TRIP - Tripadvisor Inc.

[hooplaer23]

The writeup didn't mention much about the threat from Google.  While Google Trips may have a long way to go before posing a meaningful challenge to Tripadvisor in terms of content, it seems that Tripadvisor organic search is getting pushed further and further down the page (even if its search rank remains the same).  More specifically, Google has moved some ads from the right hand side to the top of the page and also displays its own metasearch results (you can use a search like "hotels in New York" for an example).  TRIP can obviously use paid search the way Priceline and Expedia do, but if they are generating lower commissions from Instant Book, that means a bigger percentage of the commission is eaten up by paid search costs to Google if the traffic is inorganic.  Tripadvisor may be able to counter this as more users become familiar with/dependent on the site and the content flywheel continues to strengthen, meaning shoppers may return organically or through the mobile app, but at the very least it could slow down hotel shopper growth. 

[flesh]

The writeup didn't mention much about the threat from Google.  While Google Trips may have a long way to go before posing a meaningful challenge to Tripadvisor in terms of content, it seems that Tripadvisor organic search is getting pushed further and further down the page (even if its search rank remains the same).  More specifically, Google has moved some ads from the right hand side to the top of the page and also displays its own metasearch results (you can use a search like "hotels in New York" for an example).  TRIP can obviously use paid search the way Priceline and Expedia do, but if they are generating lower commissions from Instant Book, that means a bigger percentage of the commission is eaten up by paid search costs to Google if the traffic is inorganic.  Tripadvisor may be able to counter this as more users become familiar with/dependent on the site and the content flywheel continues to strengthen, meaning shoppers may return organically or through the mobile app, but at the very least it could slow down hotel shopper growth.

 

Great writeup over at vic and good points ^^^^^

 

Can anybody access all the messages on the new vic writeup and pm them to me? I know, I should do a write up but I've been so busy.

[bizaro86]

So, this is a user perspective only...

 

I used to use Tripadvisor all the time, often just casually checking out reviews in places I was thinking of going. I don't anymore, for a twofold reason. The mobile site will now only let me read 3 reviews (more available in the app!) and it asks me to get the app on every single click.

 

I used to have the app (it came pre-installed on my phone) but it started pushing notifications at me very often (pretty much every time I walked past a hotel it would use android push notification to give me the price). It was using a significant amount of my battery life to do so, so I uninstalled it.

 

Anyway, I'm not sure if this is of interest, but TRIP getting overagressive on app monetization converted me from regular user to non-user...

[Travis Wiedower]

Thanks for the viewpoint (I haven't used Trip's  app). Not saying it makes them any less guilty, but the over-notification thing is super common and it drives me nuts. Hopefully it swings back the other direction at some point. When I download a new app, the first thing I do is turn off notifications.

[benhacker]

So Google appears to have just launched a trip aggregation function.  My wife was pretty pumped when it magically showed up on her phone... she's been waiting.

 

Seems like most of TRIPs business more appropriately fits in Google's business model.  Am I mistaken here, or is this just a classic case of build vs. buy?

 

 

[muscleman]

So Google appears to have just launched a trip aggregation function.  My wife was pretty pumped when it magically showed up on her phone... she's been waiting.

 

Seems like most of TRIPs business more appropriately fits in Google's business model.  Am I mistaken here, or is this just a classic case of build vs. buy?

 

Trip aggregation in Google? Could you tell me how to see that? Do you open a browser and type certain things? Thanks a lot!

[benhacker]

I don't have an android phone, but my wife's phone now just knows she has trips scheduled, and has a way to click into locations and find things (hotels, food, etc).  She said its 'beta-y' but seems like a pretty clear statement of intent.

 

I will ask her tonight and share more if this is not widely known online (I haven't looked for it).

[Travis Wiedower]

"Beta-y" is definitely accurate. I downloaded it and played around for 20 minutes. The entire city of Austin has like 25 restaurants and 25 "things to do" and you can only view ~10 reviews per attraction. Can't sort restaurants by rating/cuisine/anything, can't view menu/pictures, etc.

 

With that being said, I like the basic layout and it'll be interesting to see where Google is trying to take Trips. Google is definitely a big risk to Trip, but overtaking large network effects is very difficult (which is why companies that benefit from network effects are so sought after).

[GregS]

Interesting comments about Google.  Thinking out loud here: 

 

I was initially skeptical of Google's ambitions in travel - why would they cannibalize the business of their best advertising customers?  But if you look at the recent change in strategy with the Pixel phone and Google Assistant, it's not clear that their traditional ad strategy works as well in that model.  Perhaps Google sees both a need and an opportunity to be directly involved in booking? 

 

I'm not sure how this plays out for any of the OTAs.  I think building a competing product will be very difficult for Google as you need to sign up the hotels and other partners and service those relationships.  Travis' comments show the effects of being so far behind.  Sometimes it is cheaper and easier to buy your way in.

 

Who would be the target?  PCLN has best relationships with partners but would be a huge acquisition.  TRIP's instant booking model may be a good fit but it's early and not yet proven.  But maybe Google will think they can do more with it and, in the meantime, they can still sell ads to EXPE and PCLN.  But I wouldn't discount Silicon Valley hubris in thinking they can just build it themselves and take share.

 

The competitive dynamics are changing fast here so it's hard to get a handle on what's next.

 

[muscleman]

"Beta-y" is definitely accurate. I downloaded it and played around for 20 minutes. The entire city of Austin has like 25 restaurants and 25 "things to do" and you can only view ~10 reviews per attraction. Can't sort restaurants by rating/cuisine/anything, can't view menu/pictures, etc.

 

With that being said, I like the basic layout and it'll be interesting to see where Google is trying to take Trips. Google is definitely a big risk to Trip, but overtaking large network effects is very difficult (which is why companies that benefit from network effects are so sought after).

 

I didn't find an iOS app. Kinds of strange that the app only has an Android version.

Google tried twice to take over Zillow's business and failed. I think it is very similar. Large networks are hard to take over.

 

 

 

[Travis Wiedower]

Google already has one failed attempt at Trip's business as well. Google failed at crushing Facebook too.

[muscleman]

Google already has one failed attempt at Trip's business as well. Google failed at crushing Facebook too.

 

Right.. My concern with TRIP is not Google. My concern is whether the bullish assumptions can come true. And even if it does, the upside is less than 2x so why bother?

[muscleman]

http://www.dataroma.com/m/holdings.php?m=AV

 

Allan Mecham completely cut his TRIP stocks.

 

[Travis Wiedower]

Did some traveling abroad recently and noted just how important TripAdvisor is in tourist areas:

 

1. Quite a few places have TripAdvisor signs out front or stickers on their front door.

 

2. One upscale hotel uses coasters that say "Rate us on TripAdvisor!"

 

3. On two separate occasions I asked people if they accepted tips and they responded "Yes we do, but even better would be for you to give a positive review on TripAdvisor and mention my name."

[glorysk87]

Did some traveling abroad recently and noted just how important TripAdvisor is in tourist areas:

 

1. Quite a few places have TripAdvisor signs out front or stickers on their front door.

 

2. One upscale hotel uses coasters that say "Rate us on TripAdvisor!"

 

3. On two separate occasions I asked people if they accepted tips and they responded "Yes we do, but even better would be for you to give a positive review on TripAdvisor and mention my name."

 

Agree with the sentiment, but none of that actually helps close the gap in terms of influencing the customers to actually complete their purchase on the Tripadvisor site.

 

TRIP reviews are exceptionally valuable at influencing purchase decisions by customers - the treasure trove of reviews has been and remains TRIP's greatest asset.

 

But the monetization gap is still very real, and the company seems unable to close it quickly if at all. Even anecdotally, whenever my wife and I take a vacation we look at reviews on TRIP, and then we scour the rest of the internet for pricing and inevitably end up booking on a different site.

 

I would love to own TRIP, but until they can solve that issue, it's a non-starter for me.

[Travis Wiedower]

^^ Agree on all fronts. I just wanted to add some anecdotal evidence to this thread. Someone who doesn't travel abroad may not appreciate how big of an effect TripAdvisor has on those areas.

 

I was especially shocked by my third bullet point. Two service workers preferred a TripAdvisor review over cold, hard cash! I'm guessing that means their bosses give them much more in a "TripAdvisor review bonus" than they expect from a tip.

[LongTermView]

But the monetization gap is still very real, and the company seems unable to close it quickly if at all.

 

Yeah, they have amazing content but then again so does Wikipedia...

[Jurgis]

My latest in-US anecdotal trip: started on Orbitz (that's where I always start), got airline fare and hotel rate. Went to airline (JetBlue) site to see if I can get better airfare - pretty much same - but they offered the same hotel through JetBlue vacations cheaper (but with more restrictions on cancelling/etc.). Booked there.

 

As mentioned before I don't usually use Tripadvisor even for reviews.

 

Just adding to anecdotes.

 

Disclosure: I have a teeny tiny position in LTRPA from Liberty spinoff and a bit bigger position in LEXEA from Liberty spinoff.

[mbreject]

I just bought a tiny bit for speculation. I feel as if Viator has a monopoly on day excursions though their margins have to be tight. Their prices are often cheaper than buying directly from the tour operator.

[Foreign Tuffett]

Did some traveling abroad recently and noted just how important TripAdvisor is in tourist areas:

 

1. Quite a few places have TripAdvisor signs out front or stickers on their front door.

 

2. One upscale hotel uses coasters that say "Rate us on TripAdvisor!"

 

3. On two separate occasions I asked people if they accepted tips and they responded "Yes we do, but even better would be for you to give a positive review on TripAdvisor and mention my name."

 

Agree with the sentiment, but none of that actually helps close the gap in terms of influencing the customers to actually complete their purchase on the Tripadvisor site.

 

TRIP reviews are exceptionally valuable at influencing purchase decisions by customers - the treasure trove of reviews has been and remains TRIP's greatest asset.

 

But the monetization gap is still very real, and the company seems unable to close it quickly if at all. Even anecdotally, whenever my wife and I take a vacation we look at reviews on TRIP, and then we scour the rest of the internet for pricing and inevitably end up booking on a different site.

 

I would love to own TRIP, but until they can solve that issue, it's a non-starter for me.

 

I am currently traveling in Southeast Asia and agree with both of your sentiments. TRIP window stickers are common, but booking guided tours and hotels using TRIP isn't even close to being cost effective. Until they can close the "price gap" with their competition I don't see IB taking off.

[JBTC]

I had a small position in TRIP and a more decent one after the 20% plunge.

 

Whether TRIP will turn out to be a good investment depends solely on if the company can ultimately manage to make money off a hugely impressive asset.

 

What I like about the business is its moat is unlikely to be eroded, hence giving them time to tinker.

 

What's quite amazing is despite the decade-long effort by Google to try to make TRIP less irrelevant, TRIP users continue to grow.

 

Google's unwavering effort reflects the fact that hotels are its largest vertical. If there's so much money in the hotel sector, and TRIP occupies a unique spot, I hope things work out over time for the company.

 

But clearly this is different from buying say WFC where the earnings are in plain sight. Investing in TRIP requires a leap of faith.

 

TRIP is late to the booking business, so it has been difficult to change people's booking habits, although if you believe management is not lying, there are green shoots in the recent result which the market has refused to trust. For example, revenue per shopper is now positive in the US.

 

I am purely speculating but perhaps one thing they could do to improve their position in booking is to implement some sort of TRIP Prime, where shoppers can enroll into by paying say 10 dollars a year to receive unlimited 10% off on all the non-chain hotels.

 

PCLN and EXPE can't do this because their revenue would collapse. But TRIP could have a shot.

 

If this is not the way, I can only hope the smart people at TRIP and Liberty will figure it out over time. 

 

[muscleman]

I had a small position in TRIP and a more decent one after the 20% plunge.

 

Whether TRIP will turn out to be a good investment depends solely on if the company can ultimately manage to make money off a hugely impressive asset.

 

What I like about the business is its moat is unlikely to be eroded, hence giving them time to tinker.

 

What's quite amazing is despite the decade-long effort by Google to try to make TRIP less irrelevant, TRIP users continue to grow.

 

Google's unwavering effort reflects the fact that hotels are its largest vertical. If there's so much money in the hotel sector, and TRIP occupies a unique spot, I hope things work out over time for the company.

 

But clearly this is different from buying say WFC where the earnings are in plain sight. Investing in TRIP requires a leap of faith.

 

TRIP is late to the booking business, so it has been difficult to change people's booking habits, although if you believe management is not lying, there are green shoots in the recent result which the market has refused to trust. For example, revenue per shopper is now positive in the US.

 

I am purely speculating but perhaps one thing they could do to improve their position in booking is to implement some sort of TRIP Prime, where shoppers can enroll into by paying say 10 dollars a year to receive unlimited 10% off on all the non-chain hotels.

 

PCLN and EXPE can't do this because their revenue would collapse. But TRIP could have a shot.

 

If this is not the way, I can only hope the smart people at TRIP and Liberty will figure it out over time.

 

This sounds more like a venture capitalist's thesis than a value investor's thesis. No FCF analysis. Only dreams of future.  :)

I am not saying this won't work. Early investors in FB and GOOG used the same approach.

 

 

[rishig]

I had a small position in TRIP and a more decent one after the 20% plunge.

 

Whether TRIP will turn out to be a good investment depends solely on if the company can ultimately manage to make money off a hugely impressive asset.

 

What I like about the business is its moat is unlikely to be eroded, hence giving them time to tinker.

 

What's quite amazing is despite the decade-long effort by Google to try to make TRIP less irrelevant, TRIP users continue to grow.

 

Google's unwavering effort reflects the fact that hotels are its largest vertical. If there's so much money in the hotel sector, and TRIP occupies a unique spot, I hope things work out over time for the company.

 

But clearly this is different from buying say WFC where the earnings are in plain sight. Investing in TRIP requires a leap of faith.

 

TRIP is late to the booking business, so it has been difficult to change people's booking habits, although if you believe management is not lying, there are green shoots in the recent result which the market has refused to trust. For example, revenue per shopper is now positive in the US.

 

I am purely speculating but perhaps one thing they could do to improve their position in booking is to implement some sort of TRIP Prime, where shoppers can enroll into by paying say 10 dollars a year to receive unlimited 10% off on all the non-chain hotels.

 

PCLN and EXPE can't do this because their revenue would collapse. But TRIP could have a shot.

 

If this is not the way, I can only hope the smart people at TRIP and Liberty will figure it out over time.

 

What makes you think the big search engine company is in the business of disrupting its advertising partners? Between Priceline, Expedia and Tripadvisor, they spend over $5B annually on digital performance advertising (not brand advertising which is mostly YouTube, FB) as per the publicly disclosed filings. Out of $5B spent on performance advertising - over $3B is from PCLN. In almost any industry conferences, PCLN management has mentioned that the search engine companies are in partnership with them given how big a business they are for them.

 

Secondly, I have been saying this for a while on the PCLN thread, but is ignored - PCLN has a massive advantage in the international hotel segment where the industry is very fragmented (hotel chains account for single digit market share). There is a reason TRIP is partnered with PCLN in the international segment for instant booking and that PCLN continues to grow at 15%-20%. Search for hotels on TripAdvisor in Paris or in Thailand. All the instant bookings on Trip are in partnership with booking.com or agoda.com.

 

 

[JBTC]

I had a small position in TRIP and a more decent one after the 20% plunge.

 

Whether TRIP will turn out to be a good investment depends solely on if the company can ultimately manage to make money off a hugely impressive asset.

 

What I like about the business is its moat is unlikely to be eroded, hence giving them time to tinker.

 

What's quite amazing is despite the decade-long effort by Google to try to make TRIP less irrelevant, TRIP users continue to grow.

 

Google's unwavering effort reflects the fact that hotels are its largest vertical. If there's so much money in the hotel sector, and TRIP occupies a unique spot, I hope things work out over time for the company.

 

But clearly this is different from buying say WFC where the earnings are in plain sight. Investing in TRIP requires a leap of faith.

 

TRIP is late to the booking business, so it has been difficult to change people's booking habits, although if you believe management is not lying, there are green shoots in the recent result which the market has refused to trust. For example, revenue per shopper is now positive in the US.

 

I am purely speculating but perhaps one thing they could do to improve their position in booking is to implement some sort of TRIP Prime, where shoppers can enroll into by paying say 10 dollars a year to receive unlimited 10% off on all the non-chain hotels.

 

PCLN and EXPE can't do this because their revenue would collapse. But TRIP could have a shot.

 

If this is not the way, I can only hope the smart people at TRIP and Liberty will figure it out over time.

 

This sounds more like a venture capitalist's thesis than a value investor's thesis. No FCF analysis. Only dreams of future.  :)

I am not saying this won't work. Early investors in FB and GOOG used the same approach.

 

Yep, I wonder why are you value investors wasting time on this thread? :-)

 

There is no guarantee here. It was $110 and now $50. News are not good. Stock is heavily shorted. Often shorts are smarter and do more work than the longs. In the near-term the shorts are probably right.

 

I am no venture capitalist, and this is the only tech thing I own. The reason is the same as what others have articulated. I travel a lot and was overwhelmed by how useful the site is to the travelers and how much respect hotels have for TRIP.

 

So it's got traction with both the travelers and hotels. It's a relatively small business operating globally in a huge space. Its competitive advantages are not easy to take away. It makes 95% gross margin and has net cash. So it has upside if things work out.

 

If things don't work out and the company's destiny is selling ads/leads to the bigger boys, it can probably cut down on spending and firing all the useless programmers and become instantly more profitable.

 

If it remains just a website where people flock to write and read reviews, it shouldn't be that expensive to run.

 

[xtreeq]

TRIP management working hard

https://vimeo.com/79954057