TripAdvisor (NASDAQ:TRIP) is the world's largest travel site as measured by monthly user traffic. Over the past couple of years, in an attempt to better monetize its massive user base, the company introduced its instant booking platform, encouraging users to book their stay directly on TripAdvisor's site or app rather than clicking away to complete their reservation. However, consumers -- who historically have thought of TripAdvisor more as a place to research trips and read reviews -- have been slow to adopt instant booking, causing revenue growth to grind to a halt last year.
In late May, TripAdvisor CEO Stephen Kaufer appeared at the J.P. Morgan Technology, Media and Telecom Conference. Perhaps unsurprisingly, nearly the entire Q&A session was devoted to what TripAdvisor is doing to improve the performance of instant booking.
Making instant booking less visible when it's not the best option
When first launched, instant booking was promoted heavily -- perhaps too heavily, given it doesn't always provide the best price. While the company will still offer instant booking as an option (because it's quick and convenient if you've already stored your credit card details with TripAdvisor), its location and relative prominence will now vary.
Kaufer explained (transcription by Thomson Reuters):
... it's a question of where we place it on the site. And so we refer to this as floating the Instant Book position. So if you look at a particular property, there's a lead provider, usually a button and then all the other folks that can offer a price, offer a reservation for this hotel. And TripAdvisor will almost always be there. When Instant Book has the best price, of course, it's going to take pole position because that's going to be best for the traveler. Where Instant Book has a price that's worse, then it's never going to be in that very first position even though it might have been, mind you, a couple of years ago.
The company hopes that when instant booking is visible, it will be increasingly recognized by consumers as providing genuine value. And for consumers who still decide to click away to book their stay on a TripAdvisor partner site, Kaufer says "that's great" -- so long as they're happy and return next time they need to make travel arrangements.
Building the list of instant booking partners
In late 2016, Expedia became an instant booking partner, followed by Hilton in early 2017, and InterContinental Hotels Group in April. Kaufer expanded on why each additional partner is a win-win for TripAdvisor and its users:
Expedia and Hilton in its book give more choice, and therefore, marginally better pricing across the Instant Book product line so that travelers are more likely to have the ability to book the lowest price.
... But if in your mind as a traveler, you're coming to TripAdvisor to get the best shopping experience, which includes the absolute best price by the time you click downstream to a client of ours, well, you're going to be much more likely to actually buy that because the confidence that we've built up that we have delivered the best price. The more confidence we deliver means the better downstream conversion rate. The better downstream conversion rate means our clients can afford to pay us a higher [cost per click], and the whole thing works quite well.
A streamlined shopping experience
TripAdvisor recently launched a redesigned app experience that it also hopes will improve monetization rates. The company has simplified its content and made the transition between researching and booking more seamless. Kaufer said:
What do people want in terms of finding the absolute best price? Show the lowest price first; highlight it; take your hotel sort, which is the list of hotels when you're going to a particular city, and make sure very great hotels but affordable ones are front and center on that list. Do all the things that consumers would appreciate to help that hotel shopping experience, step one; step two, take away the irritants, take away some of the ads that were clutter, take away some of the pop-up or pop-under experiences that -- yes, that made us some money, that's why we did them in the first place, but were in the way of that clean shopping experience; combine them; test the bejesus out of it so that as we give up some revenue here, we gain some revenue there.
Advertising to build the habit of booking
Getting people who think of TripAdvisor for ratings and reviews to also think of the company as the easiest way to book travel will not happen overnight. But TripAdvisor is getting ready to spend $70 million to $80 million on a new advertising campaign designed to do just that. And it's going to focus on a message of saving money, which the company believes will yield quick results. Kaufer explained:
So the TV campaigns ... will really focus on delivering that value proposition. It's not the convenience of booking on TripAdvisor. It's saving dollars. Saving dollars, if it can, as I expect it will, yield to a higher-quality customer visiting TripAdvisor, a higher booking intent. We're going to see that pretty quickly in our click-through ratios and downstream revenue.
In early May, TripAdvisor's first-quarter earnings showed a few signs of an emerging turnaround. While Kaufer cautioned that trends to date in the second quarter indicate click-based and transaction revenue may slow from the 12% growth seen in Q1, on a full-year basis, the company is still guiding for double-digit growth on this key metric. Whether that happens will depend largely on how successful TripAdvisor is in creating more consumer awareness and adoption of instant booking. And though the company still has quite a bit of work to do, I continue to believe patient investors will be rewarded in time.
Andy Gould owns shares of TripAdvisor. Andy Gould has the following options: short June 2017 $50 calls on TripAdvisor. The Motley Fool owns shares of and recommends TripAdvisor. The Motley Fool has a disclosure policy.