Report Overview

This report analyzes TripAdvisor’s positioning within the broader context of online travel and the various segments that the company competes in. We also offer insights into bigger-picture online travel trends through the lens of TripAdvisor. More recently, the company’s bold platform-oriented strategy has performed with mixed results both operationally and in building confidence with its investor community. We look at the company’s historic and projected financial performance and align that with recent product and technology releases and developments in hotel distribution including metasearch and facilitated bookings, tours and activities and vacation rentals. We also pull accounts from interviews with industry experts to offer unique perspective on the various industry segments and whether TripAdvisor can remain competitive in the longer-term. The company took on a big and arguably necessary gamble with its transformation from an ad-driven to a transaction-based revenue model. Everything that the company does now has different end goals when it comes to channeling eyeballs toward partner and native booking buttons. Trip is also a unique case study into online travel because it touches so many different parts of the sector. How TripAdvisor performs in the months and years to come can tell us a lot about the future of online travel.

What You'll Learn From This Report

  • Specifics on TripAdvisor’s business model across the different travel segments
  • TripAdvisor’s China strategy and its growth prospects outside of Europe and the U.S.
  • TripAdvisor’s strategic positioning against the big OTAs including Priceline and Expedia
  • The state of TripAdvisor’s tours and activities business relative to Airbnb and Expedia
  • Reference historic financial data and different revenue scenarios and projections
  • How the non-hotel segment of the business could grow/decline relative to hotels
  • Strengths and weaknesses of the TripAdvisor brand relative to its competitors

Executives Interviewed

  • Steve Kaufer, President & CEO, TripAdvisor
  • Steve Hafner, CEO, Kayak (quotes from previous interview)
  • Tony Carne, General Manager, Urban Adventures Ltd
  • Daniel Pan, Chief Of Staff, China, Tripadvisor

Executive Summary

TripAdvisor faces various challenges and opportunities in the months and years ahead. Stitching together a profitable full-service online travel brand with diverse revenue streams remains the long-run opportunity. Meeting investor expectations is one of the more urgent challenges.

Leadership is now executing on Trip’s repositioning as a hotel booking site while juggling its other business lines including tours and activities, vacation rentals, restaurant bookings, and flights. The Instant Booking model launched three years ago with the promise of moving Trip further down-funnel through improved user experience and better economics for hotel partners.

That journey has proved costly both in terms of lost revenue and investor confidence. Yet, other metasearch brands continue to entertain facilitated booking for hotels (and air); Trip’s investment could pay off down the road as a technology hedge against tenuous relationships between hotels and the OTAs, and as a desirable asset for potential buyers as the technology space in travel continues to shake out.

In the short-run, optimizing its metasearch feature will take a more central role. Margins have steadily eroded while costs have escalated since 2010. The jack-of-all-traits, master of none analogy is appropriate here. Historically, Trip has held and lost dominant positions in various segments including vacation rentals. The company fell behind its competitors Airbnb, Expedia with HomeAway, and Priceline with in the space as it transformed its affiliate program into an ecommerce site.

Trip also gave birth to the user-generated review as the go-to content format used to promote travel brands. Now, the big platforms have followed suit. Google is a direct competitive threat for just about every online travel brand. For Trip, Google content and its positioning relative to Trip’s content is a concern. As a mid-sized company, Trip has made some big decisions about its core business model. And while we worry about its tolerance for additional pivots, we also think that Trip has now laid out a clear monetization strategy. With the strategic aspects more settled, the company can focus on incremental improvement and promotion.

Furthermore, while heavily consolidated, travel is not yet a winner-takes-all business. We see this across different segments including vacation rentals. Various niche marketplaces including Luxury Retreats, recently acquired by Airbnb, are generating strong returns without holding a top-three position. The key to Trip’s long-run success will be execution. The big players will continue to outspend Trip on marketing. But as other players are finding (including Skyscanner and Ctrip), paid marketing only goes so far in building customer loyalty; travelers recognize good technology, excellent search results, amazing user experience and relevant content. As a mid-sized player, Trip has more pressure to prove it profit potential.

The challenge for Trip as a trusted travel brand is excelling at all of the services that it offers. The flights product is the least competitive of the set. Here Trip needs to balance the need to perform financially (short-term) and the need to deliver excellent service (long-term). The touted TripAdvisor brand promise rests on “trust” between the Trip community and the traveler. And while TripAdvisor remains a “trusted” brand, it is not necessarily a “cool” brand. Other players including Airbnb have masterfully positioned themselves as fresh and sticky lifestyle brands. Clever marketing and exclusive content has reduced Airbnb’s reliance on Google. Trip has some work to do in this department.

Content remains TripAdvisor’s competitive differentiator. Its growing community both in terms of unique visitors and app downloads speaks to the utility of its business listings, reviews, and forums. The full potential of this content will also evolve as Trip’s technology grows up and becomes smarter and more personalized with its user base. Structured content is the foundation for rising technologies like voice search, big data, artificial intelligence (AI), and machine learning. Trip is getting better at leveraging this rich content to make smarter traveler recommendations on what to do and where to spend.

TripAdvisor has potential to become more than a hotel booking engine, but it needs to get hotels humming and profitable to give management additional runway to fulfill that vision. Hotel metasearch is the sensible path of least resistance to sustained revenue growth and profitability – the holy grail for publicly traded companies. Here, Trip will need to hold on to two important partnerships. Expedia and Priceline account for nearly 50% of its revenue. While this concentration is risky, TripAdvisor is arguably more diverse than some of its direct competitors including Trivago that derives 80% of its revenue from those two players. The investment community will watch intently if, and how, Trip can diversify its revenue. Here, its tours and activities line will be key.

One encouraging operational scenario through 2020 would be for TripAdvisor to grow its year-over-year revenue by low double digits while maintaining margins above 20%. This should keep investors happy, giving management more runway to sort out its tech and monetization challenges. The hotel product may not get it all the way there, but tours and experiences could.

Trip revenue in that segment is growing annually at approximately 30% with an attractive average commission take of 20% and significant room to grow on the supply side. The company’s non-hotel segment operated at a loss in 2016 (measured by EBITDA margin) due to staffing needed to onboard new tours and activities inventory, among other things. As the segment matures beyond the big initial inventory push, there will be opportunity to reduce costs.

Overall, TripAdvisor has a strong brand and a sound business model that will continue to generate solid revenue and profits in the mid-to-long term. Whether the stock price will rebound or surpass 2014 levels is uncertain. Here, appeasing shareholders while growing the business for long-run success will remain a challenge for the leadership team.

If TripAdvisor can deliver continuous value to the customer through great user experience, competitive search results and relevant content, it can still compete independently. The platform also has assets that remain desirable as a potential acquisition target. Audience and content remains the company’s most valuable assets. An acquisition would make strategic sense for many of the big players including Priceline, Airbnb, and Ctrip and potentially Amazon as the company looks to compete as worldclass platform.

Key Considerations

  • Our view is that TripAdvisor remains a fundamentally sound business and a potent player in the online travel space. We believe that the company is now at the tail-end of a bigger and necessary transformation that it set out to execute well before the Instant Book integration. We believe that TripAdvisor can move its hotel business into positive growth while gaining significant upside on its non-hotel segment. With regard to performance, one encouraging scenario would be year-over-year revenue growth of 10% or more with margins at or above 20% through 2020.
  • Arguably, TripAdvisor is at the center of a bigger debate now playing out in online travel i.e. the full-service platform model versus the specialized service provider. has shown how a narrow focus on one segment i.e. hotels can turbo charge a company’s financial performance. Trivago has shown us how extreme ad spend and effective marketing can catapult a brand even in the toughest of markets. At the same time, platforms like Google and Facebook in the west and Ctrip and WeChat in the east have demonstrated the cost synergies associated with a captive audience. TripAdvisor is somewhere in between. The question is whether Trip will be able to compete as a platform.
  • TripAdvisor is unique in that it has rolled up so many different aspects of the travel journey under one platform and brand. Longer-term, we see this as a competitive advantage, even though certain features on the site are less competitive including flights and vacation rentals. These are still relatively early days in online travel. As technology encroaches further into our daily lives, TripAdvisor’s full-service reach will lend it more visibility into unique traveler preferences. Personalization will allow the site to have a unique dialog with the travel consumer.
  • The question remains how our daily preferences influence our travel preferences and how platfroms will be able to merge these two bifurcated worlds with customized content. Looking further down field, advancements in personalization will allow platforms to consider daily preferences and habits to give better recommendations while traveling. That includes accommodations preferences but also where we spend on food and entertainment. Here, TripAdvisor is in a good position. It also makes Trip a more attractive acquisition target.
  • Investors and equity analysts have been less kind to TripAdvisor. The company’s market cap has fallen percipitously since its highs in 2014. Mid-sized companies like TripAdvsor are afforded less liberty to pivot their core business models. The road to monetizing Instant Book has been slower than anticipated. Equity investors also tend to have a shorter-sighted view of companies that do not make the top-three list.
  • The Instant Book strategy proved costly in terms of lost revenue. Mobile web and metasearch technology has evolved since the Instant Book launch three years ago. Hotels are better at converting traffic from meta sites into bookings. Nevertheless, the Instant Book investment could pay off eventually. Looking at the evolution of metasearch in the airlines space suggests that hotel bookings may eventually go towards the direction of facilitated bookings.
  • Integrated payments could become another tailwind for Instant Book and facilitated booking for metasearch brands. Things like Apple Pay and other payment options delivered through Instant Book could greatly improve user experience and conversions on TripAdvisor. Uber and Airbnb have recently incorporated Apple Pay. Both Priceline and Expedia will likely soon follow suit. Pure meta players like Trivago may struggle in this department
  • The hotel segment currently accounts for 80% of TripAdvisor revenues but most visitors use the site higher up funnel when deciding where to go, or when looking for things to do once in-destination. The company needs to reeducate the market and their user base of the added value that TripAdvisor can bring to overall travel experience.
  • TripAdvisor holds a dominant position in the growing tours and activities space. The Viator purchase was a critical and smart strategic move that allowed Trip to monetize its core user base. Back-end technology for local tour operators has grown more sophisticated making it easier to bring these experiences to market on sites like TripAdvisor. Since users tend to use Trip through the duration of their travels, the platform has proved very effective in pushing traffic to these operators.
  • The non-hotel segment will continue growing at a faster rate than hotels. By 2020, we estimate that non-hotel revenue will account for over one-third of total Trip revenues. Tours and activities is the growth engine here; margins are also more attractive compared to hotels. The segment operated at a loss in 2016 due to hiring and high demand for onboarding new operators, but greater efficiencies can be achieved down the road.
  • The strength of the TripAdvisor brand is a great asset but it is not inscrutable. No other travel site combines as many bookable services with relevant and rich content. The risk of being a full-service brand is that there are multiple points of failure, particularly during these early stages of Trip’s transformation into ecommerce. In addition to building its store of trusted and accurate content, the company needs to make improvements to its search and ecommerce capability.
  • Thinner margins and rising costs for marketing will require the company to stretch budgets for other investments needed to keep pace with innovation in personalization, big data analytics, voice and other technology that a full-service travel platform may require.
  • The big platforms are a threat to established online travel players including TripAdvisor. Companies like Facebook, Uber, Google, Apple and Amazon will continue to push deeper into the space as they seek to monetize their large user base in any way they can including accommodations and travel.
  • The hotel industry continues to wrestle with the OTAs on commission rates and customer data sharing. While hotels generally have a more favorable relationship with TripAdvisor and other meta sites compared to the OTAs, Priceline (via its brand) and Expedia should continue to do well since they own the supplier relationship. This enables them to work with and draw revenue from many different publishers.
  • Brand consolidation vs. consolidation of ownership. The online travel industry is undergoing heavy consolidation in ownership. However, the number of consumer facing brands competing for the same travel customer continues to grow. Expedia and the Priceline Group now own many of the household brands in the market. Trivago, Kayak,,, HomeAway, Momondo and many others fall under this umbrella.

Competitive Landscape

TripAdvisor has continuously redefined its business model amid tremendous competitive pressures in the online travel space. Since spinning off from Expedia in 2011, the company has ambitiously moved to transform from a traffic acquisition and ad revenue model to a transactional ecommerce model with a full-service suite of bookable offerings including hotels, vacation rentals, tours and activities, restaurants and even flights. In late 2013 Trip launched its metasearch functionality for hotels, a pivotal move that put the company on track to compete in the bookings space. It repositioned Trip from a listings and reviews site into a hotel marketplace complete with live-time pricing and availability.

2014 was another key year with two acquisitions and the launch of Instant Book. With LaFourchette, the OpenTable of Europe, Trip now collects commissions on restaurant bookings. The Viator acquisition was a big deal for Trip. It supercharged its non-hotel revenues by channeling traffic to booking buttons for tours and activities at healthy commissions. Instant Book, the facilitated booking platform for hotels, came in response to issues monetizing TripAdvisor’s traffic as users have increasingly moved over to mobile platforms. Mobile web and app formats monetize at a much lower rate compared to desktop traffic due to different size and ad formats. That transition proved costly both in terms of lost revenues but also investor confidence as Trip stock value and market cap plummeted from its summer of 2014 highs.

Key Dates

  • FlipKey Acquired – August 2008
  • Launch of flights metasearch – January 2009
  • Expedia Spin-off – December 2011
  • Launch of metasearch – January 2013
  • LaFourchette acquired – May 2014
  • Launch of Instant Book – June 2014
  • Viator acquisition – July 2014
  • China rebrand – May 2015

TripAdvisor’s end-to-end platform-oriented approach is an ambitious strategy when factoring the various direct and indirect competitors in the online travel space. When Instant Book launched, many asked whether TripAdvisor could become the next big platform to challenge Priceline and Expedia. That made sense considering Trip’s massive user base and cache of user generated content. The addition of booking features made strategic sense in this context. Three years have passed since the launch of Instant Book and results have been mixed from a short-run revenue and profit perspective. In 2017 TripAdvisor has found itself in an increasingly competitive environment.

Trivago’s aggressive marketing push and traction in the U.S. has put more impetus on TripAdvisor management to increase revenues per hotel shopper. It will also pressure Trip to maintain marketing budget share of its two biggest customers – Priceline and Expedia – by offering more competitive commissions and CPC rates. While some revenue impact was expected with the launch of Instant Book, investors and analysts have had a difficult time justifying negative growth rates in 2016. Google continues to push deeper into TripAdvisor territory with Hotel Ads but also reviews for restaurants, and tours and activities. TripAdvisor built its core business on traffic originating from discoverable search content; the days of free Google traffic are waning.

In July 2014 Airbnb launched its rebrand with the Belo symbol and a message of cultural and economic unity. Smart branding and exclusive inventory helped Airbnb lock in a loyal customer base for its rentals product and now its magical trips. The vacation rental market in general has become much more competitive with Airbnb owning the shared-room and urban rental market. Meanwhile, HomeAway and (and Airbnb) continue to expand their footprint with the professionally managed vacation rental market.

The Skyscanner acquisition by Ctrip and the Momondo acquisition by Priceline also upped the stakes for TripAdvisor in airfare. It showed that significant investments in technology as well as direct connections with the airlines (not just the GDSs) play a key role in delivering value to the customer via meta platforms. Facebook also launched its Dynamic Ads for travel, further diluting TripAdvisor’s competitive positioning as a marketing platform for independent and chained properties.

In this competitive and rapidly evolving market, TripAdvisor stock has tumbled as lost revenues and thinning margins discouraged investors. 2016 was a tough performance year for TripAdvisor. Total revenue shrank by 1% while EBITDA margins declined by another 7% largely due to the Instant Book rollout and issues with converting hotel shoppers. According to management, 2017 promises to be different.

The company is set to launch a significant TV advertising campaign aimed at pivoting user perceptions about TripAdvisor’s hotel booking features. TripAdvisor will return to TV advertising in the U.S. after a two-year absence with a bathrobe-clad owl character, inspired by the company’s Ollie the Owl logo, advising consumers that through TripAdvisor they can retrieve hotel results from 200 sites, save up to 30 percent on the rates, and find the “right hotel for you and the best price.”

Logically, the jump further down funnel should be achievable given various caveats including strong user experience on the platform and the size of Trip’s marketing budge aimed at hotel shoppers.

The most telling example of marketing budgets impacting bookings is Trivago. The company has spent more than 80% of its revenues on marketing (online and offline) with significant upside on revenue growth in 2016. TripAdvisor’s planned TV campaign should give us a sense of how well the brand can convey the booking message. Management anticipates double-digit revenue growth in 2017.

We also believe that some of the panic and pessimism about TripAdvisor’s future is overinflated and linked to past stock performance and investor expectations, rather than fundamentals. TripAdvisor is unique in how it monetizes its various product categories so a direct comparison is difficult to make. However, when we look at profitability and anticipated revenue, TripAdvisor has a case.

As a platform, TripAdvisor has consistently turned a better profit margin than Expedia (see figure). Expedia’s OTA business is more profitable but here we are more interested in how these company’s are performing as a whole rather than their individual business units. If TripAdvisor can make good on its 2017 guidance of double digit revenue growth while maintaining profit margins at around 20% then this would be the much clearer indication to investors that Trip’s transformation strategy is sound.

Here it’s worth remembering that the big OTAs are under much of the same pressures as is TripAdvisor. Expedia is more exposed with its flights product which makes up a larger share of its revenue compared to Priceline. Google Flights and the big meta sites including Kayak and Skyscanner are taking more share of consumer traffic. That means more competition and higher marketing costs for Expedia as it bids for clicks via these channels. On the hotel side, the big chains continue to battle with Priceline and Expedia for lower commissions as those groups sell off their assets and focus more on direct marketing rather than running hotels.

TripAdvisor’s core focus remains hotels because management understands that they must achieve growth and profitability in that segment in order to fullfil the bigger TripAdvisor vision. At least in the short run, Kaufer and team would like to see hotels take a larger share of their business. Yet, their non-hotel segment has performed well and should continue to perform well through 2020. Here we’re paying close attention to the tours and activities space as the primary driver of their non-hotels segment.

Past, Current and Potential Performance

TripAdvisor had a tough year in 2016. Revenue growth fell into the negative while EBITDA margins declined into the 20s. Various events contributed to these losses: Difficulties in monetizing mobile traffic and the company’s Instant Book initiative, which monetizes at a lower rate compared to its metasearch product, were the two biggest factors. As with other online travel players, Trip has also spent increasingly more on marketing as a share of total revenues since 2010.


Tracking first quarter performace shows a similar errosion of margins through the first quarter of 2017.

Instant Book launched three years ago with the promise of moving Trip into the ecommerce game. Management has admitted that they over estimated the impact this would have in growing revenue per hotel shopper. At the time the company refrained from television advertising which has proved to be very effective in growing online travel businesses. Trivago in the U.S. is the example case. Assuming management makes good on its 2017 full year guidance on revenue growth in the double digits, then we can look at the following scenario as one possible outcome through 2020. Tours and activities will also likely become a bigger growth driver for group. Operators have expressed encouraging testimony about Trip’s effectiveness as an advertising partner, in addition to the progress the company has made with ramping up additional inventory onto the platform (see transcripts from interview with Tony Carne, General Manager at Urban Adventures).


It is also worth noting that a significant portion of Trip’s hotel revenue comes from display advertising, subscription service, and its other hotel revenue category which includes sales non Tripadvisor branded websites that the company owns including,, and Management expects flat to single digit growth in this category.

Trivago has done quite well as a metasearch marketplace for hotels. We assume that TripAdvisor can perform as well if not better, given its unique relationship with travelers and hoteliers on the back-end. Users come to Trip for more than hotels which could make the site stickier – all things being equal with UX, inventory, and rates. The core value proposition of metasearch to the consumer is best rate validation. If TripAdvisor can effectively communicate that Trip is now more than just a review site, then it should see uptake in revenues for hotels. Marketing budget and campaign effectiveness will play a big role but strong user experience, robust inventory, and competitive rates on hotel deals will determine Trip’s future as a travel shopping platform.

Interview with Steve Kaufer – Founder and CEO of TripAdvisor

Skift: It seems like you’ve taken your foot off the gas pedal a little bit with regard to Instant Booking relative to your metasearch product. How are you prioritizing the two right now in terms of the traveler and your hotel partners?

Steve Kaufer: Sure. We’re really focusing on what we think the traveler wants to see, wants to engage with. And so, they have obviously the complete reference reviews and content and all of that. It’s going to a nice revamp to be going out shortly. And then from a price comparison we’re doing an even better job than we did before in terms of finding the lowest price.

Some of the time, the lowest price will actually be the Instant Book provider. That Instant Book provider will be featured more prominently than anyone else. Because it’s the lowest price. At a price parity or flip its all the way around, if for some reason somebody else has a lower price than Instant Book, then Instant Book will be relegated to the back seat like the other higher price providers.

And then in price parity situations, which as you know happens often enough, we’re doing our best to figure out who would most likely want to use Instant Book and who would most likely want to click off to one of our partners. For illustration purposes, if you’re on the phone and you’ve already stored your credit card with us then you’ll probably more likely want to use Instant Book rather than click off. And so, in that sort of situation you’d likely see, things to book might be promoted stronger than the other.

Skift: Can you give us an update on how things are moving along on the supply side for Instant Book?

Steve Kaufer: Sure. The supply side is going quite well. It perhaps took a little longer than we thought but we now have the two major online travel agencies on board. We have all of the major domestic hotel chains on board and we continue to sign up individual hotels and additional chains around the globe. We pretty much have the Instant Book option on almost every hotel that matters, already. Either directly or through one of their suppliers.

Skift: What about Europe where it’s a much more fragmented market. Do you have boots on the ground that are actively going after these individual properties to sign them up for Instant Book?

Steve Kaufer: Those properties already live on That means they’re in our Instant Book store so we already have them. There might be a reason down the road where we want to go after them as small, individual properties. Because the rate of their own website might be better than the rate that they give to but that’s not really a high priority at the moment.

Skift: It seems like is the dominant OTA on the [TripAdvisor] site right now. Do you see Expedia eventually owning more inventory that publishes on Instant Book?

Steve Kaufer: The way I would suggest that you look at it is, what are the options that TripAdvisor is presenting towards consumers on all of the hotels and all of the points of sale? And while Instant Booking exists as an option in many cases, the consumer doesn’t care really all that much who the back-end provider might be. They just want the lowest price. And so, when powers the Instant Book button or Expedia powers the Instant Book button, we’re not actually getting a better price for the consumer than what the Meta option has. Because both of those buyers are buying large always in Meta option.

So Instant Book as a strategic move for us, enables us to offer the convenience especially on the phone. It enables us to source inventory from a wide number of providers. But it’s not really a contest between Booking and Expedia. Those two players are very active in our regular auctions and are offering the same pricing. And so, to the consumer it doesn’t matter much.

Skift: Currently your non-hotel segment sits at 20 percent of total revenue. Where do you see that balance five years down the road?

Steve Kaufer: No. I understand the question. Internally of course, we don’t think of it that way at all. We think of it as how quickly can we grow our hotel business? How much more global can we be? How can we deliver better pricing and better value to our folks shopping for a hotel? Separately, look at all those people who are on TripAdvisor, every traveler wants to do something while they’re on vacation. How do we make it easier for them to find and book the perfect tour attraction, et cetera?

So how big could the attraction space be? Well, I think there is folks who’ve quantified it as probably like half the size of the hotel. And who else is selling the attraction tours online? Well, I’m not sure but I think we’re probably the biggest in category. So therefore, oh my God. We’re a teeny tiny fish in a massively huge pond that really hasn’t gone to consolidate online booking yet. So massive opportunity. We’ll comment on that, at what point will it be whatever percentage of our overall business.

And then restaurants, look we’re a leader in reservations in Europe and Australia. A small portion of where all the restaurants in the world are located. So we have another ad product for restaurant tours that can subscribe for their restaurant anywhere in the world. And that’s starting resonate to us and how else can we take this massive source of traffic, of eyeballs, of demand and, our core mission, help folks find the place that they want to eat. And then on the business side, help monetize with either reservations or add products or other vehicles.

Skift: How do your non-hotel products play into longer-run profitability for your group?

Steve Kaufer: Right. We looking forward to profitability in the non hotel segment. And it would be fair to point to attractions as a very big and very interesting growth driver in that non-hotels category. Our restaurant business is growing. We like being in the space very much. We’re not taking on OpenTable or restaurant reservations in the US. They have a good product, a good service. We do something similar in Europe and Australia but we certainly … have a lot of restaurant demands that we seem to, to over years to go.

Skift: TripAdvisor revolutionized user generated content in travel which has really been your bread and butter in terms of driving traffic to the sites. Now it seems like other players are making progress with review content, in terms of hotel reviews, Google, Where do you see the bigger challenges, longer term? Is it pushing further down funnel, into bookings? Or is it maintaining your competitive edge advantage in the content?

Steve Kaufer: Obviously a combination of both. I think, we have best in class content in decision support information. Be it user generated content or pricing or 360 degree photos or candid photos or room tips, the list goes on. Nobody else in the space can really touch us on that. Other folks are strong at transactions, other folks have started to collect reviews. Some reviews good, some less so depending on the travel site.

TripAdvisor’s opportunity is to just go through the check list. What do travelers want when they’re planning their trip? They often start with, in this country at least, they’ll start with the flight. Right, we have the best in class flight search engine. They go onto hotel and we have an awesome hotel search engine that now has terrific pricing available at every turn. We’re smooth, we’re streamlining the hotel search process so that you can get out all the good stuff we have. Including the top notch pricing, to save you money on the hotel you want to stay at.

You just follow on into the trip and you’re gonna play when you’re there and you’re gonna eat when you’re there. And TripAdvisor helps you better than any other site in both of those categories. And then if you want to share when you get back home, TripAdvisor’s the most likely spot that you would turn to to share your travel tips. And I haven’t even hit upon our travel forums or, the best of what makes the TripAdvisor magic so powerful. And what makes it such a loved and trusted brand all around the globe.

Right, to your question. The need to generate content, the decisions for information is second to none. From a price comparison, from the place to go when you’re ready to book. That’s where a ton of our focus is now to make sure that we’re always giving you the best possible price that we can. Always giving new travelers the most possible choices and to make it as easy as possible. So that’s our North Star and we’re pretty excited about what we have coming up.

Skift: What about flights? I believe you recently launched an airline reviews product, right.

Steve Kaufer: Sure. So, I can’t disclose the revenue but the flights product is growing. We don’t make a lot of noise about it from an overall corporate perspective but it’s a really nice product. It’s gotten consistently better year in, year out. We’re finding you cheaper fares because we’re searching more sights. We’re pairing more faring combinations but the team’s just doing a better and better job of each release.

We’ve expanded some additional markets and the flight reviews is something we’ve been asked about for many, many years and it clearly appeals to a segment of the marketplace. It’s been off to a great start. I’ve been very pleasantly surprised by how many reviews we’ve been collecting.

Skift: Following up on your traffic acquisition, a lot of it comes from search. Google’s been through some changes in the way that they display their travel content with a lot of the premium content.

Steve Kaufer: Yeah, it’s pretty much year in, year out Google takes more and more advantage of their dominance in search by putting more and more of the rest of web further and further down the page. Top of the page, they put more of their own ads, more of their own product placement diverting more of their traffic to their own properties. But that’s good for consumers, in our view. I thought true to that original mission of Google, of trying to help users. I presume it’s in their commercial interest to do so and so therefore Google has chosen.

There’s nothing particularly new there. I’ve been fighting that battle for a long time. But we’re comforted to know that a lot of people search for TripAdvisor. They’re gonna find it whether they go to Google or whether they just type in our domain to the web. Or they downloaded our App.

Skift: SEO is still a very important part of the mix?

Steve Kaufer: Of course. We get traffic from Google organic search in literally all the categories. It was a nice virtual circle until Google interrupted with pushing their own content. They don’t have a lot of their own content for some of the categories that we play in. And when they do, a lot of consumers understand that what they might offer isn’t as good as what something like TripAdvisor might offer. For attractions or a restaurant or hotels. So, if enough consumers still scroll past the Google placement to get to the content they’re looking for, that of course makes it an appropriate channel for us.

Skift: Hot topic these days is personalization. Can you talk about any new technology initiatives on the back end that’s allowing you to do more personalization around hotel, best hotel rates but also email marketing or specific content display that’s more personalized to the user.

Steve Kaufer: Yeah. So, on the email side we’ve probably been pretty good at making those personalized emails for a lot, or certainly contextual to what we’ve been doing on the site or the App. In terms of machine learning, we’ve got a ton going on. Most of it’s under the covers on the site and App but the most visible thing is a new sort order on our hotel pages.

So, best value and it’s a combination of really great properties at really great prices. So as I know you’re familiar with, our traveler ranked or popularity index is purely, hey how great people say this hotel is. Regardless of how much they pay. And so, you’d have some cities where the best hotel, number one on the list cost a thousand a night. And you and I aren’t gonna stay at a thousand bucks a night hotel, even though it might be the best. But, so the best value, so to be clear that’s still number one in the city on traveler ranking. But we’re got value sort we’ve now put a still very, very good hotel but something that’s affordable. Maybe 200 bucks a night, at the top of that list.

And sure enough, consumers love it. Now, how did we come up with what those hotels is the personalization. A notion that, even for people that we don’t know a lot about, hey you’ve done something. Or you’ve come from a country or you’re on a page and there’s a similar profile of people like you. And what they tend to like is X. And so, we’re highlighting X for you. So we’re making the site appear a little bit different with a whole lot of different user signals.

I still say we’re very early days. We can easily envision a time when any two people coming to the site will start to have divergent experiences on TripAdvisor because the site gets to know you. You already have a different experience depending on where you live and what city you’re looking at. What you have personally done on the site is another factor. We see that getting even better.

The other thing I mentioned is the recommendations that we make on our restaurant and attraction pages and even to some degree our, you know if you don’t like this hotel. How about this one? And those are all informed by real life behavior on site by you or people like you. So that we get a more contextual and just a smarter recognition output. And in general it’s pretty easy to set up release it out there and we say, “Hey, we’ve got four reservations.” Not surprisingly we gave the users more of what they were looking for.

Skift: Would you say that TripAdvisor is a mobile first platform company?

Steve Kaufer: We have different clients. There’s the web desktop client and the App client. And there’s a client which is a mobile web client. And they all reach in and say, “Hey, give me the right content for this city.” And the right content comes back. That logic is built into the back end, not the front end. So, in that sense we’re not desktop first, we’re not mobile first. When it comes to the development of the user interface, displays on things a majority of our revenue still comes from the desktop experience. But certainly, majority of our traffic of restaurants and attractions is happening on the phone. So those teams have an extra focus on the phone. I don’t think it would be accurate to say we’re mobile or desktop first anymore. Because we endeavor to do things all at once.

Skift: Can you give us some context around your planned marketing campaign and how you will address bookings around specific devices?

Steve Kaufer: The goal of the campaign is less around specific behavior on the device and more around conveying TripAdvisor as a site that can save you some money. Because we are an extremely well-known site but not for bookings. TripAdvisor is known for reviews which is great. It’s top of funnel, it’s content that’s really hard for anyone else to replicate. And even some other sites that have a large number of views, user base still goes to TripAdvisor to see if this is a good hotel or attraction or restaurant or rental. So we can augment that perception of our brand with, hey and keep going on TripAdvisor. Because we’ll save you money if you poke around. That’s gonna be particularly helpful in attracting a new set of folks that are looking to book a room or an attraction, sort of in that transaction mindset. It then also becomes a stickier App or a stickier site. And we’re getting to be pretty good at that. We want to be more well known for that.

Skift: Longer term, how do you see TripAdvisor on the global scale? Particularly in Europe and China.

Steve Kaufer: We are a very global company. Always have been. Huge percentage of our audience come from outside of the US. Travelers in the US or outside going all over the globe. Period, no exceptions, full stop. Europe has been trailing the US in growth rates. I’d say that’s a moment in time now, not a statement of why Europe would be any less attractive of an audience to us. Like many travel companies we face market by market challenges to our offerings. Local competitors and any of those markets. But again, nothing terribly new there. And unlike other verticals, the fact that we bring 500 billion reviews and opinions instantly available in all markets. The fact that we have close to 100 billion candid photos, hey those photos work no matter what language you speak. And so, if I’m sitting in the middle of a small town in Japan or Korea or in France or Brazil, I get the ability to look at any destination. Anywhere around the globe, read lots of reviews. Eat, play, stay, rent, anything. And the photos and the tips, all of which can be, if not in my native language can be translated.

Skift: In terms of content and translation. How does the big outbound China market play out for you guys?

Steve Kaufer: So, we do have automatic translation on most, if not all of our review content. We have pre-translated into quite a few languages. I think we have more points of interest or more listings on our site than anyone else does. So already that’s a good scale and better than anyone else. But still, there are so many challenges if you are travelers from Beijing going to Europe or going elsewhere in Asia. But then there’s payments. Then there’s personalization for that audience. Then there’s, hey we want to go shop. We want to play. I want a tour guide, but my tour guide needs to speak Mandarin not English. There’s just a lot of devil in the details to provide a really great experience. While we might be a head of most, we’re still just getting started.

Skift: Anything else that we’ve missed?

Steve Kaufer: Sure thing. I think I’ve covered this but just to make sure I’m clear. Because I’ve seen some written reports from other analysts out there about TripAdvisor, you know, cutting back on Instant Book or no longer prioritizing it and I just want to be clear, to everyone I speak to at least. It remains a strategic asset of TripAdvisor. We have abilities using Instant Book to deliver better pricing and a higher level of convenience than our competitors. I just wouldn’t read too much into how much you actually see displayed in any particular scenario at the moment. So, not going away. We love it. We’re just careful to keep an eye on our travelers and make sure we’re offering it in places where they want to use it, as opposed to just where TripAdvisor wanted to position.

Skift: Can Instant Book deliver lower total cost of acquisition for your hotel partners?

Steve Kaufer: Chains have some branding muscle to get the word out. But the independents, as the world shifts to mobile, it’s gonna be harder and harder for them to capture the attention of their audience, other than their repeat visitors. But unless they are clearly visible on the two global OTAs, the one or more local OTAs and TripAdvisor.

Again, those are the vehicles cause that’s where people are going to on their phone. And it’s just, well my opinion the days of searching for a hotel in the city using Google on your phone, are waning. So, the global OTAs and the local OTAs they do a good job marketing the hotel. They charge a fair commission and the hotels risk being too dependent on just those guys. TripAdvisor offers another alternative and whether that’s Meta or Instant Book we’re moderately indifferent. A smart hotel might choose Instant Book just because they don’t need to worry about what the right bids are and everything. They just have to make sure, or help us make sure it works.

Skift: Can you talk a bit more about Instant Book adoption on the supply side? For instance, are you seeing hoteliers drop off from the technology?

Steve Kaufer: No, I mean, it’s still plug and play the way we’ve architected. So as a hotel, you’re already using an internet booking engine of some sort. We plug in with that. So, if your website’s working then your connection with us is working. And as a hotelier, you just don’t have to think about much more. A booking comes in and our system is so hotelier friendly, you’re getting all of the same information as if the consumer booked on your own website.

That’s the booking you tend to be happiest with. So no, why would anyone ever shut off Instant Booking? No one has to do anything to maintain it but the rates all stay the same. Because it’s linked to your website, so it’s basically, plug it in once and you’re off to the races. The amount of booking that we drive, of course depends on our traffic and of course it depends who else wants an Instant Booking for that property.

Could be one or more of the different OTAs and so, we try to indicate to the hotels to make sure that they can get as many if not all of the bookings that they can coming through that channel.

Hotels and Instant Book

TripAdvisor’s survival depends almost entirely on its ability to effectively monetize its hotel product. As previously discussed, one encouraging scenario would be for Trip to maintain steady double-digit year-over-year growth through 2020, at margins of 20% and above. Figures drastically below that would be a significant deviation from past performance and will likely chase investors even further away. The launch of Instant Book was a leap of faith with overall disappointing results revenue wise. Longer term, it could fit into building a high-performance end-to-end travel platform.

The challenge with facilitated booking i.e. Instant Book is that it currently monetizes at a lower rate than Trip’s metasearch product. Whether management understood this going into the project is unclear but not likely. Click-based (CPC) platforms deployed via meta auction put the burden of conversion on the hotel and OTA website. With Instant Book, TripAdvisor only gets paid if the transaction is completed on Trip. The industry has focused intently on metasearch as viable model for hotel bookings. Encouraging results with competitor sites including Trivago and better conversions on mobile on the hotel side has pressured TripAdvisor to reconsider the value of metasearch as the company looks to appease their two main customers Expedia and Priceline. Another scenario is that OTA dominance in the meta space could squeeze margins on CPC rates for the metas. If TripAdvisor and Trivago begin to undercut each other on CPC rates to retain Priceline and Expedia business, Instant Book economics could eventually get on par with Meta CPC.

The following is a quote from a recent Skift Interview with one senior team member at TripAdvisor describing the bigger-picture strategy and how Instant Book fits into it:

“Progress [with Instant Book] has clearly had a negative impact on our 2016 revenue growth amidst what remains a competitive travel landscape. Now that we have our transaction products in place, and we have been able to learn and improve, our 2017 focus will shift to re-accelerating revenue growth in our Hotel business, and we believe paid marketing channels will play an important role. Therefore, we believe our 2017 adjusted EBITDA margin will likely be lower than the margin we achieve in 2016. We are still in the early days of re-educating users about our end-to-end user experience, building repeat behavior and plugging the monetization leak in our business. We believe this journey will pay off financially, but will take time. Consistent with our past commentary, we play the long game and remain focused on building for the long-term.”

Here is Steve Hafner CEO of Kayak commenting on TripAdvisor and Instant Book:

“Yeah it’s funny we were actually the pioneer in the category of Instant Booking and we did it to improve the consumer experience. It wasn’t with a view towards monetizing differently or with a view towards changing the strategic balance of power in the industry. We rolled it out, what four years ago, five years ago? It’s something that we’ve offered. It hasn’t had a material impact on the user experience or our economics in the way that it did for TripAdvisor but TripAdvisor is trying to force it in a way that we didn’t. We basically put it out there for consumers to use if they wanted to, we didn’t bias this way towards that path and as a result our experience has been very different than TripAdvisor.

There’s only two companies in the Meta space making money and that’s TripAdvisor and Kayak, but thankfully we can hide behind Priceline how good a business we have. Yeah, there’s no question there’s more money in hotels than there are in flights because in flights there’s industry consolidation and you actually have to have a good relationship with the airline to get paid. You have to be a meaningful distribution channel for them which fortunately we are. Yeah, it’s tough if you’re a Skyscanner or some of the other folks where you may not be getting the same economics and you still have huge cost structures.”

Perception is important. Instant Book may provide better user experience but, as the popularity and marketing campaigns of other successful metas have shown, travel shopping comparison platforms are popular with customers. Here we ask whether user experience is enough to sway travel shoppers to convert brands.

The historical argument in favor of facilitated booking has been that customers would prefer to stay within one ecosystem when completing a transaction rather than getting diverted away to supplier websites. Since launching Instant Book, we have seen mobile technology improve to where the transition from meta site to hotel or OTA site has become less bumpy. This is particularly the case for the OTAs that are better at converting customers.

Over time, Instant Book could give TripAdvisor more flexibility in making incremental improvements to the user experience on things such as payments, for example. Incorporating mobile payments e.g. Apple Pay could help with conversions on TripAdvisor’s transactional bookings (Instant Book). Payments is just one instance where customers might prefer staying on Trip to book. As the platform grows smarter with more advanced personalization capability, customers could grow to understand that booking on Trip helps the website give customers better recommendations on other things like restaurants and things to do. A TripAdvisor loyalty program that combines point collection and redemption on book-with-Trip for hotels but also activities and restaurant bookings could also make the site stickier. On the supply side, Instant Book insolates TripAdvisor from potential disruptive events that might happen with the tenuous relationships between the OTAs and the hotel chains.

TripAdvisor’s Complex Relationship with the OTAs

TripAdvisor is ultimately a marketing channel for OTAs and hotel brands. Most if not all of the hotel metasearch players including TripAdvisor derive a significant portion of their revenues from Priceline and Expedia.

The following is an excerpt from trip’s latest 10-K: “For the years ended December 31, 2016, 2015 and 2014, Expedia and Priceline, each accounted for more than 10% of our consolidated revenue and together accounted for 46%, 46% and 46% of our consolidated revenue, respectively. Nearly all of this concentration of revenue is recorded in our Hotel segment for these reporting periods. As of December 31, 2016 and 2015, Expedia accounted for 12% and 11%, respectively, of our total accounts receivable.”

Metasearch is an important acquisition channel for the OTAs because they can get a better deal on traffic via the metas than they can on Google which is where up to 80% of their marketing budget gets allocated to. The OTAs will continue to spend more with the metas as long as the economics make sense. Traffic from meta channels is also high intent traffic compared to Google paid and organic traffic. Users have indicated a specific time, date and location of travel.

Competition between TripAdvisor and Trivago Heats Up

Analysts are increasingly pegging TripAdvisor’s performance to what’s happening with Trivago. The German-based company recent spun out of Expedia and IPOed in December of 2016. The company’s more transparent financial reporting has given the investment community a measuring stick to gauge TripAvisor’s progress with hotel bookings. Here is an excerpt from a recent analysis published on and written by Jake Fuller an online travel analyst and Managing Director at Gugenhiem Securities:

“While TripAdvisor is bigger than Trivago in total revenue ($1.480 billion versus $837 million in 2016), Trivago is bigger in the core hotel metasearch business ($827 million versus $750 million in 2016). Trivago reached parity with TripAdvisor in second-quarter 2016 with each at about 11% of OTA budget, but Trivago share swelled to about 15% in first-quarter 2017 versus TripAdvisor at about 11%. Why is Trivago winning OTA ad budget share? Trivago is growing hotel shoppers faster than TripAdvisor, and TripAdvisor is growing shoppers slower than the pace of room night growth that the OTAs are trying to sustain. In what appears to be a bid to address the issue, TripAdvisor is rolling out a site redesign focused more on hotel price discovery (appeals to the later-stage traveler with a higher intent to purchase) and backing that with a $70 million-$80 million TV campaign in 2017. That is still small versus the more than $400 million we estimate Trivago will spend this year. The question is how much margin will TripAdvisor be willing to sacrifice in 2018 to stem the loss of OTA ad budget share.”

While TripAdvisor and Trivago will inevitably compete at the consumer level, the big issue is competition for Expedia and Priceline marketing spend. Both are heavily dependent on revenue from these two – Trivago more at nearly 80% of total revenue and TripAdvisor at 46%. TripAdvisor also has a somewhat different relationship with the OTAs because of their integration on the Instant Book platfom. This gives TripAdvisor some additional flexibility in sweetening the terms as the landscape grows more competitive. Google will put significant pressure on both players and likely more pressure on Trivago as a hotel-specific site.

While the comparison between Trivago and TripAdvisor makes sense to some degree, since both actively compete in the online hotel and meta space, we consider them as fundamentally different in their stategy and approach. Trivago is leaning heavily on marketing to grow the brand. TripAdvisor’s platform approach aims to build loyalty with its customer base by developing a sticky, end-to-end app that follows the customer along the entire duration of the customer journey. The later approach could prove more effective longer term but there are also pitfalls including competition from Google and potentially other platforms including Apple which will most likely create an end-to-end travel product at some point.

Trips’s push into Tours and Activities

TripAdvisor holds a dominant position in tours and activities. We expect Trip to perform well in this category as it ramps up new operators. Expedia and Airbnb are also growing in the space but the Viator acquisition smartly positioned Trip ahead of the pack. Going forward we believe the segment could account for over one-third of the company’s total revenue.

The Viator acquisition in 2013 fundamentally changed its business model.  Incorporated into Viator’s platform is the technology that allows suppliers to connect to its scheduling and payments APIs and for customers to book the products online. Prior to Viator, TripAdvisor’s tours and activities listings were effectively user-generated ads that directed traffic to the supplier.

Similar to what Instant Book did for its hotel business, this strategy effectively moved TripAdvisor further down funnel by monetizing its traffic and ample inventory it already had. Prior to this, tours and activities content helped drive traffic to Trip. Now, through bookings, it also drives direct revenues. Commission rates vary depending on the type of tour and destination. Others have entered the space including Expedia and Airbnb. TripAdvisor has first-mover advantage; Airbnb is still in the curation phase of its T&A business in order to control quality and to build its brand in the space. The marketplace model insolates TripAdvisor better than the Airbnb-branded experiences model because customers tend to blame the provider not the platform.

If the first phase of Airbnb’s push into T&A proves successful, then it will likely look to work with the tours and activities aggregators such as Urban Adventures to drive volume. One likely scenario would be acquisition-led growth. Here, Trip’s T&A business would be a significant consideration in the event of Airbnb-TripAdvisor acquisition.

Three-month backlog for tours and activities suppliers to upload into the TripAdvisor platform. Operating costs will also go down significantly as TripAdvisor integrates to low-hanging fruit and moves into long-tail inventory.

Interview with Tony Carne General Manager at Urban Adventures Ltd

Skift: Could just give us a quick summary of Urban Adventures, what you guys do and what markets you’re operating in.

Tony: Urban Adventures is a day tour business. We’re in 162 destinations around the world, six continents and about 94-95 countries now at the moment I think. We’re only doing English speaking generally at the moment. We’re trying a little bit of Spanish but English-speaking is our general market, and therefore our customers come from the main English-speaking destinations the UK, North America, Australia and New Zealand. This year we’re on track to take about 250 thousand bookings across our destinations. In terms of growth we’re hitting the high 70’s. So it’s going pretty well, I must say.

Skift: Can you talk about the customer journey and booking funnel in the tours and activities space.

Tony: Yeah, so it’s a bit of a mixture. We’re multi distribution we work with pretty much everyone, which includes retail, so retail in Australia and the UK. And they tend to have a booking spike around the three month mark prior to departure, but definitely the biggest spike is in the last week, I think, and then bigger in the last two days. So that’s kind of where all the action is in the tours and activities business. And so the connection to APIs, particularly over the last 12 months, to Expedia, Get Your Guide have all hooked up and that’s been great for us and great for them because it’s given them access to live availability so they can play in the space where people are actually booking last minute. Once you’ve got those connections, once you’ve got all the plumbing in place, it makes it simple. And they all kind of find their customers in different ways but connections to APIs have just supercharged everything, which has been fantastic.

Skift: Looking at your sales and distribution mix, what share typically comes direct versus indirect as a whole, across all the different channels?

Tony: Last year we did 16% direct. This year we’re 18% and I think a comfortable spot to be would be around 30%. I guess that’s where we would like to be in the long run. The caveat to that is that everything continues to grow. All channels are selling a lot better, retail is selling a lot better, we’re selling a lot better. And ultimately for us to be a decently profitable business, we want to push our direct out, because that’s essentially where we make the biggest margins.

Skift: For the the rest of your bookings would you say that Get Your Guide, Viator, and Expedia make up the majority of that?

Tony: Yeah, GTA would be another they do particularly well for us in South East Asia, and in Europe and North America, so we really look forward to seeing how that goes in the high season. Because Europe’s their real stomping ground, I think, you know, if they can’t push through some good numbers there, I guess something’s wrong.

But in general, tours and activities is coming out of the old world at the moment. And I’d say two years ago, to give you an analogy, most people were on foot heading to the west heading for gold, and Viator found themselves a wagon and a horse and they started trotting off in front of everyone. But then TripAdvisor picked them up, turned that horse into a thoroughbred and they’re kind of sprinting away.

Skift: So what types of activities typically sell well on TripAdvisor? Is it the day tours? Is it the multi-day? Is it just the activities?

Tony: We only do day tours. I know that Intrepid put a few products up there that are multi-day. We’ve got a really great and strong relationship with Viator and I’ve been with them since we opened essentially. And in the end, tourism’s still a relationships business and so I think that plays a part of it. We’re guaranteed to depart, we’re free-sell, we don’t put any friction into the booking process. We like to think that we run pretty great tours and the customer satisfaction’s really good, and the reviews show that out on our site, on TripAdvisor, on Viator’s own site. So, I think all that plays a part in what sells. And in the TripAdvisor case specifically, it’s still a business of reviews. So that’s how powerful it is.

Skift: What does the path to purchase look like?

Tony: Anyone that ends up on Viator is obviously their client. Viator does’t mention our business to the client they portray the product as a Viator product. But they’re not sending us traffic. They’re transactional, they’re taking the money, sending us the booking and then sending on the net proceeds after they’ve taken their commission from that sale. TripAdvisor I guess used to send traffic in the past, and probably still does a little bit. But definitely it’s fallen off the cliff a little bit, simply because after purchasing Viator, they have book now buttons on TripAdvisor itself. So as a customer, if you’re going through that journey and end up on TripAdvisor to validate the product or validate the business before you make your purchase decision, well once you’re there you can just click Book Now, which will then end you up on the Viator site or the Viator white label that now looks like TripAdvisor on their site, and they’ll check out there.

So, it’s been a really clever move for those guys the way they’ve attacked moving into tours and activities to pick up the business that was probably already doing the best from a transactional point of view. And I think they’ve assimilated it pretty seamlessly and quickly to the TripAdvisor business.

Skift: So for Urban Adventures do you still capture that customer information, or does TripAdvisor hold onto that?

Tony: No we don’t see much at all. We know the customer’s name and that’s about it. Yeah, so generally no email address, no phone number. Obviously it’s their customer, so it’s their right to hang onto that information.

Skift: Can you talk about your business?

Tony: Yes, so we kind of acquired the franchise model. We call it a network, we call it a co-op. So we find people who we think are the best in their city at delivering customer experiences. It could be a freelance guy for example, who’s the best in town. We help them start their own business, which would then become, for example, Philadelphia Urban Adventures. So we help a freelance guy take the steps from working from other people to working for themselves under our brand.

Skift: Do you work with Airbnb?

Tony: We don’t do anything with them at the moment. We’ve had a few of our partners independently lodge itineraries with them. At the moment they’re in 28 destinations, and I think they want to push that out to 40. We’re at 160. We’ve got a head start on them at the moment. We’d be more than happy to work with them. How do I see it shaking out? At the moment, they’re building their dream product that goes into the whole magic trip concept. But in order to scale they’re going to need to get other product. And it’s not entirely obvious where they might get other products in there, so within the heap of it, and if they’d like to work with us, I’d be more than happy to.

At some point, presumably they will just open it up for anyone to load what they want to load, and let the reviews shake it out. And we’re pretty confident in the way that we operate that our reviews will push us to the top of their systems as well.

Skift: When you look at Urban Adventures, Airbnb, TripAdvisor, Expedia, can you explain the different business models currently out there?

Tony: Expedia still has product managers who are choosing product and loading product. Airbnb is 100% curated at the moment, so they’re not taking anything at the moment. But, potentially if they’re going to scale the product, they’re going to have to open it up one way or the other. Viator was a curated marketplace but the move to TripAdvisor has shaken that up somewhat in that TripAdvisor already had pretty much every tour business in the world in their system. Even like mom and pop ones loaded into their system, because you as the operator didn’t necessarily have to load your own content. If one from their community had been on your trip, then they could load that onto the TripAdvisor system, and now it’s up to you to claim your listing. That’s the genius of early TripAdvisor model. The community put the product up there, and then as they grew in volume- what are they now at 400 million unique a month or something at the moment … They became a really important part in the funnel.

A good majority of customers will have a TripAdvisor step in their path to purchase. Particularly for them, so if you take Urban Adventures for example, if a customer has never heard of Urban Adventures but maybe their friend went on this Urban Adventure in Venice, it was really amazing, you’re going to Venice, you should go on it as well. Yes, they would trust their friend, but a good number of them would want to sense check that. And now, it’s almost an innate part of the process that people will go to TripAdvisor to sense check even their friend’s opinions. If it all checks out, then book.

Skift: What impact did the Viator acquisition have on Trip?

Tony: Sure.

Skift: TripAdvisor started off as a community where the tours and activities content drove a lot of the traffic to the site. And then they would monetize in other ways whether it be paid advertising for hotels specifically. But now with the Viator acquisition, this is giving TripAdvisor the ability to monetize the actual traffic for the tours and activities. Am I understanding that correctly?

Tony: Correct yes. I look at TripAdvisor like Facebook. Facebook was a community around social, and TripAdvisor is a community around travel. Built on the same … talk before about how … was the vendor didn’t have to set yourself up, someone else could do it for you, which means you’re dragged into the whole thing. And then you wanted to be a part of it because essentially, one great review can equate to something like five extra bookings. And so when you’re getting free traffic, more reviews, more bookings, it’s all working beautifully. But similar to how Facebook’s gone down the track is that it’s not free forever. Hey, get your business on Facebook and get a million people to like you.” And once everybody has done that, then said, “All right. Well now, pay us if you want to talk to them.” I think it’ll be exactly like that.

Skift: Do you get a sense of how fast they [TripAdvisor] will grow?

Tony: Viator was already growing, but like TripAdvisor just turbo-charged it, really turbo-charged it having all those eyeballs and direct booking and APIs. They’ve got the perfect storm there, massive people that are looking for stuff, essentially last minute. We sell right up until literally, the last minute because they’ve got live availability via the API. In a lot of places where we are, there’s only two or three things left in the last four or five hours. So again, that’s worked in our favor and that’s probably why our growth’s been so high.

The main operators would have the API connection. So Gray Lines, City Sightseeing, Big Bus, they all have API connections. And that’s really high transactional volume, not so much on the value but definitely on the volume. And like I said, if they do follow that Facebook playbook, once they get it to that point, they can start to take a lot of the cost out. They won’t need the humans involved to continually be adding and loading more product. The product will be loaded and it will be down to the vendors on whether they want to play, or not play.

The little guys down at the bottom, in my experience, don’t necessarily understand pricing for distribution. It’s not part of their thing and they’re like, “Oh, I wouldn’t pay that guy 20%. Why would I do that? What’s he doing?”. I guess we go about it in a very, very different way to that in that we just understand there’s a cost to acquisition in your business. And you need to add that in to your pricing to be able to access those customers.

Skift: Is TripAdvisor scaling the business quickly?

Tony: Yes, and the money making is to come. At the moment, they are loading product like it’s going out of style. There’s a big backlog, it’s a three, four, five-month backlog to get your product up there. So people are scrambling to get their stuff up there as well.

Interviewer: So there’s still plenty of room to grow on the inventory side for TripAdvisor then?

Tony: Definitely. And I think they’re hiring. I think I’ve seen they’re hiring as well so to get more people to input that product. I mean they’re in a hurry. I wouldn’t be too worried if I had TripAdvisor stock. I’d be holding. Maybe buying.

Skift: How will Airbnb stack up?

Tony: They’ve got plenty of their own customers. They got massive brand loyalty and I think Airbnb is definitely not too late to the game. I think the game is still very, very early days. But the difference is path to purchase and how TripAdvisor is an integral part of it for many people to validate whether the price is good or not, an Airbnb customer doesn’t have that in their path to purchase. They’re an Airbnb fan, they trust the brand. Airbnb has its own reviews so that’s your community and I dare say, the Airbnb community look down a little snobbishly on the TripAdvisor community as being a bit mainstream. The clever part of the Airbnb business is that community building, so that they’re taking out people’s need to search outside of their own ecosystem to validate knowledge.

Google is the other player. I think you’ll find that TripAdvisor gets very aggressive on moving people to the app space, so that they’re not googling a business’ name to try to get to the TripAdvisor page. Because already, you can see Google is putting its own Google reviews really high above the fold. And if they’re all five star it all sounds good, well do you need to go through to the TripAdvisor community to see a similar set of numbers. You don’t really. You’re just validating, “Am I making the right purchase decision here or not?”

And so, I think that’s the potential danger for TripAdvisor, if they don’t move people in to their own app ecosystem. I’m not a big massive fan of apps unless you are a massive business. And TripAdvisor’s a massive business and Airbnb’s a massive business. And Airbnb’s pretty much pushed everyone into their app. “This is where our community lives, don’t search for us online. Just go straight in here. We’re here. Here’s the reviews. You know us, we know you. You trust the community. Book.” Whereas TripAdvisor, while their advantage is they’re a step as people try to validate direct booking channels or whatever, the risk is that if people are just googling it, Google will give them the information first and stop people going all the way through.

Skift: Are there any specific products or technologies that Google is working on in the tours and activities space? How do you work with Google?

Tony: We don’t work with them very much at all. So AdWords was a complete flop for us. We couldn’t work it out. We’ve got an average product price of $60 so we could never work out a positive ROI on it, and we gave up on it six years ago after donating $100K or so to Google and have never gone back to it, and don’t really feel the need to do so.

Within our direct business, we have built a really great content team. Our advantage over other players in the market is that we have boots on the ground. We got 160 destinations where we have a physical human being or a team of human beings, who can deliver us information that a lot of our competitors can’t get. We’ve got that local who can feed through some great local, interesting neighborhood style information to our content team, who then pretty that up and put it on the web. The majority of our traffic comes from organic search based off long tail content. And that’s a strategy that’s working really, really well for us.

Vacation Rentals

Technology has allowed the traditional vacation rental market to grow and move into the consumer and travel industry mainstream. Airbnb popularized apartment sharing and managed-by-owner rentals, which has consequently done wonders for the professionally-managed rental market. On the demand side, this so-called “Airbnb effect” fostered consumer awareness and appetite for non-traditional accommodations, i.e. apartments, homes, etc. On the supply side, it generated investor interest in the way of acquisition and venture capital, in just about everything that touches the vacation rental market. This evolution and the shifts taking place among suppliers, marketplaces, and technology are what Skift Research refers to as the three waves of consolidation within the vacation rental market ecosystem.

As marketplaces, and TripAdvisor also hold a strong position in the professionally-managed segment. These platforms leverage large marketing budgets and strong branding to capture global market share. Airbnb focuses primarily on the do-it-yourself property owner, rather than the multi-property management group. Increasingly, the company is also growing its footprint with property management groups that consequently use Airbnb as a distribution platform. Vacation rental metasearch platforms, including, could signal a vacation rental market consolidation push.

Trip’s vacation rental business is yet another avenue to monetize its community base, but the company will likely struggle longer term to compete against the likes of Airbnb, HomeAway, and TripAdvisor has 820K vacation rentals listed on the platform, down from 835K in Q4. By comparison, Airbnb has 3MM+ listings, Expedia has 1.6MM+ properties (85% are online bookable) and has 640K vacation rentals (all instantly bookable). We think inventory growth and delivering a seamless and reliable customer experience is critical in growing share in AA’s.

Airbnb’s dominant position first-mover advantage with primary-residence host puts it at a competitive advantage in urban markets. Its brand strength with both hosts and consumers will make it difficult for HomeAway and Expedia Group to compete in this space, but not without trying. HomeAway (and TripAdvisor) actively recruit the do-it-yourself hosts. However, the platform holds a stronger position in traditional vacation markets catering to beach, golf, and ski goers. Part of the reason why it has managed to retain its position is the technology. The HomeAway platform has catered to the professional multi-unit manager for much longer than Airbnb. This has made it a favorite among traditional VR managers.

The recent regulatory climate is another consideration, as more city markets take a negative position against rentals. Airbnb’s recent move to limit the number of properties that hosts can publish in cities like Barcelona and Amsterdam is telling about its future as a platform-of-choice for professional managers. As the supply side consolidates — i.e. with Wyndham, Accor, Vacasa, and other players rolling up smaller local players — multi-property management technology will become increasingly important for all marketplaces in the space. Airbnb will need to improve its technology to break into more consolidated markets via supply acquisition. The danger for Airbnb is with losing its brand positioning. For HomeAway with Expedia, with Priceline, and TripAdvisor, the challenge will also play out on the branding side.

Positioning in China

Generally speaking, China is a massive opportunity for the travel industry. All of the big western brands have either a direct or indirect strategy for China. Ctrip is the dominant player and will likely hold on to its dominant position for the foreseeable future, in large part to its relationship with which feeds up to 80% of Ctrips non-China hotel content. While we don’t think that TripAdvisor will ever capture a significant share of the Chinese domestic hotel market, the brand could play a unique role in that ecosystem from a content perspective serving the outbound international segment. The China outbound market is rapidly growing with more travelers looking for opportunities to travel abroad. Translatable local content beyond hotels will play a more important part in attracting this segment. The following is an interview with Chief of Staff, China, TripAdvisor discussing the company’s China Strategy.

Interview with Daniel Pan, Chief Of Staff, China, TripAdvisor

Skift: For TripAdvisor in China, is it the same business model as in the U.S. with both meta and instant booking?

Daniel Pan: Yes, the TripAdvisor China business, in terms of our revenue model, is very much like our global business.

In terms of really how IB (Instant Booking) is doing in China versus how meta’s doing in China, I guess our product work is never done. It’s very important for us to really always test and learn and iterate our revenue products. As you know, we would do a lot of pushing and pulling with our IB, as we noted in the last year. The same thing in China. We have a revenue strategy market by market. In China, is all about finding the right mix.

Skift: Can you discuss the TripAdvisor rebranding in China.

Daniel Pan: So that was like two years ago, where we did a couple things. We would bring our name, our current name, which is Mao Tu Ying. I’ll elaborate a little more on this name, because it’s actually a play on the Chinese name of Mao, which is a logo, the mascot.

We replaced the wall of the character with the Chinese character for travel. So, it sounds like Mao, but it also carries a hint of travel. So that’s the new brand name. And quite coincidentally, if you look at all the Chinese travel companies, they all use animal mascots.

So that’s on the branding level. On the product side, we also did a few changes. First, from a strategy perspective, we started to really focus on serving our travel population. I’m confident to say today the vision for travel to China, the vision for the Mao Tu Ying brand, is all about helping the Chinese outbound travelers to take their journeys abroad more comfortably.

On the product side, we did a lot of things, including localization efforts, helping the Chinese outbound travelers to read our review, to understand our content easily, with language support, and also, we had established our regional account and we improved our user ability by allowing searching.

We did a lot of things to make sure the new brand is aimed at Chinese outbound travelers.

Skift: In the U.S. and Europe, revenue is very much skewed towards hotels. I’m assuming it’s the same here. Is that the case?

Daniel Pan: Hotel is absolutely our core business. I will not say it’s the only part, but it’s a very core business for China. For the other product lines, like airlines or restaurants, we’re constantly trying to improve the product to provide a better overall experience for Chinese travelers.

Skift: Are there censorship issues on the reviews or no?

Daniel Pan: It is actually a question in China we tend to get. First, all the reviews submitted by the Chinese user to the Mao Tu Ying app are subject to the same review processing guidelines as other countries. So, its the same guidelines, same team, same mechanism. Having said that, we do not allow personal insults, smear campaigns, and things like that. So far, we’ve been in full compliance with Chinese laws, local regulations, and we’re looking to do that.

Skift: In China, it seems like everyone uses mobile and WeChat. Do people here use TripAdvisor in the same way they would in the U.S. and Europe?

Daniel Pan: You are right. Actually, if we look at the entire Chinese traveler market, the outbound population and the domestic travelers are quite different in terms of education levels and income and so on. When we talk about this outbound traveler population, we target the free independent travelers.

I have to highlight that a key difference versus a Western country is that they have higher need for information. We see travel blocks, or tour blocks that are pretty big in China in terms of continental needs. We also launched our own structured travel block product in our ad, again for the Chinese travelers. Review content is also very important. Usually the next step after they figure out the itinerary based on travel block, then they will look into specific restaurants and hotels. Reviews are also important for them.

Skift: Operationally, how integrated is TripAdvisor into corporate? Is it kind of siloed?

Daniel Pan: We work very closely with Singapore and headquarters in the U.S. It’s really part of a family.

Skift: What trends are you seeing for adoption of TripAdvisor in China?

Daniel Pan: I think the drivers behind our adoption in China is twofold. One is the FIT segment, which is our core market, is leading the cross-border travel market in terms of trips taken and travelers.

As personal income grows and the economy improves, people are getting more sophisticated about travel. A large percentage of the travel market is becoming outbound, and a big group of outbound is becoming FIT. But that’s sort of the fundamental driver of our adoption, and also in the segment, we’re getting share.

We have made a lot of product improvements over the past two years along with better content to make sure we are a better product for the Chinese consumer. By doing this, we will triple our mobile app users and MAUs.

So in the US, TripAdvisor and all the other online travel sites, some people use Google to drive traffic. In China, how is it a similar thing with Buye, where you guys are bidding for clicks, or is it a different type of market? What are the other sites out of the live view?

Skift: TripAdvisor just announced that they’re going back to T.V. advertising. Would any of that be for China? Or probably not?

Daniel Pan: When you look at that, you have to understand that in the U.S. and in China, we are totally different in market positioning, because in the U.S. you should find that most people travel.

In China, it’s a very targeted segment, although it’s a premium segment. We need to target our marketing efforts. We’re thinking about the media, advertising channels that the Chinese people really use quite frequently. That’s why we’d be doing actually a lot on social media. We’re pretty much focusing our efforts on mobile. China has been leapfrogging into mobile options, so we want to make sure we really focus our limited resources on mobile.

Skift: What are some of the biggest difference that you see in the Chinese travel market versus other parts of Asia?

Daniel Pan: FIT has very high growth potential. I point to the fact that less than 10% of the Chinese population has a passport. So, as you can imagine, with disposable income levels growing, this percentage, which fundamentally is a pre-requirement of airline travel, will go up. It’s a huge market out there.

Second, a lot of behaviors are advanced in terms of mobile adoption. Mobile is now the first screen versus the other screens at your home. The China consumer is tech savvy and very fast in picking up with new services. They are also young and a lot of them are white collar employees and only four to five years into their job. But they’re really adventurers where rather than spending all their money on other consumer things, they’re really starting to think more about travel and enriching their life experiences.

Skift: When you look at Tencent, Alibaba, and Baidu, how much of a threat do you see them as?

Daniel Pan: We think we occupy a unique space in China. We don’t really dare to compete with the “BAT”s, as you mentioned those three companies, we call them the BATs. Instead, we see them as valuable partners who sort of own the important traffic and uses the assets to where we can.

These companies also take stakes in Ctrip and other travel partners, which we are already in partnership with. So it’s an ecosystem, and we’re contributing our assets differently, our brand, our global positioning, and our global contents will be really helpful for also their consumers who want to go outbound. Its figuring out how to work together.

Future Scenarios

Opinions and scenarios speculating on TripAdvisor’s fate have varied widely. Some point to Trip’s brand strength and community reach as its key competitive advantage as well as a green light to transition over to bookings. Others site Trip’s inability to compete on advertising revenue with the big players including Expedia, Priceline, and increasingly Google as a threat for the company. Technology investment is another factor and whether Trip can build its stack fast enough to compete with the innovation coming down the pipe from players like Google, Apple and Amazon. Arguably, smaller more vertically focused companies should be more nimble when it comes to tech innovation. Focus on personalization will help make the app sticker over time; growing a loyal following that comes to Trip for exclusive deals and value-add beyond a cheap hotel night will prove critical. Here Trip stands a chance as a platform and at delivering incrementally better personalized user experience combined with robust inventory and competitive pricing. Big spend on marketing will keep single-service sites top-of-mind but we believe that the platform approach will ultimately win out. TripAdvisor could be that app. We believe that an acquisition also remains a possible scenario. Trip is a desirable asset; anyone of the big players including Priceline, Expedia, CTrip, Airbnb, Amazon, and Apple are potential buyers.