Tripadvisor, Inc. (TRIP) Earnings Call Transcript & Summary

So good to have you back here with us.

Oh, always a pleasure.

Especially following the big announcement you made last week.

I did catch a few people by surprise, I think.

Yes. Leaving the company next year, how did you arrive to this decision?

I -- it had been on my mind, I guess, during the pandemic. Of course, I would never make any move when travel was so down. And I looked around and said, "This company, TripAdvisor has so much potential." We are in such a good place right now, as travel recovers, with our focus on subscriptions, with our focus on Experiences & Dining, with the return of travel in general. And so there's -- it's been well said, there's never a perfect time. But founder transitions do happen. I don't think anyone can begrudge me 20 coming up on 22 years in the job. So company is in a good spot. I'm thinking I probably want to go do something different at some point, I have no idea what. And let's go ahead and share the news.

So you're not retiring?

I'm retiring from TripAdvisor, and I hope to have something else in mind at some point. But if you know my personality, it's like I'm 110% in the job until the day I'm not. So at the show, love the networking, meeting with clients, doing all the things a CEO would do when as engaged as I am, which is 110%.

I mean after 20 years, is it going to be hard to let it go?

Oh, yes. I mean, I don't want to take us down memory lane too much, but TripAdvisor, I'm really proud of the impact that we've had as a company. And I'm really confident on the impact that we will have going forward, both with the traffic, the new innovations that we're -- that we have launched, that we will launch. It's a really great company, tremendous people inside the company and, I think, great relations throughout the industry. So to leave at any time is just, "Oh, my baby is -- well, somebody else is going to be in charge," but I'm good with that at the end of the day. I think there's -- the culture of the company is far stronger than kind of me as a particular leader. So I think it will continue to do amazing things.

And what do you expect to see in the new leader? Should they be like Steve, should they not be like Steve, somewhere in between?

Oh, I hope they're like me in some regards, and I hope they're a hell of a lot better than me in other regards. So there's -- with every leader, there's some good and there's some could be improved upon. So I think TripAdvisor has embodied a great set of innovative principles of always trying to make things better. We're -- I don't think anyone can accuse us of resting on our laurels. So I look forward to the new leader continuing the innovations. Let's go make TripAdvisor Plus and additional subscriptions rip-roaring successes throughout the industry, throughout the world. That will be great. You talked about like, what would I miss the most? I'm not going to be there. I'll be cheering from the sidelines, but I won't be there to actually help make those innovations into game-changers that we intend. But again, plenty of things to improve upon the way I run things, and I look forward to my successor doing so.

So a little case of FOMO, but that's to be expected. Diversity, or rather a lack thereof, especially in the highest echelons of management, has gotten so much more attention in the past year, 1.5 years. And the travel industry is no exception. Is that a consideration as the company seeks your successor?

Absolutely. As we shared publicly, we have internal candidates and we have an external search that is now underway, presenting a diverse slate of candidates requirement, period, full stop. I'm on the interview. I do get the privilege of interviewing my successor. And I don't know how to say it any clearer, that is just a requirement. I -- we've also done a lot of improvement in our ED&I work within the company that I'm happy to talk about. But for the successor, yes, clearly a diverse slate required.

Until then, the job is still yours. You have some work to do still. So let's talk about the latest at TripAdvisor, right, subscriptions being one of the newest and most exciting things, right? You've already had to make some changes to the program kind of early in its life, right? So now the retail rate is shown to the user. If they purchase a subscription and book the hotel, the hotel then pays you a commission like they would any other distribution channel. So is this in a way just becoming Instant Booking 2.0?

Well, conveniently, it did enable us to reuse some of the technology, but it's all about solving this consumer challenge and presenting this notion of a $99 subscription, TripAdvisor Plus, as a great way to travel. So we all kind of know how the industry works in terms of travel, sellers getting commission on a hotel or experience. We're taking all that, turning it into this wonderful marketing fund. The marketing fund in turn pays back consumers for actually using our product. So in a simplistic way, I guess, you could say the commission is paying a cash back to the traveler. But that notion of being able to book ideally just about any property and, for certain, all of the experiences on TripAdvisor, getting a cash back as you arrive in destination, which you can then go actual spend real dollars on your vacation, that's amazing. That's better than anything else. And to folks who might say, "Well, are your deals better than those that I might find -- is your cash back better than you might find on other sites?" Remember, for hotels, TripAdvisor is a metasite. So we see the prices from everywhere. And we're not going to be offering a cash back on a worse price, that doesn't make any sense. So we're offering these -- this cash back capability when the pricing works out, so the consumer is saving very real dollars. And we refer to it as kind of our no-brainer moments where the traveler is interested in this hotel, they like its location. They like the price point, they like the photos. They like the reviews, everything about that stay to make for a great vacation, and then we come along and say, "Hey, how about a cash back that might be equivalent to 10% or 20% or even 30%?" That's extra dollars to make your vacation go further.

And what would you say to those people then who say subscriptions are great, right, in things we use in our daily lives, Amazon, Netflix, Spotify. But travel is so infrequent of a product, it doesn't make sense. So what would your response be to that?

So it's not a product for someone that travels once every 5 years. No, absolutely not. Everybody I know -- I'd venture a guess, everybody on TripAdvisor is traveling at least once a year. So therefore, if they're taking that trip and we're showing them how they can save more money than they would otherwise with that one purchase, it becomes a no-brainer. Most people take more than 1 trip, certainly the folks that are on TripAdvisor planning these bigger vacations. And so you use it on the first strip because it obviously paid for itself just then. And now you're getting a 10%, 15%, 20% discount on pretty much every other trip you're planning to take. Oh, and by the way, what about all those things you want to do in your hometown, let alone the experiences on the vacation? 10% off, there you go. What about, oh, I also need to -- I'm visiting mom, I don't even need a hotel, but I do need a rental car. Great. Join TripAdvisor Plus, get to up your travel by getting into the next level of elite status at a rental car company, all those great reasons to join and stay joined. I don't know that there will be many people at the end of the year that will say, "Yes. No, I don't plan on traveling next year so, therefore, I'm going to let the subscription elapse."

Yes. And then what about on the activities front, right? The other big segment within the TripAdvisor business? A couple of years ago, activities was dubbed the next big thing in online travel. Several of the established online travel giants were lined up to claim their throne. But since then, several have changed their approach. You have Expedia and Booking going the partnership route instead of the building it themselves. In your case, Viator now is operating independently. Is the opportunity still as attractive as it was predicted to be?

Oh, I think it's better. I mean -- and you've seen it in our numbers. Experiences has recovered from COVID faster than our Hotel business. Amen, awesome, this is great. Our bookings in October for Experiences exceeded 2019 levels. Wow. So we think it's great the fact that Booking and Expedia have said, "Hey, we're focusing on other things, and we're going to turn to folks that do it better. Hey, Viator partnerships." That's great for us and is -- I wouldn't take at all as a sign that the market isn't as exciting as it was. To the contrary, I think they realize, and I don't want to speak for them, but they realize that we can offer a better version of supply than they can themselves. And so great. Let's go partner with a company that's the best at it. We love it. Distribution is part of our game plan. So all good.

On the topic of Viator, right, recently, they launched a new product, Accelerate, where the suppliers can increase their commission paid to Viator. Good for you guys, but maybe not so good for them, but they get increased visibility, right? And I've been hearing a little bit of confusion within the sector how that's done. Is it just through the ad placement that would be at the top? Or do they get some kind of advantage within the search sort order as well?

So I believe there is kind of an ad placement, special promotion across the site. It's a media placement that you earn with an increased commission. But then the sort order, to be clear, has a number of different things factored into it. The first is, like, is it a good product at a good price point? So we're looking at how many photos, we're looking at the review scores. We're looking at like do we think consumers want this? And so to tour operators, to anyone in the audience, like make sure your product has wonderful photos, great descriptions, all the best information that you can upload, which is all part of managing your product on TripAdvisor. It is accurate to say that with the quality of the product, there's also a component that's commission. That's always been part of our sort order in -- at Viator. And so if your commission is up, yes, that's going to impact your sort order as well, but we did not refactor any sort order to take into account the Accelerate program. That was always just kind of always part of the algorithm from day 1.

Yes. And then also the media business is something that you guys have been expanding as well, looking for new opportunities to monetize the platform. And I understand that expanding into nontravel products as well is something that is looking promising. So can you talk a little bit about that? Like, do the travelers want to be served all this content that's not related to their core purpose of being on your platform?

Our media business is -- I think it's a great part of our business, but perhaps underappreciated given the size of the traffic that we have, the fact that we have travelers going places and, certainly, endemic or travel advertisers on our site are key. But there's a type of traveler that we've been able to identify that other sort of nontravel advertisers are particularly interested in. That's great. We've never detected that travelers object to seeing an ad for a car, like perfectly good if we're targeting it well. I should add from the media perspective, though, you can look at the -- beyond the banners and box ads on TripAdvisor to the more content sponsorships, which we love doing and really helps advertisers get their message out in a much more contextual way. And then we just did 2 really cool integrations with Alexa, where it's an interactive, hey, I'd like to explore Orlando. So we'd visit Orlando. We just announced, launched an Alexa integration that lets people like take a -- a virtual tour is the wrong word, but an interactive exploration of the city. And like I applaud visit Orlando, I applaud Dubai on the way that they were able to advertise their services in a way that's both appealing to a new generation and a really cool way to figure out what to do somewhere.

Yes, absolutely. I mean, TripAdvisor has been through such a journey, right? You've built this company and from being acquired by Expedia, spun out, going public, tons of other things. I mean -- but we all make missteps in life. We learn from them, we grow and we move on. What would you have done differently within the TripAdvisor business specifically?

Oh, geez. There is -- there would be a nice long list. I'm a believer, you can look back and you can learn a lot from the missteps along the way. TripAdvisor as a core business. We saw Google coming into the space, like we are going to expand our business in ways that won't be under threat from them. And we bought Viator and we bought LaFourchette, 2 great businesses. So happy that they're in the family, good step forward. And then we tried something like Instant Booking. It was before its time. I cannot regret that move. It didn't work out. That's the benefit of hindsight, but it had a ton of logic behind it. It so happens we're able to reuse that technology, that's really good. We were a bit late -- candidly on like things that I wish I had done differently, we were late to the vacation rental entry space. We could have -- like it's not that there were serious discussions underway, but wouldn't it be nice to buy Vrbo when they were a 50-person company?

Yes.

It was -- it could have happened. TripAdvisor was big, we have the cash. It was a great lodging category. That would have set us up extremely well. We obviously did get into the space later on, but it was a heck of a lot more competitive and challenging at that point. So I complement the company on taking bets, being innovative year in, year out and acknowledge that when you have that strategy, sometimes they'll work and sometimes they won't. And sometimes, it will just take longer for them to work. And I think that's the right trade-off to make.

What advice would you give to your younger self?

I -- my younger self. It's advice I learned along the way, often the hard way. And so if I could go back to myself as we were scaling in the good times, I coined a phrase kind of reinvent yourself when times are good. It's -- and I've had, unfortunately, times where we've had to lay off people and restructure under very challenging circumstances. It's never -- fun is the wrong word, it's never a good time to do that when you're forced to through external circumstances. So if you're at a company that is growing, that is scaling, think about how you can change your business now to become more efficient, to get into newer product lines, to otherwise not accept the status quo of how the company operates in favor of doing something better, different. The adage, if it's not broke, don't fix it, yes, I don't really buy into that. I always look for how can we make things better because it frees up resources to do more things, to place more bets. And yes, maybe it took me 20 years to figure that one out, previous company.

Yes. Well, maybe in the next one, right, you'll know better from that. Just within the travel industry, well, are you -- in your next company, are you going to stay in travel? Or are you open to ideas outside?

I'm not ruling anything out.

So maybe we'll be back on the start-up stage here next year at Phocuswright?

Well, I've always enjoyed coming here. And I love, love, love the travel industry. But I'm excited to think about my future doing something, which is a little odd because I'm not even sure what that something is. So we'll see.

Within travel then, what either trends, products or companies are you excited to keep watching, let's say, in the next 5 years and see how that plays out?

I do some thinking on the topic and one of the reasons I love the industry is because there's so much kind of point innovation at all different phases of the travel life cycle. One of the things that I think could really dramatically change travel, and I'll extend it to that 5 to 10-year time frame, is how augmented reality could play a role in what the average traveler experiences when they're going somewhere. And so like the technology is almost here. You've got the glasses that are coming out. It's connected to your phone, which means it's all Internet-enabled. But I just envision looking at going to a museum, looking at a painting. And now seeing in my augmented reality glasses, like and hearing the artist telling me about a particular area of brush stroke that I should pay attention to. I want to -- I'm going outside, I'm looking at a building. And I'm like -- and now I get the architecture -- the architect, I get the background of the information. Of course, you have simultaneous translation for international travel. I walk down the street. I pass an Indian restaurant. I love Indian food. Do I want to eat here or not? And of course, there's plenty of sites TripAdvisor included that can help on that sort of answer. And to finish the cute little story, and now I go look at a menu and I see which dishes are the best I should eat. And that's just a great, new, different type of way to experience a destination.

All right. Well, we're excited to see what's next for you. Thank you so much again for joining us. Ladies and gentlemen, Steve Kaufer.

Thank you all.