TRIP - Tripadvisor Inc.

[prevalou]

From Priceline 10K:

 

For example, TripAdvisor facilitates hotel reservations on its transaction websites Tingo and Jetsetter and, with respect to some accommodations, allows consumers to make a reservation while staying on TripAdvisor through its "Instant Booking" offering. Instant Booking now includes participation from six out of the top 10 global hotel brands, including Marriott International, Hyatt Hotels and Best Western International. We recently agreed to participate in "Instant Booking," and we do not yet know how this participation will affect our business. For example, while we expect to benefit from incremental business generated through "Instant Booking," participation could cannibalize business that would otherwise come to us through other ad offerings on TripAdvisor, directly (including after a consumer first visits TripAdvisor) or through other channels, some of which may be more profitable to us than reservations generated through "Instant Booking." Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTC. For example, in September 2015 Google announced the discontinuation of its Hotel Finder meta-search service in favor of integrating hotels directly into search results and encouraging users to book hotel reservations directly through Google's "Book on Google" service, which it is now expanding from mobile phones to both desktops and tablets. To the extent consumers book travel services through a service such as Google's "Book on Google," a meta-search website or directly with a travel service provider after visiting a meta-search website or meta-search utility on a traditional search engine without using an OTC like us, or if meta-search services limit our participation within their search results or evolve into more traditional OTCs, we may need to increase our advertising or other customer acquisition costs to maintain or grow our reservation bookings and our business and results of operations could be adversely affected.

 

If some of which may be more profitable to us , others are probably less profitable

[muscleman]

From Priceline 10K:

 

For example, TripAdvisor facilitates hotel reservations on its transaction websites Tingo and Jetsetter and, with respect to some accommodations, allows consumers to make a reservation while staying on TripAdvisor through its "Instant Booking" offering. Instant Booking now includes participation from six out of the top 10 global hotel brands, including Marriott International, Hyatt Hotels and Best Western International. We recently agreed to participate in "Instant Booking," and we do not yet know how this participation will affect our business. For example, while we expect to benefit from incremental business generated through "Instant Booking," participation could cannibalize business that would otherwise come to us through other ad offerings on TripAdvisor, directly (including after a consumer first visits TripAdvisor) or through other channels, some of which may be more profitable to us than reservations generated through "Instant Booking." Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTC. For example, in September 2015 Google announced the discontinuation of its Hotel Finder meta-search service in favor of integrating hotels directly into search results and encouraging users to book hotel reservations directly through Google's "Book on Google" service, which it is now expanding from mobile phones to both desktops and tablets. To the extent consumers book travel services through a service such as Google's "Book on Google," a meta-search website or directly with a travel service provider after visiting a meta-search website or meta-search utility on a traditional search engine without using an OTC like us, or if meta-search services limit our participation within their search results or evolve into more traditional OTCs, we may need to increase our advertising or other customer acquisition costs to maintain or grow our reservation bookings and our business and results of operations could be adversely affected.

 

If some of which may be more profitable to us , others are probably less profitable

 

This is even more confusing to me. I thought IB is for booking directly with hotels, not OTAs. Hotels pay 15% or 12% as commission to TRIP. But if IB with priceline, then how do they split the commission with the hotel?

 

I think it is likely that TRIP only gets a small share of the commission split, and Priceline still gets a bigger share, so TRIP's revenue dropped, and they project more rough time in 2016. But if that's the case, why even bother to sign this deal with Priceline?

 

 

[KCLarkin]

I think it is likely that TRIP only gets a small share of the commission split, and Priceline still gets a bigger share, so TRIP's revenue dropped, and they project more rough time in 2016. But if that's the case, why even bother to sign this deal with Priceline?

 

I don't think you can really understand the IB business without listening to the past several quarterly calls.

[muscleman]

I think it is likely that TRIP only gets a small share of the commission split, and Priceline still gets a bigger share, so TRIP's revenue dropped, and they project more rough time in 2016. But if that's the case, why even bother to sign this deal with Priceline?

 

I don't think you can really understand the IB business without listening to the past several quarterly calls.

 

I read the past two CC transcript but didn't understand much. I think I should read more before asking additional questions here. Sorry. :)

[KCLarkin]

I read the past two CC transcript but didn't understand much. I think I should read more before asking additional questions here. Sorry. :)

 

The calls make more sense in chronological order. Priceline deal makes sense when you understand the conversion challenges faced in the initial IB rollout.

 

Also, the revenue impact is not as straightforward as recent posts suggest. This is an oversimplification:

 

Revenue(IB) = hotel shoppers * conversion rate * revenue per booking

 

So even if Priceline takes the a large cut of the IB revenue, the total revenue could be higher since Priceline hotels will convert at a higher rate than hotel direct bookings.

[gjangal]

For TRIP's IB to succeed IMO they probably would have done one of the following that PCLN and Expedia probably have already implemented

 

1. Integrate with every brand's (IHG, Marriot, Choice etc) property/reservation management system to make sure instant booking flows through to the reservations.

 

2. Since hotels are a fragmented space, it is possible that many other hotels use different approved property/reservation management systems . TRIP has to make sure that it has to integrate with majority of these systems to make sure that booking flows through.

 

3. They need to have rate parity with the OTA's to succeed, so they might have to take lower commissions.

 

1&2 could explain the slowness in ramp up.

 

The travel industry is becoming more competitive with AirBnb's entry. Especially they are bringing new inventory to low and mid segment hotels which is the bread and butter of OTA's and TRIP. All of these names have to compete from 0 or acquire companies to get into the vacation rental business. This new paradigm shift could mean pressure on room rates and commissions. Valuations for OTA's look stretched if growth doesn't materialize or if they face pricing pressure,

 

[muscleman]

I went through the past few Quarterly CCs but still can't understand why "Our revenue per hotel shopper is currently in order of magnitude lower than that of our largest partners."

In the CC they call this the Instant booking dilution, but why did this happen?

Is it because users don't click to book instantly on Trip as frequently as they do when they see an expedia or priceline sign?

 

 

The 10-K and 10-Qs don't have a a breakdown of the revenue from IB vs click based meta search.

 

Note that the deferred revenue and deferred merchant payable grew quite a bit compared QoQ. But they said this is mostly due to attractions and vacation rental business growth, not IB.

 

Could anyone please help me to understand how the IB feature weakens the revenue?

[prevalou]

https://skift.com/2016/05/05/tripadvisors-instant-booking-bet-looks-ugly-for-now/

 

People prefer the real thing (booking on Booking.com where they have an account) and so don't click on IB. Before they clicked on metasearch, so loss in revenue.

[muscleman]

https://skift.com/2016/05/05/tripadvisors-instant-booking-bet-looks-ugly-for-now/

 

People prefer the real thing (booking on Booking.com where they have an account) and so don't click on IB. Before they clicked on metasearch, so loss in revenue.

 

What data can I track each quarter to tell if this situation is improving or deteriorating? They said "Phone hotel shoppers accounted for approximately 30% of our total hotel shoppers during Q4, and monetize at approximately 30% of rate of desktop and tablet in Q4. This compares to 19% the rate last year.", but they didn't provide the exact number for desktop vs mobile monetization.

[JBTC]

TRIP doesn't seem to be keen to disclose its financial arrangements with hotels and PCLN.

 

Some discussion in the sellside research below.

 

https://piper2.bluematrix.com/sellside/EmailDocViewer?encrypt=2e19582f-5008-4c16-9fdd-34a77db48456&mime=pdf&co=Piper&id=ra@skift.com&source=mail&pdfFileExtension=.pdf

 

 

[deadspace]

I think one point to consider is the validity of the Bull case that tripadvisor is finally able to monetize its users with InstantBook.  It is possibly more likley that Tripadvisor found itself backed into a corner by the shift to mobile and needed to turn to instant book to salvage its revenue.    Mobile users do not monetize as well as desktop and ads are difficult to place on the smal mobile screens for click revenue.  Bulls continue to suggest that TRIP is agressivly moving forward to monetize and putting up with the short term pain but perhaps it saw the revenue fall coming at it and is trying hard to hold back the fall in revenue.  In other words the fall in revenue may not be "volunatry" as some suggest 

[glorysk87]

I continue to remain torn on this name.  They have an unbelievable asset in their incredibly active user base and all of the reviews that said users have contributed.  This is something that I've yet to see even close to replicated within another company or ecosystem.

 

But they can't seem to get this business model transition down.  Even for me, when I was researching vacations for this year - I used TripAdvisor to do all of my research, but I found myself shopping around other sites to actually book the trip.  I think it's just human nature to search around to find the best deal.  That's the gap they're having a lot of trouble filling.

 

If anyone's familiar with the company RetailMeNot, they faced a similar problem. It's been a few years now and they haven't quite figured it out.

 

I want to buy TRIP. But I can't pull the trigger until I have confidence they can successfully complete this transition. Unfortunately, by the time there's any sort of certainty in that regard the share price will likely be much higher.

 

So I will stay away.

[Travis Wiedower]

It seems I'm more bullish on Instant Book than most (though I still don't own TRIP). It just makes logical sense to me that millions of people who trust TripAdvisor and use it on a regular basis will eventually trust them to handle bookings as well. Why go to TripAdvisor and Priceline when everything can be done on TripAdvisor? The fewer websites I have to visit the happier I am. With that being said, I do think the transition will be slow. Habits are hard to break and right now people are used to booking on the Pricelines of the world.

[deadspace]

Problem in that the price for hotel bookings on TRIP is not the cheapest price and people who use the TRIP app know this and will shop around including going directly to the hotel website -  it may be a far better business to just rely on the click based revenue of referring directly to the hotel website

 

Here is an example - I just booked  5 nights  at the residence inn in Palo ALto  - on the TRIp app the lowest price is $2,722.92 and they state this is a gauranteed lowest price through priceline (you can call them and they wil match the  lower price after booking if you find a lower price offer )  Price on the hotel website $2,012.00  If this is a typical example then instant book is dead.

 

 

[glorysk87]

Problem in that the price for hotel bookings on TRIP is not the cheapest price and people who use the TRIP app know this and will shop around including going directly to the hotel website -  it may be a far better business to just rely on the click based revenue of referring directly to the hotel website

 

Here is an example - I just booked  5 nights  at the residence inn in Palo ALto  - on the TRIp app the lowest price is $2,722.92 and they state this is a gauranteed lowest price through priceline (you can call them and they wil match the  lower price after booking if you find a lower price offer )  Price on the hotel website $2,012.00  If this is a typical example then instant book is dead.

 

This is exactly right.  I always find a price to beat the one on TripAdvisor. Granted my sample size is about 3 vacations, but all 3 I've found better prices elsewhere.

[deadspace]

And to make matters more complicated - that guaranteed lowest price on tripadvisor through priceline is even lower if you book directly on priceling

 

Recap of these prices for residence Inn palo alto:

 

$2722.92 thripadvisor through priceline guaranteed lowest price

$2,012 hotel website

$1,757.60 on priceline website

 

This is insane

 

 

[deadspace]

. Why go to TripAdvisor and Priceline when everything can be done on TripAdvisor? The fewer websites I have to visit the happier I am.

 

See above - I just saved $1000  on a 5 day hotel stay by not clicking instant book  - that makes me happier

[KCLarkin]

If this is a typical example then instant book is dead.

 

Correction: It looks like Marriott hotels can be booked directly from TripAdvisor but not Residence Inn (by Marriott). I wonder if IB gets rolled out to Residence Inn later?

[KCLarkin]

And to make matters more complicated - that guaranteed lowest price on tripadvisor through priceline is even lower if you book directly on priceling

 

Recap of these prices for residence Inn palo alto:

 

$2722.92 thripadvisor through priceline guaranteed lowest price

$2,012 hotel website

$1,757.60 on priceline website

 

This is insane

 

2 thoughts:

- there are 3 different "residence inn palo altos" listed in TripAdvisor. Are you sure those are all the same hotel and same nights?

- are you sure those are all in USD?

 

I did a search for the Residence Inn Palo Alto (menlo park) and Trip and Priceline are the same. Hotel website appears to be $30 cheaper.

[deadspace]

yes you are correct so the correct pricing is:

  residence Inn palo alto menlo park:

 

$2722.92 thripadvisor through priceline guaranteed lowest price

$2,012 hotel website

$2067 on priceline website

[Travis Wiedower]

See above - I just saved $1000  on a 5 day hotel stay by not clicking instant book  - that makes me happier

 

Well yeah, of course if one site is cheaper then that's the preferred option. I've only booked one hotel recently but it was the same across all sites. A month or so ago I looked at several hotels in random cities and TripAdvisor was identical/comparable on every single one if I remember correctly. Both our examples are very small sample sizes though.

[deadspace]

From q2 2016 conference call

CEO

 

For us, the habit of booking and rebooking and rebooking on the phone, on the app specifically, is going to be what we believe drives our future monetization model. We kind of have the best of many worlds because we have this awesome meta price comparison engine on any device that allows the traveler to make sure they are getting the best deal and we have moved into the transaction business so that they don't have to go anywhere else to get that best deal. They can book right on TripAdvisor

 

 

I have to agree that if a site gives me all the options and I can click on the lowest price why would I go anywhere else.  But if the hotel website is offering a consistently lower price then the system breaks down and IB does not seem viable if this is the case

[ccplz]

https://skift.com/2016/08/22/can-tripadvisor-turn-things-around-the-debate-rages/

[muscleman]

yes you are correct so the correct pricing is:

  residence Inn palo alto menlo park:

 

$2722.92 thripadvisor through priceline guaranteed lowest price

$2,012 hotel website

$2067 on priceline website

 

 

I do see that now.

I tried to search for 10/6 to 10/9 for Palo Alto Los Altos.

Total: $636.04

 

But booking.com's price is just 573. Ironically the price comes when I click that meta search link. So convenient.

 

 

So if IB cann't guarantee truly lowest price, then customers will keep clicking those meta search links to check if they can get a lower price, and since booking.com or expedia is something they already trust, they will just book there after the page opens.

 

 

 

 

 

[Travis Wiedower]

A VIC write-up from August is now visible to us plebs who aren't members (user is macrae538). He did a great job of walking through the thesis and explaining why Instant Booking can be so valuable a few years down the line. Best summary of the bull case that I've seen.