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

All right. Good afternoon, and welcome to the next session at the UBS TMT Conference. My name is Lloyd Walmsley. With me, I have Chris Kuntarich. We work on the Internet research team together covering companies including TripAdvisor. We're excited to have Ernst Teunissen here, CFO of TripAdvisor, for the next session. Ernst, thanks for being here. Great to have you.

Great to be here, Lloyd. Thanks for inviting us.

Great. Well, Chris and I will go through some questions and then encourage everybody in the audience to go ahead and enter a question through the system or shoot me an e-mail works as well. I'll try to keep an eye on that. But for starters, we'll go through our list and I guess the first question I have is a lot of big news, Steve kind of hanging up the reins and Lindsay Nelson is also leaving. How much of this is really a reflection of struggles with TripAdvisor Plus? Should we kind of expect an entirely new direction from the company? What do you think the company is looking to accomplish in the next chapter that requires a refresh at the top?

Yes. Sad to see Steve go. A decision not linked to any of the above mentioned, Lloyd. He was after 2 decades in the seat. He was the founder. He founded it above a pizza shop 21 years ago and has been growing it into the largest travel platform, an amazing achievement and just felt time -- it was time for him as a founder to step down, not unusual, unheard that the founder, at some point, steps down. And it's never the right time to do that, but he felt that. And definitely, at the beginning or in the middle of the pandemic, it wouldn't have made sense for him to do that, but he felt coming out of the pandemic, now is a good time. And in fact, we've seen some other travel leaders recently do the same thing. So I'm sad to see Steve go. He's had a huge impact on TripAdvisor and the culture, but we have a strong team underneath him. We have some great assets, and we have some key strategic plays ahead of us, and there's lots of opportunity and a new CEO coming in can really take advantage of that and take us to better and better places with this fantastic brand. So and of course, Steve is going to -- he's not leaving until a new successor is in the seat. So he is around. From an internal perspective, it's business as usual. There's no gap that has been created since his announcement, he's here. He's at the helm and will be here until we have a new CEO joined.

The company has taken a lot of different tax over the years. We had Instant Book. There was a bit of the social feed, TripAdvisor Plus now. I guess, how do you think investors should get comfortable given these gyrations?

So we have like a great brand. We have a platform with tremendous amount of traffic and loyalty. We're a profitable platform. And we're convinced that there's more value we can deliver for travelers and partners. And as a result, just get more credit for the incredible role that we play in this ecosystem. Bluntly, we don't monetize our position in this ecosystem as well as we could or should right now. And so what you have been seeing us do over the years with various innovations is attempting to unlock more of that value. Now many have had really strong success. I would say, our growth diversification into Experiences & Dining has worked out really well. I'm very excited about that. The -- just before the pandemic hit, we saw double-digit growth in our B2C -- B2B services. We had just launched a new product around sponsored placements, which was taking off really nicely. Our Media business was getting some new life with non-endemic advertising. And so we have been continuing some innovations that were -- that worked out really well, and we're very happy with. And there were some that have not quite lived up to our expectations along the way as well. To -- with regards to Plus, that's early days. We are -- we believe that subscription for travel is a huge opportunity. I mean, there are some subscription models around, but there is no scaled subscription model in travel yet. We think we have maybe perhaps the best opportunity given our reach and our brand and then the number of subscribers we have and of the traffic we have and users we have. We have maybe a unique opportunity to capture this. And we think that's a good opportunity. And it's early days. We've been through some versions of a start-up this year in trying to get that off the ground. We're in beta right now with the revised more cash back oriented model than in instant saving. But we think this is something that fits the brand well as a long-term opportunity. So I guess there was spread here, Lloyd, is we are convinced to committed to continuing to seek ways of how we can better monetize that platform that we're on and we'll continue to do so with innovations.

And then how fast are you guys looking to move to find a replacement? And what are some of the profiles of the candidates you're looking at for CEO?

Yes. Well, the Board has initiated process. We talked about that at earnings. Board is very focused on it and is focused on the process of selecting the best. It's obviously always sooner -- better sooner than later and that would be great. But finally, the right person is important, too. And Steve is still here, but the Board is very committed to move as fast as they can and they are right now. I won't speak to the specifics of what they're looking for. That is for the Board, but both Steve and Greg. Greg, more recently at a Liberty conference, have talked about the attributes that they're looking for. I would say the Board's focus is on finding someone with the experience and flexibility to take the company forward to new heights, leverage the assets that we have and take it forward to new heights, and hopefully as soon as possible.

Okay, Ernst. Maybe if we could just turn to a little bit more towards the near-term trends. You've given the 4Q guidance that you guys are not anticipating 4Q revenue as a percentage of 2019 to show as meaningful of an improvement versus 3Q. We've had the Omicron variant, definitely capture a lot of headlines. Curious if you could give us an update on that front?

Yes, indeed. Well, in travel, this will less surprise you, any headlines in the news to have a correlation with what we actually see in our traffic as well positive or negative. And Omicron has not been different in that sense. And the big strategic or longer-term question, of course, and the scientists are all over this, is how important is this Omicron development? And how quickly is it spread, but maybe more importantly, how virulent is it? And is this a temporary phase or something that is with us for a longer time. And we'll find out, but we have been on an uneven recovery path throughout this year. This is something that when we actually set out to talk about our fourth quarter, we said we were cautious in our outlook and part of the reason we were cautious is because we are -- we realize we're in an environment where there's been an evident flow of situations like this. Now hopefully, we can move beyond it quickly. We remain just very optimistic over for 2022. If you vaccinated. We all are -- there's the Pfizer pill being developed, kids are getting vaccinated. There is going to be, at some point, a new normal in which people are going to travel and we're moving towards that steadily and hopefully, moving beyond this particular variant as fast as possible. But of course, I know a scientist and I'm also relying on what I read in here and hopefully -- but hopefully, we get past it quickly. You asked about our sort of what we said about Q4 and how we looked at that. We had a pretty fast recovery path this year. We started in Q1 and we were -- our revenue was at 33% of 2019. And in Q3, that was 71% of 2019, so a pretty rapid progression. And we reported in Q3, we saw some really nice developments, the U.S. auction did really well for us in Q3, CPC is above 2019 in Q3, which is -- was really awesome and testament to the environment or auction in the U.S. above 2019, particularly, really, our Experiences business has done really well in the -- as well as our restaurant business in this recovery and has surprised us on the upside recovering in this year. Now we said in October that we expected the revenue recovery in Q4 to plateau down. This was at the back of the Delta hit in September. And we said we were cautious and expected it to not be materially better in Q3 as a percentage of 2019. Now with the Omicron impact, I think, that is still the case in line with Q3 as a percentage of 2019 is maybe a prudent way to think about it as we know it today. But that is in line with how we thought about what would happen to Q4. And then hopefully, on to a better path in 2022 and our expectation for 2022 still is a steady improvement versus in the recovery and hopefully pretty strong 2022 and a strong back half of 2022. Within that commentary, Experiences & Dining has continued to recover very well and is recovering in Q4 better than in Q3 and has been sort of a highlight in our portfolio from a revenue perspective.

Got it.

From an EBITDA perspective, we didn't say much about EBITDA. During our October call, we focused more on the revenue trajectory and recovery trajectory. But I'll take the opportunity to give a little bit of color because I -- when I look at some of the sell-side consensus, I think the -- something is getting lost in translation of the seasonal translation of cost between revenue and EBITDA as a percent of revenue. So obviously, Q3 is always our highest revenue quarter in absolute terms. And it gives a lot of leverage through expenses. And so if you look at our expenses for Q4, it's a reasonable assumption. I think it's in line with Q2 as a percent of revenue rather than aligned with Q3. And so I just want to provide that sort of color just to make sure that, that doesn't get lost in translation. May be difficult for -- I appreciate difficult for helping us to fully understand what speaks in variable in our cost structure.

Got it. Helpful color there. Maybe if we could just talk more a little bit about normalized guidance approach. How do you think about returning back to how you're guiding in the past?

Yes. And so it's been really difficult, of course, to have visibility in the pandemic. And there's still -- we're still in an environment where the visibility is not perfect in travel. We're hoping to get closer to a period of time where it's a little bit more predictable easy to give guidance, and we'll return to say more about how we look at the longer-term environment at that point. In the meantime, we are trying to guide to the nearer term as much as we can to be helpful adjusted that for revenue and our expenses for the quarter. It's -- we're unfortunately still a bit removed from pre-pandemic levels of foresight.

Understood. And maybe just to kind of round out on the visibility into '22, kind of where are we at right now versus kind of what typical visibility at this point would be?

Yes. I think we're not at a typical visibility just yet because of the unevenness that you see, I think we are on a pretty clear path of recovery of travel. It is just that the recovery as we have seen this year, is uneven. It's not a linear line, and that makes the visibility a little harder. We're feeling good about the prospects of the next year.

Okay. And maybe just one more on near-term trends, just auction stability towards the end of November. Does it seem like participants are pricing in high cancellation rates? Or is there anything -- any dynamics change there that we should be aware of?

It's always difficult for us to see exactly what goes into the mix of our partners, but the overall, this year, we have seen a pretty healthy environment for our auction. As I was mentioning, CPCs were -- have been high in the U.S. in particular, and OTAs and hotels are being very constructive on our auction, so we feel good about that. If Omicron news hits, there are certain parameters in our auction react to that, but the bidding environment has been stable and healthy throughout this year.

So shifting gears to TripAdvisor Plus. I guess, for starters, how do you guys think about investing in that? And I think there's a lot of -- internally, a lot of folks deployed against that, how do you balance investing against something like that, that might have a longer-term payback versus experiences in dining, that sound like are really delivering a lot of near-term recovery strength.

Yes. So on Plus, we believe there's a large opportunity long term to develop. We just talked about that to develop a travel subscription. That's great, and we're uniquely positioned for that. It is obviously an area where we're innovating where, as you say, the revenue payback will happen over a longer period of time. Experiences & Dining, obviously now at a stage that we have known ROI to investment parameters and track records. We feel pretty good about the database that we've established on LTVs in these 2 businesses. Both on the Experiences side as well as on the restaurant side. And so that gives us a lot more confidence as we have this year to lean into marketing and to go beyond direct payback on the transaction, but to factor in the lifetime value. And so that's been great. We have a proven track record of investing and delivering against supply and demand. And so our philosophy not surprisingly, I'm sure, is that we allocate part of our capital to innovation and we also balance the level of investment we're putting it behind it to the degree of proven track record and that means wise to invest deeper in E&D in Experiences & Dining at least in the near term.

And how have adoption trends looked under the current rewards format versus when you initially rolled out with the kind of instant savings? And I guess I should have probably first ask you to just explain how the format's changed a little bit since the initial rollout and what you've seen in the newer format.

Yes. So we introduced vacation funds in September in beta where it's available on a slice of our traffic, and we're testing and iterating and changing the formula. The most important difference is we move from an original instance savings model, which we put behind the paywall to make sure that we also solve for the needs of our partners and move that to a model where it's in front of the paywall, but it's structured as a retail price and a cash back fund that you get upon checking. So that's the more important change that we have -- that we've made and we're testing and trying right now. No update on it. We're -- it's still in beta. We didn't provide any specific output or quantitative data on this testing, and we'll do so when the time is right. But we do know that it has addressed some of these core partner concerns that there were about rate parity in particular. It has led us to be able to provide the more exposure and more choice in terms of supply.

Yes, yes. And that would act as a good segue. The next question is like what are you hearing from the supply channel in terms of willingness or excitement around working together on the product?

Yes. So the -- as I just said, the more excitement about this model than about the previous models. Obviously, this is a little bit more of a compromise between keeping a killer consumer value prop in terms of the discounts that we can provide, but now in the form of cash back, but also having something where our partners, the chains feel a little bit more comfortable with the format. So that was an important reason behind what we rolled out.

And then when -- since the rollout, we've always thought the credit card opportunity and doing some partnerships there or even rolling out your own could be highly compelling kind of. What is your latest thinking to have conversations on this front then?

Yes. As you can imagine, we are -- we have a team focused on thinking about the right ways to make these attractive propositions for partners. Partners can be important in both in enhancing the value of the subscription, but also important in this distribution channel. And credit cards are part of that. And so we will -- that is something we actively think about, and we'll update you on when it's rolling.

Got it. Okay. And then I'm getting a question in from an investor asking if you can clarify a little bit more some of the comments you made around how [TheStreet] modeling revenue and EBITDA for the fourth quarter?

Yes. In what particular do you think, Lloyd?

Well, so the question -- forgive me, I don't have our model right in front of me, but the question is, are you saying that revenue is looking closer to $238 million and an 11% EBITDA margin, which would be something like $26 million?

Yes. So the comment I was making is like the -- what we have said is not a big increase in terms of revenue as a percentage of 2019 versus Q3. And as I just said, with Omicron its proven to factor in flattish in line with is a good assumption. And then in terms of the expenses, I just said, yes, Q2 is a better comp for expenses as a percent of revenue than Q3 because of the seasonality of revenue and flow through. So indeed, that was the commentary. It's like margin structure more like Q2 than Q3.

Okay. Okay. I think that's helpful. I have to dig through our model as well. But I think Chris had a few on Experiences & Dining.

Yes. Maybe if we just start on the Experiences side. Can you just talk a little bit more about the state of TripAdvisor's Experiences inventory post COVID? And really, how should we be thinking about those top 2, 3 growth drivers for the segment?

Yes. Experiences, very excited about Experiences. We have a very, very strong supply base that we've aggregated over the years, and we have over 300,000 products in offer. One thing that we're particularly proud of and pleased with this year is that our demand, and therefore, the way we marketed products was very skewed to city. Experiences was skewing to international travel. Americans traveling to Rome to look at the [Colosseum], the [Louvre] tour in Paris. And what we've seen in the pandemic, this was one of the pleasant surprises is that the team was really able to pivot the how we merchandise and marketed demand -- supply to our demand towards much more domestic use. And so we saw tremendous growth in U.S. domestic Experiences. So the jet ski in Florida or the helicopter tour in Hawaii, the Kayak tour on the Colorado River. And we effectively actually repositioned on our site, a lot of the focus there and with great success. And so we have great connections with our suppliers. We -- we've just rolled -- tested and going to roll out a new program for our suppliers called Accelerate. We have an activity around software solutions for suppliers with Bokun. So we feel we've built a pretty strong platform there and the growth that we're looking for in the business is acquisition growth, customer acquisition growth, supply growth with customer acquisition growth. And then we have an opportunity and focus and a track record of improving repeat transactions with our customers, moving lifetime value up, improving the site experience across the board. And although we made huge progress, there's also a lot we can still do to drive the growth in this business, which has been, I think, the progress we've made is quite phenomenal this year.

Got it. And you'd mentioned the Accelerate program. So just curious with how has that been received really by the supplier community so far? And maybe how should we be thinking about the longer-term aspirations of this type of a sponsored listing product?

Yes. And so it is like a sponsored-listing product, you're correct. We've been testing that, and we're rolling it out next year. It is an opportunity for our supply -- for our partners, our suppliers, our key partners, operators to increase the visibility and increase their position on Viator and do that in view of better margin for us. And that's a win-win. It means more demand for them. It means a better take rate for us. We don't do that just for anyone that would want to do it. We have -- we look at their minimum scores and their customer satisfaction ratings that they have. But we're seeing some very good signs so far, and we're ready to start ramping that more broadly next year. And this is one of the many efforts we're rolling out. So the only thing we're doing to attract suppliers, but it's a nice vignette. And we think it's one that is going to give us extra revenue as a percent of the gross booking value that we generate for these partners.

Okay. Understood. And maybe the big thing out of the Experiences space for you on the 3Q call was you seem to be alluding that you're looking for outside investors to take either a stake in Viator or your Experiences business. I guess kind of what would that bring you? What are you guys looking to do here? Is there any other color you can help us understand?

Well, one thing that we realized pre-pandemic, but I think the recovery now is which we'll be highlighting it, is we have 2 really great assets in Viator and TheFork, which make up the bulk of the E&D segment. They are pure plays in the category. They're category leaders. They are both operating in market environments with a big TAM, but also in market environments where there is still low online penetration. So in Experiences, we estimate that online penetration is about 20%. So there's 80% still off-line, which is very low penetration compared to other segments of travel. That's an opportunity. Online reservations in restaurants as a percent of the total market is lower in Europe where we primarily operate with TheFork for instance, in the U.S. And so that's a big growth opportunity. There are adjacencies in both businesses that are attractive with TheFork. We're rolling out this year -- we have rolled out this year, TheFork PAY, which is an ability to pay in the restaurants with your app and with integrating with the restaurants, that's getting great traction, and giving us foot in the door into more fintech-oriented opportunities, which is a market in itself that is quite fragmented in Europe. And so we have big opportunities ahead of us for both companies. Now the reason why we're sort of talking about and looking about are there ways how we can structurally sort of separate out this business a little bit more to allow for better evaluation and sort of separate valuation of these companies within our portfolio. It's sort of really twofold. One, we have a sense that we don't get full recognition for the value of these businesses and the strength of these businesses currently. And not only comparing it to private valuations, we see come across our radar all the time for assets like this, but also when we look at pure plays that are publicly listed, have been listed are getting listed is we believe that there is a number of appreciation of the true potential and true value of these businesses. And with that associated is we are spending significantly on these businesses and we could probably spend more if we were more aggressive in going into adjacencies and the true potential of the businesses there are, which is harder to do in the constructive part of a TripAdvisor where everybody is watching our EBITDA. And so at a minimum, what we will do and can do is provide more clarity through disclosure. We are breaking out E&D, but there is -- we can better make that arm's length. We're breaking out revenue and EBITDA from E&D, but we can do that in more detail and give you more of a breakdown. We can give better forward-looking visibility on how we see the model evolve. But -- so that's a good thing. And that's 1 option we do it through disclosure, and that will get us somewhere. But we're also looking at some other options, which may be, for instance, seek further separation by also differentiating the shareholding a little bit. It's like we would like to, especially for Experiences to keep control over the company because that's strategically important to us. We think there's a lot of value creation, but there are ways in the public domain or in the private domain with partnerships, strategic or otherwise, to separate out these assets a little bit more than we have today and then achieve both valuation crystallization, but maybe equally important, also the ability to separate out where we make investments in our business for what reasons. So that is a project in flight, and we're looking at -- in progressing. We will keep you up-to-date in where we go. Different options have different advantages. The more public options have a clear valuation crystallization, more product options, may have other advantages, and may be a stepping stone to, and we'll give more updates as we are, but we just -- we wanted to tell investors that we are pursuing this as a way to better show value for our shareholders.

Okay. Understood. Maybe you touched a little bit on it early on, but looking at the other side of the business on the Dining side, you had acquired Bookatable towards the end of 2019, and that was to go after the U.K. and Germany opportunity. And I guess, can you just talk a little bit more about how you're thinking about the organic opportunity to grow within this segment?

Yes. The organic opportunity is substantial still. And we are core markets for -- TheFork is core markets within Europe. And then we have an operation in Australia, but the focus is really Europe. Our strongest market are really where we have the biggest revenue right now are in Italy, France, Spain, Switzerland, Benelux, Central Europe or Continental Europe. And the big parts of opportunity -- the large blocks of opportunity within Europe are U.K. and Germany. And with Bookatable that we -- the deal that we just did before the pandemic struck, gives us a platform, a stepping stone in these 2 markets to grow faster. And so that's a focus area but it's an area of investment for us. And we're leveraging TheFork brand, TheFork platform, TheFork interface with consumers to go after that. So that's a growth factor. The other growth vector is just growth even within the markets that we are in. I said it's underpenetrated compared to the U.S. We are -- have very strong supply in restaurant access in old -- first major cities, secondary cities, but there are more geographies that within the countries that we're in, that we can go after. And then there's these adjacent areas that we look at as well. So we believe there's a substantial TAM ahead of us in growth space ahead of us. It's a market where if you look at the European sort of restaurant ecosystem, there's the very competitive food delivery ecosystem, that is not a natural organic transition for us to go into. There is the more ERP and SaaS-oriented ecosystem, which is very fragmented in Europe, unlike in the U.S., where it's consolidated, more very fragmented, where we have a little bit more organic or acquisition opportunity to go. But it's a dynamic and a strong market. And within transactions, we have a pretty strong market position.

Ernst, if a strategic was interested in just acquiring outright the Experiences & Dining business at a healthy price, I mean, are you all committed to keeping a stake in it? Or a majority in it for strategic reasons? Or would you be open to offloading the entire thing?

Yes. Look, never say never, right? And so we're economic animals and looking for shareholder value, and so never say never. But the way we've been thinking about it is there are important strategic ties to specifically the experiences business in our TripAdvisor business. Trip -- Experiences is a big part of the TripAdvisor vision of what we want to deliver for our users. So strategic access to that supply is important. But we also think there's real value creation ahead of the company as well that we would love to be part of. And so it's not where our preference goes in these options if we rank order them. But yes, it's also never say never. You can never say never in any of these opportunities, of course.

All right. Maybe switching gears a little bit and looking at the cost side of things. On the 3Q call, you said that you still expect the majority of that $200 million of fixed cost savings to persist that came from the restructuring. So can you just kind of help remind us and investors what are those key buckets of costs that you were able to remove? And why are each of those buckets really not likely to come back?

Yes. So we took out $200 million of fixed costs between 2019 and 2020 when the pandemic hit. And the most important block was people cost. So we unfortunately let go of 25% of our workforce, which was very substantial. And we were not alone in doing that from the travel industry, but it was a pretty substantial reduction in our total workforce. Now we also had some other discretionary costs that we took out. We reduced our real estate platform footprint. We looked harder and negotiated some of our agreements that we had, contracts, licenses and things like that. And we took out the bulk of our brand advertising that we had done on TripAdvisor. Now into this year, 2021, we publicly said, "Hey, we want the vast majority of those costs to stick in 2021, savings stick." And we did. We hired some people in 2021. We -- there's natural annual wage inflation. But by and large, we've been very prudent in not adding cost back. We see this as not as one of the -- not as a yo-yo diet, and we gained back the weight again. We see this as a sort of a permanent lifestyle change that we've made and believe we are fitter going forward, and we've been able to come up with an operating model that doesn't require us to have as much expense, fixed cost and have also deprioritized certain things that were lower yield and are not focusing on. So we have a commitment to be more efficient going forward. Now as you look into 2022, there will be some usual inflation to wages and pockets in the company. There is higher wage inflation, so we'll have that in our core business. We'll add back some, but very selectively. We'll invest somebody in our sales force as our B2B business comes back, when we are in our core business is going to be quite prudent in adding that cost, and we're really committed to continuing to operate quite leanly. The big question really about is E&D. We are going to add some of that savings back in E&D to support that growth. And tied in with some of the structuring questions we just went through is like how much do you want to lead in there, but we will spend more on those areas. But even with that, comparing 2022 fixed costs in 2029 -- 2019 fixed costs, we're expecting to operate more efficiently. And it's one of the -- we'd like to think that this is a permanent improvement of our efficiency going forward.

Got it. And you touched on it a little bit here, but just want to go back to it, we've heard in our work and just across the space, really engineering expectations are high this year for raises and bonuses, all things considered. So you said some pockets here. Is that kind of what you're alluding to? Is there other pockets that we should be thinking about where wage inflation could be very meaningful? And I guess maybe kind of broadening the question a little bit, how should we think about this dynamic impacting you in hiring and turnover?

Yes, we are seeing, and we're not alone, talking to colleagues and reading the press that there is inflation more broadly in the system but there is pressure on labor for companies like ourselves. Engineering is one area, but it's not the only area, but engineering is a particular area where this is true. And we are in competition with others for those assets. And so that does have an influence in the cost of our labor going forward. And we continue to strive to be competitive, and we're continuously investing in being a Great Place to Work and have a reputation as a great employer as we fight to retain talent too.

So Ernst, shifting gears to kind of the overall, I guess, state of the marketing intensity. Where would you put kind of the, I guess, your client base, hotels, OTAs in terms of where they are today on the kind of pendulum of growth versus profitability? And how do you think that changes into 2022?

Yes. To start with, so the overall, the OTA partners, which is the bulk, as you know, of our core auction -- hotel auction. As I was commenting, CPCs have been very healthy in the year for areas where there was demand. And so in the U.S., for instance, that was already the case. And so notwithstanding public statements that they're making, we've seen in the auction that, that was a very healthy environment and it's just a sign that they were willing to pay for good leads from TripAdvisor like they would in 2019. And so that has been the case. I also commented on our B2B business in the last quarter. Our B2B business is a subscription business. It's a little bit more a funnel than performance marketing. It's been visible on TripAdvisor. We have our Media business, which is also a little bit more a funnel. And so what we've seen with our B2B business is it was more resistant when business was really down in 2020 because the subscription business would be. But it's also harder to move up here is less elastic moving up as well. So it's not performing strongly in the U.S. as it has -- as the auction did. And that's because hotels are focused on ways to spend marketing that are more performance-based for them as well. And so we think that's going to be a lagging factor in our business. We think that kind of business display, B2B is going to come back with a more wholesome recovery of the marketplace. We -- those are the, I guess, our biggest advertising partners and how we see them look at least our product offerings.

So you guys have kept brand advertising to be pretty limited. You seem to be ready to start dipping your toe back in. What's the strategy on your own brand spend over the next few years?

Yes, we have put some money to work in the fourth quarter on brand, but not TripAdvisor, for TheFork. And so we see near-term opportunity to go back into brand spending maybe more around our E&D segment rather than to the core TripAdvisor. Will we ever go back to brand spend on TripAdvisor? We probably, maybe, but that's not a near-term moving into 2022, not a near-term plan to ramp up that has been very significantly, but something we'll evaluate along the way.

And then how should we think about your mix of performance marketing going towards the core hotel metasearch versus the Experiences & Dining segment?

Yes. So we have -- clearly, what you've seen this year is that the mix has shifted. We have spent more on E&D in terms of incremental -- incrementally more on E&D. So HM&P is the -- historically, has been the largest part of our variable marketing overall budget. Majority goes into HM&P. That is also the case in sort of Q1 to Q2, Q3 year-to-date. It's -- the largest part of our spend is in HM&P but we have leaned in more on spending in E&D. In HM&P, we have not changed our ROAS requirements. We have been able to spend more this year because the CPCs were strong. And so you see within our hotel business that the mix of paid versus free has shifted more towards paid in 2021 compared to 2019. But that's not a function of changing our ROAS targets. It's a function of high CPC's disproportionately favor paid to spend more, and that has a leverage effect. And that's why we've seen a much stronger performance in our paid marketing channels in hotels, but it's not because of ROAS. On the Experiences side, we have actually leaned into ROAS. And so as I said before, where before we had a short-term payback period requirement, we could comfortable with the LTV model, and we spend deeper into it, lowering our immediate rollouts. But at great effect, we -- the elasticity of it was very favorable with just moving our ROAS targets a little, we got a lot more revenue in, and that's been a huge success and good long-term return good against our LTV. And so you see that on a relative basis that we have leaned more on E&D and marketing HM&P.

And the last one I think we have time for. Anything that you would call out positive or negative that you're seeing out of Google that's either creating headwinds or tailwinds for you all either organically or on an acquired basis?

No. I think it's a mixed bag. Nothing to call out in particular. It's good to see that there is more scrutiny and pressure and we hope that the environment will be favorable for us to us going forward. I would just say the other thing I would just add in our 90 seconds, Lloyd, is I think it's important, something that sometimes overmissed -- missed when we talk about the recovery and the pent-up demand next year is that as TripAdvisor, we've always skewed very significantly towards international travel and more complicated travel or considered travel. And that's been the last part of travel to, really, the part that has not fully recovered. And so as I think about pent-up demand for next year and I think about sort of recent trading for us versus OTAs, I think an important factor to consider is, is that when international travel starts getting released into 2022, more considered trips, longer trips, I think we're going to disproportionately be favored from that, including in the option but also outside.

That makes a lot of sense. That's -- thank you for pointing that out, Ernst. And thank you for being here and presenting. It's great to hear from you, and thanks to everybody who tuned in.

Thanks a lot for the opportunity, Lloyd. Thank you so much.

All right. We'll do it again soon.