Is Mixing Reviews & Bookings a Shaky Strategy
In this article by SeekingAlpha, LN Investors looks at the rise and pitfalls facing TripAdvisor from an investment and financial point of view. In terms of investment it concludes that TripAdvisor is “a more attractive stock than its direct competitors, Expedia (NASDAQ:EXPE) and Priceline (NASDAQ:PCLN)”.
Although TA began life as hotel review site is now a “one-stop shop” travel booking business. As LN says “Early investors must be ecstatic from the share price tripling from about $30 to as high as $110 within the first three years.”
Of course all this comes down to marketing! First by having a clear focus and delivering to that promise. Now as TA moves into direct competition to its major partners we wonder how clear the focus is and if indeed it is not sabotaging its primary business for added growth and putting TripAdvisor Strategy on Shaky Ground. Already the OTAs have barked and turned away form support of the TA booking app. But to be fair transaction based services are where the opportunities for TAs growth seem to be. The authors tell us “The online travel reservations business is highly competitive. And for TripAdvisor to maintain its previous double-digit earnings growth it either has to expand its ad revenues or get more involved directly with hotel, flight and tour reservations.”
As LN says TA has to be careful as it moves forward to compete with the major customer who are the OTAs.”About 80% of the revenue comes from ads, 69% click-based and the other 10% from display. There’s nothing wrong with that. That’s actually why the company has been as successful as it is. Viewers come for the extensive reviews and holiday ideas, and TripAdvisor gets revenue for ads and referrals. Like many others, I myself have used the site to find interesting locations and good restaurants, and it is helpful because I get the viewpoint of fellow travelers and diners.”
But 46% of total revenue was from Priceline and Expedia in 2014. There is where TA has most vulnerability – Priceline and Expedia will not like when TA erodes their business with deals like it has with Marriott Hotel where it bypasses the OTAs altogether. These mammoth OTAs may well respond in ways that put “pressure on TripAdvisor and competition can become expensive.”
TripAdvisors Margins fall
TripAdvisor’s profit margins are on the decline and net income margins has trended down since 2012. We can expect greater competition, higher operating costs and lower margins in the future, especially as TA grows its competitive booking and OTA type business.
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Major Booking Sites Still Won’t Allow Purchases in TripAdvisor’s App – Skift.
Not having a booking engine of its own or the huge database of hotel rooms and rates that the OTAs have Trip advisor has been scrambling to partner with site like booking.com and Expedia for its new booking app. It has not convinced its largest online travel agency partners to facilitate hotel bookings right within TripAdvisor apps.
While the new feature, Called Instant Booking, is a key part of TripAdvisor’s hotel metasearch strategy because it allows lookers to bookers right in the app without having to navigate away to a hotel and TripAdvisor will to collect higher costs per click and attract additional revenue.
Although OTAs all participate in TripAdvisor metasearch offering bookings on their own OTA websites, none of the major online travel agencies have optn in on direct booking within the TripAdvisor app. They are not eager to participate as it will strengthen an already powerful TripAdvisor, as well diminish the other commercial and branding of the OTA itself.
“OTAs (online travel agencies) expressed varying degrees of interest” in participating in Instant Booking, says TripAdvisor CEO Stephen Kaufer.
Why TripAdvisor has a chance to eat the lunch of Booking.com.
Online travel agencies are massively outspending hotels in online marketing and customer acquisition, and their aggressive online and TV campaigns are driving consumer traffic to their websites, away from hotel’s official websites.
Specialized hotel OTAs do not only outspend hoteliers, they also seem to be outsmarting hoteliers with strategies to drive prices down and commissions up.
Prices are kept low by increasing available accommodation inventory with speciality lodging (bed and breakfasts, serviced apartments, hostels) and even thousands of individual apartments that can be rented on a daily basis.
“According to a spot check at some of our customers, we estimate that over the last two to three years average commissions paid by hotels to OTAs in markets like London, Barcelona or Lisbon have gone up from 20% to 30%.”
– See more at: http://www.tnooz.com/article/tripadvisor-bookingcom-eat-lunch.metasearch/#sthash.w1XoZ9mu.dpuf
Related see https://marketinghotelsandtourism.com/4-stages-of-user-search-behavior-for-travel-products-clickz/
MediaPost Publications TripAdvisor, Hotwire Top Travel Site Ads, Study Shows 04/15/2014.
“Ads can succeed several ways, whether they engage through a relevant message or empathy,” he said. “A straightforward approach as to what makes Trivago different than other search travel sites seems to work for the site.” Josh Berger, research director at Phoenix Marketing International.
The Research identifies Trivago advertisement “The Perfect Hotel” as the top-performing message. More than 55% of leisure and 50% of business travelers said they would recommend the site to others.
Google did not rank within the first five sites, while TripAdvisor and Hotwire still lead in their category.
Overall, Hotwire took the No. 2 and No. 3 spot among leisure travelers, with its ad From New York to Texas ranking No. 1 with the highest recall at 81%, followed by its Florida to Seattle ad with 79%. Expedia and Priceline rounded out the top five overall spots for leisure travelers, respectively.
Another insight is that leisure travelers are more concerned with saving money, while business travelers look for conveniences.
Business travelers ranked Hotwire No. 2 and Hotels.com, No. 3, with Kayak and Expedia following in that order. Hotels.com, The Obvious Choice & Captain Obvious, had the highest recall among business travelers.
Hotel guests read 6-12 reviews before booking, says new TripAdvisor survey.
Its not surprising that 80% of those surveyed read at least 6-12 reviews before making their decision, and they’re most interested in recent reviews that will give them the freshest feedback.
TA is remaking itself as a hotel friendly marketing company. Its meta search lets hotels get their own direct booking engine in front of hotels at the point of purchase. When asked about TripAdvisor’s recently launched Hotel Price Comparison function (meta search), 51 percent agree that it ‘has helped me save time during my planning process’ and 52 percent agree that TripAdvisor’s meta search ‘has helped me find the right hotel at the right price’.
Its a service that hotels will not find on the OTAs that use their own engine and take commissions. TA lets hotel bid for the exposure and charges a dollar or so for each lead. Very Cost effective it seems, but that price may change as OTA compete for the business. My guess is that TA clients like to book direct and may choose hotel options over OTAs in any case.
See more at: http://hotelmarketing.com/index.php/content/article/hotel_guests_read_6_12_reviews_before_booking_says_tripadvisor_survey#sthash.Xhm4avia.dpuf