TRIP - Tripadvisor Inc.

[patientcapital]

I recently sold my TRIP stake.

 

I also owned it for the exact same logic as cubsfan, but I've come to believe I was wrong about one key assumption: their moat isn't widening, it's narrowing.

 

I used to view TripAdvisor's massive library of reviews as a huge moat, with winner take all economics, but I now believe that moat is gradually shrinking due to Google.

 

In short, the Google Travel business has TripAdvisor in it's cross-hairs, and they are trying to leapfrog them. Today, Google Trips auto imports your travel plans from your gmail, and they leverage the wealth of reviews they have collected over the years through Google Maps. Here's a scary realization: for a given city, compare the rankings of the "top things to do list" between the Google Trips app and TripAdvisor. They are almost identical. For your next trip try downloading one of their city guides. It's actually really impressive what they've done and how it integrates with Google Maps to help you get to your attraction. Again, I was a TripAdvisor "homer" and I didn't want to believe this was the case, but it is.

 

To be clear, Tripadvisor still has the edge on hotel specific reviews, but that may change over the medium term.

 

I recently listened to a Q&A with Oliver Heckman: the head of Google Travel. It's my view that his vision is to reduce the friction a customer experiences has when it comes to travel. He sees that there are too many layers to book travel plans. Google search --> metasearch (trip/trvg) --> OTA --> hotel. He wants to leapfrog metasearch first, and send people direct to the hotel site or OTA. I also suspect he wants to leapfrog the OTAs and send travelers direct to the hotels eventually. It was a simpler task, but they already did a great job with Google Flights to cut out the OTA entirely and go straight to the airlines. Google Hotels is the product he's focused on with his 850 person team.

 

I've read the argument that google's ad revenue for their travel business >>> google travel, however, I get the impression that they aren't thinking about it that way at all. Oliver just wants to make a better customer experience and that likely involves less TripAdvisor / Trivago.

 

Tripadvisor isn't dead by any means, but it's also worth noting that their biggest threat is also a key supplier of their website traffic. This is a similar conundrum that the OTAs have experienced with Tripadvisor now that they are also in the OTA business through instant book. PCLN recently decided to cut their spending with TRIP, and now TRIP decided to cut some of their spending with GOOGL this quarter.

 

My view is that Google has and will continue to raise the price of their paid traffic, which chokes Trip's profitability, all the while trying to leapfrog them with their google travel platform.

 

I want to own things for a decade or indefinitely because that's how I can get the most out of compound interest. In the case of Trip I decided to sell because I don't know what they look like 10 years from today. If you told me I couldn't sell for 10 years, I'm not sure I'd buy it today. I thought I knew the answer when I bought in the low 40s in 2016, but I've come to believe I was just wrong, so I decided to sell.

[cubsfan]

I think those comments are quite good - and I agree Google has always been the

one to worry about here. So TRIP is not a slam dunk at all, and I too, couldn't buy

it with the idea that I could walk away for 10 years. Such is the nature of such

a dynamic and competitive market.

 

 

[KCLarkin]

I sold my TRIP today and bought GOOG. These trades were independent but the dynamics between GOOG-PCLN-TRIP did finally push me to open a position in GOOG.

 

I made a mistake on TRIP and was happy to get out with a profit. I still think the most likely outcome is a takeout with a nice premium, but it is definitely hard to predict how this will look in 10 years.

[ebdem]

I recently listened to a Q&A with Oliver Heckman: the head of Google Travel. It's my view that his vision is to reduce the friction a customer experiences has when it comes to travel. He sees that there are too many layers to book travel plans. Google search --> metasearch (trip/trvg) --> OTA --> hotel. He wants to leapfrog metasearch first, and send people direct to the hotel site or OTA. I also suspect he wants to leapfrog the OTAs and send travelers direct to the hotels eventually. It was a simpler task, but they already did a great job with Google Flights to cut out the OTA entirely and go straight to the airlines. Google Hotels is the product he's focused on with his 850 person team.

 

Thanks for the excellent observation! Do you have the link to the Q&A?

[eclecticvalue]

Tripadvisor is not focusing too much on the hotel business and is focusing more into the attractions side because there isn't a website that does it well so there is opportunity left.

 

About the google trips- We will see if they can execute well. The problem with google has been the execution side with their products and I was thinking people go through google search to find not only hotels but discounts. So will the google trip show these discounts. Will the experience be better. Because people won't stop comparison shopping anytime soon. Also what makes Tripadvisor great is the community/social aspect. How will google do it. Maybe add some AR/VR features???

[KCLarkin]

the attractions side because there isn't a website that does it well so there is opportunity left.

 

The economics are also more attractive. In hotels, TRIP is squeezed between Google on the demand side and the OTAs on the supply side. TRIP provides much of the value, but Google and Priceline capture most of the revenue.

 

In attractions, TRIP can get much of the demand for free (from existing TRIP users). And they are acting as the OTA. So they can capture a larger portion of the revenue.

[LightWhale]

Tripadvisor is not focusing too much on the hotel business and is focusing more into the attractions side because there isn't a website that does it well

 

Have you checked out airbnb 'experiences'? It's becoming quite popular, and as a private company they have a great capacity to suffer until that line of business becomes meaningful.

[KCLarkin]

Have you checked out airbnb 'experiences'? It's becoming quite popular, and as a private company they have a great capacity to suffer until that line of business becomes meaningful.

 

At least in Toronto, I found the 'experiences' disappointing. Basically, you can have some random person show you around town. Prices seem high. Most of the experiences seem unappealing. But there is definitely potential here.

 

Viator/Trip, is more focused on "prestige" attractions like Ripley's aquarium, niagara falls.

 

AirBNB could definitely be a viable competitor in this space.

[patientcapital]

I recently listened to a Q&A with Oliver Heckman: the head of Google Travel. It's my view that his vision is to reduce the friction a customer experiences has when it comes to travel. He sees that there are too many layers to book travel plans. Google search --> metasearch (trip/trvg) --> OTA --> hotel. He wants to leapfrog metasearch first, and send people direct to the hotel site or OTA. I also suspect he wants to leapfrog the OTAs and send travelers direct to the hotels eventually. It was a simpler task, but they already did a great job with Google Flights to cut out the OTA entirely and go straight to the airlines. Google Hotels is the product he's focused on with his 850 person team.

 

Thanks for the excellent observation! Do you have the link to the Q&A?

 

I don't remember which video it was, I watched as many interviews I could find.

 

This one was good and recent:

 

 

Here's one from 2016, where at 14:40 he outlines the frustration of all the layers in booking travel:

 

 

This one was also useful:

 

 

[patientcapital]

Really good article on Google from the NYTimes: https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html

 

Perhaps I'm seeing what I want to see within this article, but a central theme of the story is that Google hates vertical search engines.

 

From the NYTimes Article:

 

"What is the real threat if we don't execute on verticals?" one Google executive emailed his colleagues in 2005, according to internal documents later shared with the Federal Trade Commission. "Loss of traffic from Google.com because folks search elsewhere for some queries," he wrote, in answer to his own question. "If one of our big competitors builds a constellation of high-quality verticals, we are hurt badly," the internal documents continued. Another executive put it more bluntly: "Google's core business is monetizing commercial queries. If users go to competitors such as Amazon to do product queries, long-term revenue will suffer."

 

My read is that TRIP/TRVG are vertical search engines (travel metasearch). The reason why Google didn't squash this particular bug is because unlike most other verticals, the travel industry has been handsomely rewarding Google through it's insatiable thirst for SEM. I've honestly never seen an industry like it - where all the companies show SG&A (as a % of sales) DE-LEVERAGE while their revenues have grown +20% YoY seemingly forever. If I was Google, I'd be happy with that too.

 

This reality for the OTAs/metasearch engines always perplexed me. I think we've hit a tipping point for the industry, because eventually that SG&A deleverage will squeeze your EBIT margins when your leverage on your COGS flattens out. Today, the OTAs and metasearch engines have announced they aren't bidding to ROI breakeven anymore (which never made sense to me), and I think Google realizes that it needs to be more aggressive in it's own travel vertical search to grow in this vertical.

 

This is just my view, I could very well be wrong. I just don't know if TRIP will be better or worse off in the future, which is why I moved on.

[chesko182]

Great comments patientcapital, also read the article and found quite insightful.

 

Might be observational but I've noticed that TRIP is also showing up less and less in Google search results when I put in travel related queries and usually Trip would be the top hit, now its either 4th or 5th or even non-existent... pretty much spot on with what the article is saying.

 

Love GOOGL as a business but if they're actually doing things like these on purpose they're up against a lot more fines I would think. But they will probably get away with it anyway.

[peterHK]

Looks like TRVG results spooked the market.

 

The two are similar, but this happened last quarter where the disaster that is TRVG spilled into TRIP's results, and then the market came around (once earnings were released) to the idea that TRIP is a better business than TRVG. The more and more the non-hotel business contributes, the less related the two become.

[mwtorock]

Looks like TRVG results spooked the market.

 

The two are similar, but this happened last quarter where the disaster that is TRVG spilled into TRIP's results, and then the market came around (once earnings were released) to the idea that TRIP is a better business than TRVG. The more and more the non-hotel business contributes, the less related the two become.

 

They still draw money from the same pockets. There is going to be impact (much less hopefully) on earnings. more importantly, longer term, are the factors the guys talked about here going to impact the business model?  will TRIP be able to draw traffic against competition from google?

[peterHK]

Nice quarter. Looks like the hotel business continues to do well with desktop declining and mobile growing and monetization for mobile growing. Non hotel did well too.

 

Over time the shift to mobile is very good for Trip as it sort of undermines GOOGL's power over the company as GOOGL doesn't drive traffic to TRIP's app.

[Guest roark33]

This idea of mobile app shift has always been my fear for an investment in Google.  It's shocking how slow it is playing out in general or how well Google is shifting to mobile.  This isn't just a TRIP thing....

[KCLarkin]

This has quietly went on a very nice run over the past month. I didn't think the earnings were 40% good, but I guess the advantage of high short interest is big moves to the upside. Other than the modestly good earnings, does anyone have any intel on why this continues to jump higher.

[cubsfan]

After a multiyear period of re-investment into 2 new businesses (Restaurants & Attractions), you have 2 new sectors with rapid growth and huge markets - beyond the core Hotel business. So you have this situation where the most heavily downloaded travel app in the business (TripAdvisor) can potentially capture 3 large markets as opposed to 1. Per transaction monetization at the mobile level is lower than the desktop, but the transaction volumes are growing fast - and you have the best app. The growth prospects are terrific once we normalize from the desktop.

[kab60]

This has quietly went on a very nice run over the past month. I didn't think the earnings were 40% good, but I guess the advantage of high short interest is big moves to the upside. Other than the modestly good earnings, does anyone have any intel on why this continues to jump higher.

I'm a bit surprised myself, but I think the above post is a decent explanation. At 30 USD@share attractions was somewhat of a free option. Now it seems like people are catching up and paying up. Still long.

[Guest roark33]

Given that TRIP basically lost the approach to Hotels, booking vs. reviews, why does anyone think that TRIP will win when it comes to these other new categories.  I would say it is more likely that TRIP is just new to the scene with a growing pie, but will lose in the end. 

[cubsfan]

Given that TRIP basically lost the approach to Hotels, booking vs. reviews, why does anyone think that TRIP will win when it comes to these other new categories.  I would say it is more likely that TRIP is just new to the scene with a growing pie, but will lose in the end.

 

For restaurants - Trip has already won in Europe. They bought and integrated La Fourchette the market leader.

Opentable owns the US, but the Eurozone is a larger economy. Maybe the rest of the globe is up for grabs.

 

And Viator was the market leader for booking attractions when Trip bought and integrated them.

 

I'd say that's a very positive outlook for those 2 businesses.

[kab60]

Given that TRIP basically lost the approach to Hotels, booking vs. reviews, why does anyone think that TRIP will win when it comes to these other new categories.  I would say it is more likely that TRIP is just new to the scene with a growing pie, but will lose in the end.

I think it makes sense that they win these categories in a lot of places. They have the demand (and get it cheap), so they "just" need to build the supply. They probably learned a lesson or two, so I expect them to build supply aggressively. If they slow it down to improve profitability it's a red flag, but that's not what they're signalling.

[KCLarkin]

Given that TRIP basically lost the approach to Hotels, booking vs. reviews, why does anyone think that TRIP will win when it comes to these other new categories.  I would say it is more likely that TRIP is just new to the scene with a growing pie, but will lose in the end.

 

The difference with experiences: TRIP owns the actual booking experience. So they aren't taking the crumbs left over from Booking.com and Google. The reason why they could win in this case, is that they own both the top and bottom of the funnel. Plus, they have first mover advantage.

 

Booking.com seems to be extremely interested in this space, but it's not clear to me what their advantage is over TRIP. They are very talented though, so definitely a risk.

[ebdem]

I think these arguments on TRIP are quite interesting: https://www.contrariananalyst.com/tripadvisor-lolapalooza-in-motion/

[cubsfan]

I think these arguments on TRIP are quite interesting: https://www.contrariananalyst.com/tripadvisor-lolapalooza-in-motion/

 

Interesting - who is the author? 

 

There is not exactly a lot of "hype" in this name - it's been a disaster for a few years.

[Jurgis]

I think these arguments on TRIP are quite interesting: https://www.contrariananalyst.com/tripadvisor-lolapalooza-in-motion/

 

Interesting - who is the author? 

 

There is not exactly a lot of "hype" in this name - it's been a disaster for a few years.

 

Maybe I have CoBF tunnel vision, but I disagree. There's been quite a bit of hedge fund "hype" in TRIP for last year or two. Read this thread and look at the links.

 

Edit: although I have to say that https://www.contrariananalyst.com/tripadvisor-lolapalooza-in-motion/ "analysis" is rather lite ...  ::)