The TripAdvisor 2020 Report

November 17th, 2018

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Third quarter financial results further reasserted TripAdvisor’s relative position of strength in global online travel.

Questions Addressed

The TripAdvisor 2020 Report is updated quarterly in order to properly assess the company’s current and future financial performance, competitive position, and impact on the travel industry segments in which it operates.

We address the following questions throughout the report:

  • How will TripAdvisor’s recent strategic initiatives impact its financial performance?

  • How will TripAdvisor impact the various travel segments in which it operates?

  • How will external forces shape TripAdvisor’s competitive position through 2020?

Quarterly Summary


TripAdvisor is on a clearer strategic path relative to last year, with good room to grow its hotel, activities, and restaurant booking products. The company is growing its active user base in an expanding global travel market. Leadership is moving fast and in various directions to capitalize on its 390 million monthly visitors. Its bookable activities marketplace is growing in revenue and supply. The platform remains unproven as a preferred hotel booking channel; although it’s getting better at monetizing hotel shoppers. The new social media feed is a smart yet untested innovation to the platform’s user experience. If executed well, the new feature could drive ample new advertising revenue from hotel, activities, destinations, restaurant, and potentially non-core travel retail categories e.g. luggage and travel accessory brands.


Competition, especially from Google, will put pressure on Trip to keep innovating and muscling its way into hotel search and booking. Trip is also in the process of building a deeper partnership with Google, as a distribution channel for its Experiences segment. The company’s strong position with activities suppliers differentiates Trip from Booking Holdings and Expedia. These two companies also account for over 40 percent of TripAdvisor’s consolidated revenue. This lack of client diversity is a threat, as the competitive landscape shifts. Lagging progress and emphasis on apartment rentals is also a concern.


TripAdvisor is having a catalytic impact on the future in-destination experience. The company has  preached about the untapped potential of the bookable activities market since 2014, with its acquisition of Viator. Competitors are now following suit to intermediate all manner of travel-related local businesses. Expect further consolidation across three layers of the market: Software, marketplaces, supply.


TripAdvisor has had its historic ups and downs. The company spun off of Expedia in 2011 when the majority of travel shopping was still happening offline or on desktop. The company invented the user-generated content format, which led to an early lead and rapid consumer adoption as a restaurant and hotel review site.

Its business model was intuitive and lucrative. The content produced by its users boosted TripAdvisor to top positions in organic search rankings - i.e. on Google. Consumers would come either directly to the site or through search channels, and then click off via display ads and paid links to external hotel, attractions, and restaurant content.

Three market developments steadily eroded Trip’s margins:


The explosion in mobile computing hurt many click-driven advertising businesses, including TripAdvisor. The smaller screen format offered fewer instances to engage visitors with ads compared to desktop. Traffic also migrated to ad-free apps pushing companies to find new ways to monetize on mobile users.


The second shift was Google’s growing dominance in online search. Google’s move to prioritize paid links ahead of organic results continues to be impact TripAdvisor. Seventy-nine percent of Trip’s paid and un-paid desktop traffic comes from search channels, the vast majority of which through Google. The search giant also released its hotel and flight search tools which further obfuscate organic results leading to TripAdvisor.


The third significant market shift impacting TripAdvisor was broader consolidation in online travel. Expedia and Booking Holdings (then Priceline Group) swallowed up most of the smaller marketplaces (Travelocity, Kayak, etc) and came to dominate the online travel shopping space. This pinched TripAdvisor between two massive holding groups that outspent competitors (and each other) on performance marketing on Google and increasingly Facebook.

TripAdvisor revenues declined while the cost of user acquisition steadily climbed.

Data Source: Company filings

Data Source: Company filings

This pushed leadership to rethink how it monetizes on its user base. 2014 was a pivotal year with key acquisitions. The Viator and LaFourchette integrations transformed Trip into an in-destination activities shopping platform. This moved revenue away from a pure advertising model toward a transaction-driven model where activities suppliers pay a negotiated commission rate on bookings executed on TripAdvisor. Restaurants also pay a fee per realized reservation. Trip now also offers other advertising options that help improve supplier visibility on its site. Its non-hotel business segment accounted for over 30 percent of the total revenues in the third quarter 2018.

From Q3 prepared remarks on hotel segment performance: “What a difference a year makes. We enhanced the hotel shopping experience, improved our platform, and optimized marketing investments to increase customer value. This has improved revenue performance, increased operating efficiency, and completely revitalized Hotel segment profitability.”

From third quarter financials.

From third quarter financials.

Data source: Company filings

Data source: Company filings

Data source: Company filings

Data source: Company filings

Key Events

2011- IPO/Spin off from Expedia
2014 - Instant Book launch
2014 - Viator acquisition
2014 - La Fourchette Acquisition
2018 - Rebrand to TripAdvisor Experiences
2018 - Acquisition of Bokun
2018 - Launch of social media feed


In 2014, Trip pushed more aggressively into hotel bookings with the launch of Instant Booking (IB), a feature enabling users to complete hotel bookings directly on Trip. IB proved to be a drag on short-run revenue growth. The hope was to win shoppers with improved user experience and to build a direct connection between Trip and hotel inventory suppliers. Instant Booking worked on a cost-per-acquisition (CPA) model, where Trip would collect revenues on confirmed bookings made via its “book” button, instead of clicks (CPC).

Background: Metasearch, CPA, and CPC mechanics

For Trip, the challenge with the CPA model is that shoppers tend to click around, but often don’t book. With Instant Booking, the burden of conversion fell on TripAdvisor. This proved challenging, most likely because consumers did not consider Trip as a go-to hotel booking platform. A larger portion of the hotel shopper volumes were less committed. Focusing on the click and pushing qualified traffic to its advertising partners turned out to be more profitable.

Metasearch channels e.g. TripAdvisor, Trivago, and Google are a valuable source of pre-qualified traffic for hotel advertisers. A general Google search e.g. “hotels in New York” indicates general buyer intent. Meta platforms pre-qualify traffic based on specific date and room requirements. It is then up to the booking agent e.g. OTA or supplier to effectively “close” the sale, once the shopper is redirected to their site.




Trip’s focus on optimizing its hotel auction seems to be paying off. Total hotel segment revenue in Q3 2018 fell year over year, but profitably and hotel shopper engagement on its mobile app improved. The Trip app captured over 50 percent of total hotel shoppers. Mobile engagement is important as Trip aims to become a one-stop shop for travel. From its Q3 prepared remarks: Over time, we believe mobile monetization can improve as TripAdvisor increasingly becomes travelers’ one-stop shop throughout the hotel shopping journey. A healthy overall scenario for Trip’s hotel segment would be a top-line 10 percent year-over-year growth with 20-30 margins.

Source: Company filings

Source: Company filings


TripAdvisor’s non-hotel segment - also referred to as TripAdvisor Experiences - is a bright spot on the company’s books. Year-over-year revenue was up again by 20 percent in the third quarter. Margins slipped a few points - down from 35 from the previous year, while total adjusted EBITDA (a metric used to track profitability) increased by seven percent to US$47 million.

Data source: Company filings

Data source: Company filings

The segment accounted for 33 percent of total revenue in Q3 2018, up four percentage points from the previous year. Future revenue potential is significant, with a large portion of travel activities bookings still conducted offline. TripAdvisor’s strong position with the consumer also gives it leverage to push existing and new suppliers to make their inventory bookable on the platform. Trip collects anywhere between 12 and 25 percent commission on its activities bookings.

Relative Size

TripAdvisor is still ten times smaller than Expedia and Booking Holdings both in terms of revenue and in total transaction volumes. We can approximate TripAdvisor’s gross bookings (gross sales) by factoring segment and consolidated revenue as a share of total gross bookings. The below figure shows consolidated estimates through Q3. In 2017, Booking and Expedia processed US$81 billion and US$88 billion in gross bookings, respectively. Total estimated gross bookings for TripAdvisor were US$8.6 billion.

LUFT calculations  Assuming reported revenues account for 18 percent of total gross bookings.

LUFT calculations
Assuming reported revenues account for 18 percent of total gross bookings.

Supply-side dynamics

We recently interviewed numerous in-bound tour operators to understand how TripAdvisor has impacted their business. The general mood is that of some concern about the pace of change in the market. The core tour operator business model has changed very little over the past 20 years.

The digital transformation that the airlines and hotels went through is now happening with the activities suppliers. Attractions, tour operators, and guides have grown and in many cases thrived without third-party booking options. Consistent growth in global tourism has fueled demand for in-destination experiences.

Traditional marketing and distribution channels - i.e. organic search, physical travel agents, telephone and walk-in bookings - has kept the industry fragmented with suppliers operating with less overhead in the way of trained marketing staff and tech.

For day tour operators, major attractions, and restaurants, much of the business still comes from walk-ins, phone bookings, and direct online bookings. Multi-day tour operators tend to acquire more of the their business through “offline” channels. Increasingly, both single and multi-day experiences are becoming bookable online.

Digital is becoming a requirement for tour operators

The proliferation of third-party online channels for air and hotel products acclimated the travel consumer to use mobile search and booking apps. The operations software layer for activities providers has also matured in recent years. Players like Peek, Rezdy, Trekksoft, and Fareharbor have brought online booking and management tools to suppliers. The market is now mature enough for e-commerce platforms like TripAdvisor, Google, Booking, and Expedia to quickly intermediate the business i.e. to capture the phone, walk-in, and direct supplier bookings.

The days of high-quality free traffic are over.

Similar to Google, TripAdvisor is leveraging its position of strength as a driver of traffic, in order to push activities suppliers to become online bookable. “It takes just one operator in a given market to plug into TripAdvisor, and this pushes everyone to follow suit”, expressed one Norwegian adventure travel tour operator.

Trip now emphasizes bookable over non-bookable content in its search results. The bookable content stream on the app and site can be compared to Google’s paid links and owned content layers, where organic search results become less visible to the consumer. Traveler-focused activities businesses, especially those in less trafficked areas, depend heavily on their TripAdvisor listings to generate visitor traffic. Suppliers are pushed to list on TripAdvisor, but also to become bookable on TripAdvisor.

This benefits the growing middle layer of software companies that offer channel management and connectivity solutions to tour operators. TripAdvisor acquired Bokun. Some are stand-alone SaaS providers eg FareHarbor, while others like Peek and GetYourGuide also have customer-facing marketplaces.

Learnings from the hotel segment

The hotel industry already went through a similar transition over the last 20 years since the genesis of online travel. Hotels initially welcomed distribution agreements with the OTAs and tolerated higher commission rates, because these bookings were considered new business. Online channels quickly grew in share. Independent properties tend to more dependent (25-50 percent of bookings) on the OTAs. Properties affiliated with big global chain brands rely more on traffic generated within the network and from loyalty programs. A big hotel chain might generate 10-20 percent of bookings through the OTAs across its entire network of owned, franchised, and managed properties.

This process took about 20 years for the hotel segment. We expect it to take another five years for the travel activities segment to reach similar proportions. The technological requirements for independent tour operators are compounding rapidly. A tour operator with a full-time staff of five people is now looking into online booking connectivity, channel management, revenue management, social media channel management, and content management solutions.

The complexities of running a tour operator business are getting to the point where it starts to make sense for these businesses to think about consolidation, in order to capture economies of scale in marketing and operations costs including staffing.

LUFT estimates

LUFT estimates

TripAdvisor and Reserve with Google

Reserve with Google is a recent feature that is steadily rolling out for local businesses using the Google my Business advertising platform. This next phase of Google’s evolution poses both a threat and opportunity for TripAdvisor. TripAdvisor is a Reserve with Google connectivity partner (see connectivity partners database). We believe that Google will become successful in its transition over to “completing actions” i.e. both search and bookings. This is transformational for Google because it effectively inserts the ad giant into the back-end of small businesses.

Benefit for Google (and partners)

The logic is as follows: Google improves its position with the consumer by making searchable businesses bookable on its platform; Google takes local ad spend share away from Yelp, Facebook, television, print, and other channels; Google steadily increases the volume of paid links that appear in local search results on both search and Maps; businesses are pushed to spend more with Google ads to become visible with consumers.

Google is now working with over 30 different connectivity partners to enable its Reserve with Google feature. This includes many, if not most of the tours and activities marketplaces, including TripAdvisor Experiences. Why did TripAdvisor agree to help facilitate Google bookings?

Race for the supplier

Currently, activities suppliers must work with one of the designated connectivity partners in order to become bookable on Google. There is no direct-connect offering. Those tour operators connected to Google through TripAdvisor will pay agreed upon TripAdvisor commissions on bookings that pass through Google. With this configuration, Google effectively becomes a complementary distribution channel for Trip. Reserve with Google is a free feature for TripAdvisor (and for all other integration partners). This will expedite the process of intermediation in the segment.

For TripAdvisor, the competition is both Google and the likes of Peek, Fareharbor, Rezdy, Musement, and other Reserve with Google connectivity partners. Operational software for any business is sticky and often comes with high switching costs, once systems are integrated into the rest of the business functions. Hotels rarely switch their property management systems for this reason.


TripAdvisor’s CEO recently recanted the company’s position regarding its suppliers that use Bokun, Trip’s in-house (recently acquired) tour operator booking solution. An original statement from the group explained that suppliers that use Bokun would receive preferential positioning on the TripAdvisor store front. A follow-up statement from CEO Steven Kaufer said that all suppliers would be treated equally, and that TripAdvisor was more interested in them becoming bookable on TripAdvisor.

The clear preference for TripAdvisor is to have its suppliers connect through Bokun, because this gives rights to distribute via Google and other future channels. We speculate that the company recanted its original position because they sensed an impending backlash from the supplier community.

Supplier relations

Numerous recent supplier sources indicated that TripAdvisor’s help desk is virtually non-existent. These are existing suppliers already connected to TripAdvisor. We question whether the supplier community still has the negotiating leverage or collective unity to put pressure on TripAdvisor. Many if not most already have listings on TripAdvisor and depend on it heavily for incoming traffic to their properties both physical and digital. This puts TripAdvisor in a good position to grow its non-hotel revenue base.

More on TripAdvisor’s relationship with Google

Over time, Google could cannibalize some of TripAdvisor’s activities booking traffic as the Reserve feature catches on with consumers. This would impact TripAdvisor’s overall visitor traffic volumes, in turn limiting its ability to monetize on hotel bookings and other existing and emerging revenue sources. However, and assuming that the current Reserve with Google business model remains intact - i.e. no direct-connect to Google for activities suppliers - then Tripadvisor will continue to monetize on activities bookings completed through Google, at least for those that use TripAdvisor as their connectivity partner.

TripAdvisor’s Social Media Play

TripAdvisor’s new social media feed feature is a traffic monetization play that could extend beyond its core travel advertiser base - i.e. hotels and bookable activities, and into travel-relevant retail ads, concerts, parades, and destination marketers. From the Q3 2018 prepared remarks: “In September, we pre-announced the “New TripAdvisor”, which opens our publishing platform to brands and influencers, and allows consumers to effortlessly discover, save and share great recommendations through new content and new features.”

Our view is that the evolution into social media is a timely move for TripAdvisor. This is a unique feature in an otherwise undifferentiated space from a user experience perspective. We expect Expedia and Booking Holdings may eventually follow TripAdvisor’s lead. However, Trip’s base of rich in-destination content makes it ideally suited for this format.

Facebook and TripAdvisor

Facebook holds quasi-monopoly power over social media in general, at least in Western markets. New brands and formats are quickly acquired or copied by Facebook. Just recently, Facebook launched its Lasso app targeting young adults with music video and lip sync creation functionality. Lasso is a direct clone to TicTok, a similar independent platform. Facebook intends to  outcompete TicTock by leveraging a vast library of licenced music to expand the selection of base tunes that users can use for creative projects.

The current selection of social media channels is limited largely to four core brands: Facebook; Instagram; Twitter; and LinkedIn. Facebook’s flagship brand is on the decline. A travel-specific social media option makes sense in the current market. Here we point to LinkedIn and its successes as a social media channel dedicated to work-related content and relationships. If TripAdvisor manages to hook its audience with engaging content, it could open up a deeper network-building opportunity where users actually share content and connect with friends and family on the app. This remains to be seen.

Google has also struggled to break into the social media space. YouTube has become the ad giant’s social content play. We speculate that Google’s home page could become increasingly personalized yet it still lacks the “connectivity” hook, warranting people to build inter-personal relationships through the channel.

TripAdvisor’s unique strengths in hotels and activities is also a competitive moat against Facebook. FB will struggle to offer the same level of in-destination connectivity. Overall, TripAdvisor’s ability to execute on this social feature demonstrates strong leadership and a certain organizational effectiveness.

TripAdvisor The Restaurant Booking App

TripAdvisor's non-hotel segment includes its Experiences product and La Fourchette, a popular restaurant booking site for the Europe market. We estimate that the site generated anywhere between 20 and 30 million Euros in 2017. The site was quoted to contribute in excess of one billion Euros to overall restaurant sales, in an interview for a French publication. The site collects a two-euro fee on confirmed reservations. The formula below is EUR 1 billion / Avg reservation value * 2.

LUFT estimates

LUFT estimates

The following is an excerpt from Trip’s Q3 2018 prepared remarks. “LaFourchette seated diners grew 28% and bookable restaurants grew 19% to 54,000 [year over year]. Consistent bookings and conversion growth, most prominently via the mobile app, indicates significant brand strength and deepening engagement as we help local and in-destination consumers discover and book great places to eat.”

Partnership with Instagram.

Trip announced a partnership with Instagram in French media channels in October (2018). From translated source: “Through a statement, Instagram has announced the deployment in France of an action button with LaFourchette, online restaurant booking site, allowing users to book a table directly via the social network of photos.”

Both Trip and Instagram (Facebook) stand to benefit. With the partnership, Instagram improves its overall value proposition as a booking tool. The integration will help re-educate its user base on the value of the platform as a shopping channel. TripAdvisor benefits from additional traffic and monetizes on the reservations captured through Instagram. In addition to the two-Euro fee, TripAdvisor also offers a premium version and advertising slots for restaurants, a recent addition.

Sponsored ad for restaurant.

Sponsored ad for restaurant.


U.S. restaurant bookings market heats up.

TripAdvisor could make a move to expand its restaurant reservations business in the U.S. LaForchette is almost entirely in Europe. The restaurant bookings space has also gotten increasingly competitive. General media sentiment points to challengers to OpenTable. A recent article in the tech publication Recode explained that booking site Resy is gaining share over OpenTable by offering a fee-free service to its restaurant partners. 

From the article: “OpenTable and Resy both charge restaurants a monthly fee for their services. But only OpenTable charges for each reservation made through the platform — $1 per reservation made directly on OpenTable’s site and apps and 25 cents for each reservation made on a restaurant’s website.”

This suggests that TripAdvisor could eventually run into competition and hence profitability challenges with LaFourchette. Management is optimistic for the short-term:  “Looking forward, we expect Experiences and Restaurants revenue growth to accelerate again in Q4, which will also accelerate Non-Hotel revenue growth. We anticipate full-year 2018 Non-Hotel segment revenue growth in the mid-twenties-percent range, in line with recent years.

Reserve with Google and restaurants

Google has aggressively gone after the restaurant reservations space through its Reserve with Google feature (Read: Reserve With Google: Implications For Online Travel And The In-Destination Experience). LaFourchette is among the global list of connectivity partners currently integrating with the search giant.

The following figure shows all of the restaurant booking solutions partners that are currently integrating with Google. Here we see that Google intends to roll the feature out globally (column G). Some of these are marketplaces i.e. they have a consumer-facing portal, while other are pure solutions - some more robust than others.ii

OpenTable is not currently listed as a Reserve with Google partner, even though the company has been Google’s default restaurant booking connectivity partner for years. We can only speculate on why OpenTable is not currently listed as a partner. Perhaps an oversight, but also telling. The restaurant booking solutions vendors that partner with Google do so as an added benefit to their restaurant clients. They advertise the feature in their marketing materials as a differentiator.

With LaFourchette, TripAdvisor’s competes in Europe with Accor Hotels owned ResDiary and Michelin owned Bookatable. Accor acquired ResDiary in April of 2018 for an undisclosed sum, but with the intention of expanding the restaurant reservation platform’s already global footprint. From recent article:“ResDiary is well-established in the Asia Pacific region and the UK, and has a footprint in 60 countries globally, seating 166 million diners a year in more than 8,600 venues.”

Michelin acquired Bookatable in 2016. At the time, the company was said to have been Europe’s biggest online reservations system. Handling reservations for over 15,000 restaurants - according to an article from Eater. The platform reportedly handled over 34 million covers in 2015.

LaForchette has the added competitive advantage with the TripAdvisor affiliation which sends traveler bookings

Quick SWOT


The benefit of being a full-service platform should not be understated. Having all of the search and shopping features under one brand and one user experience will have compounding benefits in the way of user data collection and efforts to personalize offers. It also gives Trip the opportunity to become more of an everyday brand e.g. used by residents to discover things to do. We think of TripAdvisor as a mini Google of sorts. Both Expedia and Booking are now transitioning to a full-service model for these reasons.


China; ability to fund new technologies e.g. voice etc.; lack of initiative with alternative accommodations inventory speaks to its approach to accommodations bookings more generally.


Growth with Experiences product; New ad formats with its new social media feed; net positive top line growth in hotel revenues;


Strained relations with activities suppliers; cyclical economic trends impacting financial markets and travel demand, strained relations with Expedia and Booking Holdings, its two biggest ad clients; Google as its lead competitor. Pull-back on ad spend from either Expedia or Booking Holdings; Google entry into bookable activities; TripAdvisor as a mid-sized player makes it an expensive acquisition target.

2020 Forecast

2020 will be a symbolic year for TripAdvisor in terms of benchmarks. Top line consolidated revenue will likely surpass $US 2 billion. We also see a scenario where its non-hotel segment surpasses or approaches 50% of total revenues. This is significant because we see plenty of margin potential with its Experiences business. Trip CEO Steven Kaufer recently came out doubling his opportunity estimate for this part of the business.

Data Source: Company filings; LUFT calculations

Data Source: Company filings; LUFT calculations

More Conclusions

Can TripAdvisor achieve profitable long-run growth? Yes, but some questions remain. Trip still needs to prove itself as a viable long-run hotel booking platform. We think that this is achievable, given the brand’s relative strengths as an in-destination planning and booking tool. Google's push into bookable activities is a very real threat and will put constant pressure on Trip to innovate and execute. That said, TripAdvisor has proved nimble in its ability to pivot. Our sense is that Google will face challenges with its current consumer base. The company is under market and investor pressure to continue its growth trajectory. Year over year growth will need to come from its advertising business. Our sense is that Google has reached peak ability to add sponsored content, without sacrificing overall user experience. This could give TripAdvisor the legroom to offer users an overall superior user experience rich with content and booking options. Maintaining healthy and open relationships with its supplier base will be critical to this process.