The latest business news is that Expedia-Booking Holdings are moving away from marketing spend on TripAdvisor. This is a heads up for other metasearch websites like Trivago and Kayak. The visitors will remain active consumers for comparison shopping. However, the travel communities should know about this marketing move of Expedia spending less on TripAdvisor in the last 4 years.
What is TripAdvisor?
TripAdvisor is an American travel & restaurant website which reflects hotel and restaurant reviews to visitors across the globe. It is witnessing booking sites spending fewer numbers as per the latest reports this year. And the graph has just been sloping down.
It was founded by Stephen Kaufer, Langley Steinert, Nick Shanny, and Thomas Palka in Feb 2000. They boldly started as a site where they initially focused more on those official words from guidebooks or newspapers or magazines, before realising that their user review section was a huge hit.
“The objective was to give visitors the freedom to give reviews”
The Journey of TripAdvisor & Booking Sites!
In 2004, the company was purchased by IAC & in 2005, IAC created an independent company under Expedia. As per its annual report, TripAdvisor earned 43% of its revenues through its most significant partner Expedia and its subsidiaries.
These include revenues from the sale of advertising, CBA & subscription-based advertising. Expedia is basically, TripAdvisor’s former parent company.
Revenue Reports & Business relationships
“Half of TripAdvisor’s revenue comes from Expedia and Priceline,” Analysts say!
As per RBC capital’s latest reports in 2014, Expedia & Priceline constitute:
- 50% of TripAdvisor’s total revenue.
- 70% of click-based advertising revenue by the end of 2016.
TripAdvisor has managed to give different directions to its revenue streams. Not only to hotels but tours and activities, and restaurants. Some notable facts are:
- Last year, the non-hotel segment of TripAdvisor, accounted for $458 million of TripAdvisor’s $1.61 billion in total revenue.
- This segment got complete 23 per cent of TripAdvisor’s total revenue in 2017.
- When TripAdvisor’s non-hotel revenue went to 27 per cent clip last year, the hotel-segment revenue downgraded to $1.16 billion.
However, the main cause of the revenue decline was the fading loyalty of the two online travel agency partners.
What is the Current matter?
TripAdvisor like other metasearch sites has been criticized for its complete-dependence on marketing spend from limited OTA’s.
And now, the spotlight of these major online travel agencies is fading away. Due to the marketing spend through TripAdvisor and other metasearch engines. All because they are taking a decision of spending their resources toward brand advertising.
This can be seen in the collective marketing spend of Booking Holdings and Expedia Group. Due to which TripAdvisor reached a four-year low in revenue by the end of 2018.
As per latest reports TripAdvisor’s year-end financial filing, Booking Holdings and Expedia Group’s contribution have decreased. And the marketing spend have gotten drastically affected. The total revenue of TripAdvisor has come to $597.5 million, from $669.1 million, in 2017.
Key findings on the Trajectory of marketing Spend
The collective marketing spends were at a peak four years back at the time of partnership. But ever since, have been trending downward due to multiple causes.
Primary among them are :
- The major online travel agencies observing a reduction of their marketing efficiency graph in performance.
- They have commenced a new focus on brand marketing, including TV, as a way to direct mass bookings.
We explain the path of Booking Holdings and Expedia Group’s marketing spend on TripAdvisor in the table below:
The reason for switching to brand advertising
From the above graph, it seems that Booking and Expedia are very clear about their plans. And want to give priority to brand advertising over performance marketing.
But what are the reasons they are leaning away?
- A few years back, Expedia and Booking generated about $19 of travel sales for every $1 they spent on digital marketing. But that efficiency has reduced to about 15 per cent to $16 in bookings for every marketing dollar spent.
- Also, the declining efficiency of performance and Search engine ads coupled with increased competition is a reason. Because getting user attention from various booking campaigns have caused these OTAs to restructure their plan.
- Plus, online travel executives are aiming at brand ads. These ads can improve user reach at an earlier stage of the purchase funnel. In this case, the company does not wait for every user to get converted.
- This new plan will build brand awareness, and drive larger web traffic.
However, “TripAdvisor still remains too important a marketing vehicle for major online travel agencies to abandon because the TripAdvisor users convert at a higher level because of the site’s upgraded user interface and its own TV advertising campaigns”, said Dan Wasiolek, senior equity analyst at Morningstar
Hopes for the Marketing Vehicle of TripAdvisor:
TripAdvisor is still running better than other metasearch sites such as Trivago and Kayak.
“It’s really good that TripAdvisor is expanding its non-hotel business. Especially where no single advertiser holds sway”, said Lee Horowitz, Vice President, internet equity research at Evercore.
Having said that, for the Hotel business, TripAdvisor will remain honour-bound to the passion of the OTAs (online travel agencies). This is because the hoteliers don’t seem to have the motivation to enter the metasearch space more aggressively.
Horowitz also added. “With both the OTAs and hotel-segment focusing on direct traffic, the bear case for metasearch remains firmly intact.”
However, we still hope the best for TripAdvisor. Powering up with multiple kinds of revenue has made TripAdvisor a mixture of meaningful business. Also counting their non-hotel segments of travel experiences and restaurants they are prioritizing investments within these high-profit areas.
Aren’t these then just temporary business tactics?
TripAdvisor, of course, wasn’t the only metasearch platform to monitor strong engines in its online travel agency marketing spend.
Plus, in 2018, Booking Holdings’ spending in Trivago amounted to 39 per cent of its total revenue. This was way less than 44 per cent the previous year.
Hence, it should be observed that this curtailment of online travel agency spending in metasearch giants might not be a permanent phenomenon. These are called as business tactical moves that are always subject to change and might clasp the consumers with their new marketing strategy.
Any effects on the Travellers and Travel Industry?
“The leaning away” strategy of Expedia and bookings from the marketing spend on TripAdvisor is a season. This will have no concern for the travellers and the travel community.
TripAdvisor, the world’s most visited travel website, turned 19 this month.
It has been the website that understands the language of travellers. The TripAdvisor logo owl’s one eye is red and the other green. In fact, the two colours symbolise the way travellers choose where to go (green) and where not to go (red) for their next trip. It has everything right from experiences to reviews, food and the world. And none of the travel community people can stay without surfing its amazing user interface.
TripAdvisor still has a long way to go to expand its marketing boundaries. Even if it can manage its instant booking feature, it still faces challenges. It will be a task of changing consumer perceptions in the face of Expedia, Booking.com and others. Because these OTAs are reaching the peaks of digital media and broadcasting.