asian internetco to support their travel businesses. This is a fantastic asset, great brand, with a large moat -- that just happens to have a weak business model. But its market cap is now about the same as Yelp, which is a much worse business in almost every way.

[LongTermView]

A few years ago I was at the airport and watched as a woman desperately tried to change their reservation made via Expedia and the airline employee said "sorry, if you purchased through us I could do a lot, but I'd recommend you call Expedia and work it out with them."  She tried and without luck couldn't get anyone on the phone and purchased a new ticket.  That ticket alone destroyed decades of savings she could have had from a site like that.  I've paid a few dollars more per reservation since and haven't ever had an issue with cancellations or changes.

 

Yeah, I buy most of my flights direct, especially with airlines like jetBlue and Southwest. When it comes to hotels, I've used Expedia quite a bit and my wife uses Booking.com. I use the tripadvisor reviews and might start booking hotels with them.

[Gregmal]

I've followed these travel cos for a bit, and the value I suppose is there; however I'd like to play devil's advocate here for a minute. These agencies make money on a commission or spread basis. The benefit to the consumer is obviously convenience, and saving money. That's probably the bulk of it. This won't disappear overnight, however as someone already mentioned, if travel agencies are no longer the cheapest, then you are basically left targeting the lazy consumer.

 

Also, I've read people say there are high barriers to entry, but what really keeps Amazon or Facebook from getting into this space? If it's really just about squeezing a profit margin, we've already seen AMZN do this a million times over in other areas. Why wouldn't they be able to do it here? I think it would be incredibly easy for AMZN or FB to leverage their platforms and do direct deals with the airlines/hotels.

[Jurgis]

I changed my mind about Attractions a bit. I still think that the market is limited. I'd have to estimate how limited: the optimistic ceiling is probably something like 1/3 total hotel revenues (not TRIPs hotel revenues but total across platforms), but likely the real ceiling is much lower.

 

First, TRIP only has an EV of 3.8B. So, even a niche market can move the needle. 2nd, Trip will be able to monetize accommodations fairly well since they don't need to share commission with OTA. 3rd, attractions should be high margin since the customer acquisition cost for Trip is near zero.

 

As for acquirers, Priceline would be obvious choice. But this would also be a cheap acquisition for Google, Amazon, Facebook, or an Asian internetco to support their travel businesses. This is a fantastic asset, great brand, with a large moat -- that just happens to have a weak business model. But its market cap is now about the same as Yelp, which is a much worse business in almost every way.

 

Yes.  8)

[Liberty]

Also, I've read people say there are high barriers to entry, but what really keeps Amazon or Facebook from getting into this space?

 

I suppose they could try again...

 

https://techcrunch.com/2015/10/14/amazon-shuts-down-its-hotel-booking-site-amazon-destinations/

[Gregmal]

Also, I've read people say there are high barriers to entry, but what really keeps Amazon or Facebook from getting into this space?

 

I suppose they could try again...

 

https://techcrunch.com/2015/10/14/amazon-shuts-down-its-hotel-booking-site-amazon-destinations/

 

Interesting. Was not aware of that.

[Spekulatius]

Booking a trip recently and noticed that booking on the hotel/B&B website is now cheaper than the booking engines.  In the past, the PCLN, EXPE, etc. and now TRIP would have lower prices, but if this changes, then you wonder how much pressure will be on all these business models.  You'll recall when airfares paid commissions and now don't and packaged vacations used to pay a 10% - 15% commission and now it is down in the 3% - 5% range.  The commission hotels pay is still high, generally over 10%, so there is room for this to be squeezed.

 

I stopped using middle-man sites when I realized this as well.  Another change is hotels have a more lenient policy on cancellations compared to the aggregators.

 

A few years ago I was at the airport and watched as a woman desperately tried to change their reservation made via Expedia and the airline employee said "sorry, if you purchased through us I could do a lot, but I'd recommend you call Expedia and work it out with them."  She tried and without luck couldn't get anyone on the phone and purchased a new ticket.  That ticket alone destroyed decades of savings she could have had from a site like that.  I've paid a few dollars more per reservation since and haven't ever had an issue with cancellations or changes.

 

I had  my own experience when Rita hit Texas in September 2005. We had a trip to Mexico booked with Expedia and had a stopover in Houston the day  Hurricane Rita made landfall. Expedia would not let us cancel  the flight  and the trip even though one of the largest evacuation in the history in the US was occurring and was all over the TV. We ended up canceling the trip and had to pay around $100, to do it. Last time I booked airfare with them.

[ebdem]

Also, I've read people say there are high barriers to entry, but what really keeps Amazon or Facebook from getting into this space?

 

I suppose they could try again...

 

https://techcrunch.com/2015/10/14/amazon-shuts-down-its-hotel-booking-site-amazon-destinations/

 

Interesting. Was not aware of that.

 

 

Maybe it's just a good move for Amazon to buy TRIP. Then they have a great plattform to sell everything related to travel and all the content TRIP offers. "Alexa reserve me a seat at that restaurant" "Just done it with my TRIP booking system." - "Alexa, buy me a ticket for the museum." "Just did it with Trip". Where can I find the best deals and best reviews on Hotels? On TripAmazonizor...

[ZenaidaMacroura]

Also, I've read people say there are high barriers to entry, but what really keeps Amazon or Facebook from getting into this space?

 

I suppose they could try again...

 

https://techcrunch.com/2015/10/14/amazon-shuts-down-its-hotel-booking-site-amazon-destinations/

 

Interesting. Was not aware of that.

 

 

Maybe it's just a good move for Amazon to buy TRIP. Then they have a great plattform to sell everything related to travel and all the content TRIP offers. "Alexa reserve me a seat at that restaurant" "Just done it with my TRIP booking system." - "Alexa, buy me a ticket for the museum." "Just did it with Trip". Where can I find the best deals and best reviews on Hotels? On TripAmazonizor...

 

mind blown.

 

Suddenly feeling antsy about PCLN...

[kab60]

I just came back from a short weekend trip to Rome. I liked Trip before (only just recently as an investment) but was pretty blown away by how useful the app has become whether it is to find sights and attractions or good eateries. Attractions is showing really good momentum in the numbers now, but I think they're only in the early innings of significant growth. There's still a lot of inventory they lack (more bookable places to eat, attractions etc.) but it's already hugely useful. Whether it pans out as an investment depends on their ability to monetize, but the value for consumers is pretty damn impressive already, and in the long run I think that's a winning strategy.

[scorpioncapital]

Have you looked at Google Trips?

 

 

[kab60]

Yep. Not too impressed. I think it's slick how Google Calendar figures out my flight schedules and Google Trips imports it but I like Tripadvisors app and content more. I think it's pretty valuable with the number of reviews and frequency of news ones considering how the quality of say a restaurant can change quiet fast.

[gary17]

The non-hotel business continues to grow quite impressively, but the accounting for me is too difficult to really understand what's the bottom line for shareholders... (a bit like amazon...  that there's a lot of reinvestment into the business it's hard to understand).

 

What are other people's take on this?  If they don't need the TV advertisement... what's the owner's earning for TRIP? and is it expensive ?

 

Gary

[cubsfan]

I own quite a lot of TRIP, but you might struggle looking at the value metrics.

I think you have to believe a few things:

- the data is quite valuable and hard for someone else to duplicate (600M reviews)

- 2 emerging businesses consumed a lot of profits while the they were being built

- the 3 markets they operate in are quite enormous

- there are some first mover advantages they have

- the metrics are moving in the right direction now, with most categories increasing

  and evidence of potential to monetize further.

- potential for a "winner take all" situation because scale has now been built

 

So, I do think your comparison to AMZN is correct, but total dominance is not required to make this a decent investment. Just stopping the bleeding, while

the shift to mobile happens from desktop - with revenue stabilization - showing that the business is not deteriorating can make this work out pretty well.