The Corliss Group Luxury Travel Agency Forum The Corliss Group Review: Trip..
The Corliss Group Review: TripAdvisor challenge the Two Providers of Online Travel Services9 Years Ago“BREAKFAST is nasty,
the rooms are nasty.” So complained a reviewer of an Oregon guesthouse earlier
this year. There is nothing unusual in that: all hotels must deal with the odd
disgruntled guest. This critique, though, appeared on TripAdvisor, a travel-review
website. When the correspondent went on to document drunken housekeepers and
licentious receptionists, the owners sued him. It was more than a point of
pride. What customers say on TripAdvisor can make or break hotels. Around 260m
people visit the site each month to read some of the 125m reviews.
The firm makes money by
displaying prices from online travel-agents
(OTAs) alongside its reviews, and then charging those agents each time a
customer clicks through. It is such a good example of a network effect that it
is the subject of a Harvard Business School (HBS) case study. The more users
post reviews, the more useful the site is to those about to book a holiday.
This makes it more important to hotels and travel agents, who offer better
deals. This results in more traffic—and more reviews—closing the virtuous
circle. Last year TripAdvisor reported revenue of $944.7m. Because users post
reviews free of charge, in 2012, Jeffrey Bussgang, an HBS lecturer, calculated
that its gross margin was an astounding 98%.
For these reasons, some
think TripAdvisor may be able to take on the “big two” OTAs, Expedia (from
which TripAdvisor was spun off in 2011) and Priceline, which on August 6th
bought up to 10% of Ctrip, a large travel website in China. These firms sell
flights and hotel rooms directly, rather than pass booking requests on to
others, as TripAdvisor does. But, says Blake Harper of Wunderlich Securities, a
stockbroker, the two ways of doing business are converging. Sites owned by the
big two, such as Hotels.com and Booking.com, now encourage user reviews. At the
same time, TripAdvisor has launched Instant Booking, which lets smartphone
users complete their bookings without leaving the TripAdvisor site (although
the transaction itself will still be with an OTA or a hotel).
Instant Booking serves
another purpose. Half of TripAdvisor’s traffic comes through mobile devices.
Being able to book in a single place will make its app slicker. Moreover,
smartphones are creating firms which cater to travellers when they arrive at
their destination—and TripAdvisor is getting into that business. In May it paid
a reported $140m for La Fourchette, an online restaurant-booking service. On
24th July it said it was paying $200m for Viator, a firm that sells guided
tours and other touristy activities.
TripAdvisor’s boss,
Stephen Kaufer, denies he wants to take on the big two. “We are a media site,”
he says. “I want Expedia and Priceline to thrive because they are my clients.”
But soon, holidaymakers will be able to book their entire trips without leaving
the TripAdvisor app. Rivals beware. |