News for the Hospitality Executive
by Max Starkov
February 22, 2012
Since its inception back in February 2000, TripAdvisor has become the world’s largest travel site with over 50 million users, including 16 million mobile users. There is no doubt TripAdvisor was one of the pioneers of user-generated content. The website re-invented customer reviews in the hospitality space and inserted itself in the “last mile” of traveler’s hotel stay planning and booking process. Obviously, a force to be reckoned with.
TripAdvisor began trading as an independent public company on The NASDAQ Global Select Market on December 21, 2011 following its spin-off of Expedia, Inc.
Is TripAdvisor coming out of its divorce from Expedia as a winner or loser? Now that TripAdvisor is an independent public company, has it become more unbiased and industry-friendly? What does the future hold for the company in the midst of important changes in the industry and in travel consumer travel purchasing patterns?
I would like to review some of the concerns I have about the business model, industry and traveler perceptions of the company, as well as its future.
Weakened Market Position
TripAdvisor came out of its split from Expedia with a weakened market position due to a number of reasons, one of which is the proliferation of customer reviews over the past few years:
Years of tainted, non-verified reviews and “gaming the system” cases have put a dent in the credibility of TripAdvisor. Recently, as a result of the UK’s Advertising Standards Authority’s (ASA) adjudication regarding complaints against “claims on tripadvisor.co.uk,” TripAdvisor was told “not to claim or imply that all the reviews that appeared on the website were from real travelers, or were honest, real or trusted.”
Negative Perception in the Industry
Hotels perceive TripAdvisor as being anti-industry, pro-OTA and one-sided pro-consumer. Remember the annual and much publicized “The Dirtiest Hotels List,” abandoned by TripAdvisor only in January of 2012? For many years former-owner Expedia and other OTAs have dominated the site and still do through the “Show Lowest Price” booking options and the various advertising opportunities that are simply out of reach for small to mid-sized properties. Non-verified and obviously malicious customer reviews have ruined the sleep of many a property manager. Lack of a balanced approach and even an elementary “fair share of voice” algorithm when presenting the customer reviews continue to tarnish hotel reputations: you may have 100 excellent reviews and if you have 1 bad review, it gets prominently displayed on the first page of the hotel profile. The list goes on and on.
Business Model Concerns
TripAdvisor makes money not from its core audience, travel consumers, but primarily from click-based advertising (72%), display-based advertising (17%) and subscription revenue (11%).
Back in the pre-Expedia days, TripAdvisor’s business model was far friendlier toward small and mid-sized advertisers i.e. hotels. A property could buy an enhanced listing with a link to the property website for $99/per year. It could have a banner campaign for $1,000/month.
What is the situation today? TripAdvisor’s current business model is not suited for the highly-fragmented hospitality industry and could be perceived as anti-industry. The site relies heavily and almost exclusively on big OTAs and a handful of big hotel chains and advertisers.
What are the advertising options for the 52,000 plus hotels in the U.S. or the 300,000 hotels worldwide?
The property business listings are the only property-level advertising option today. Unfortunately, this very pricey option provides almost no benefits apart from a few tiny links to the property’s own website, hidden under the property name. The tiny text links of the property business listing are being completely overshadowed by all other advertising initiatives on the hotel profile page:
So how could that be? TripAdvisor is focused predominately on hospitality, and yet the business model does not account for two simple facts:
With thousands of hotels, which are all small and mid-sized businesses, where is TripAdvisor’s micro-campaign business model and online self-serve campaign management technology to enable the highly-fragmented hospitality industry?
Website Usability Concerns
Ever since the emergence of the “commercial” Internet back in 1995, there have been practices established to distinguish paid content from non-paid content on any website. This is the reason why when you go to CNN or FoxNews you see “Advertisement” under any banner advertising or “Sponsored Listings” above any click-based advertising (CPC).
The emergence of user-generated content added additional requirements to the mix; now sites had to present all three types of content in a differentiated manner:
The main focus and the main revenue driver for TripAdvisor is the “Show Lowest Price” reservation widget smacked in the most visible part of the site. Needless to say this functionality is available only to OTAs and big hotel chains and advertisers who can afford the minimum spend mandates. You would expect that in 2012 this functionally - crucial to the well-being of the company - would offer a user-friendly interface and seamless integration with the central reservation systems of advertisers.
So what happens when you click on the “Show Lowest Price” button? Six to eight pop-up reservation screens overwhelm the user and provide a true 1990s user experience. Compare this to the elegant user interface of the Kayak.com’s search and availability functionality!
As described by an overwhelming number of advertisers and industry insiders, TripAdvisor is an advertiser’s nightmare, compared with all other advertising options in the industry today, such as Google AdWords, Bing, Yahoo Travel display advertising, etc. This is because
So what is the situation today, more than 45 days after TripAdvisor’s spin-off?
I truly expected that after its “liberation” from Expedia, TripAdvisor would try everything possible to repair its strained relations with the industry. It would embrace the industry and send a strong, unequivocal message to hoteliers: “I am no longer an OTA subsidiary and I am an industry friend. I am now part of the direct online distribution channel and I am on your side. I will work with you to understand your need periods and help whenever possible. I am unbiased and will work with you to improve the quality and credibility of customer reviews and help you address customer concerns. I will help you reach travelers interested in your destination and in your hotel.”
None of the above happened. TripAdvisor did nothing to pacify or smooth out things with the hospitality industry. No press releases with an “I am a hotel-friendly media company” message. It did not sponsor industry events. It did not announce scholarships for hospitality schools. Many hoteliers do not even know that TripAdvisor is no longer associated with the industry’s “Villain Numero Uno,” Expedia. In other words, business as usual.
So what does the future hold for TripAdvisor?
I have followed TripAdvisor from its inception. I have admired their pioneering role in user-generated media. I have really hoped that TripAdvisor would transform itself into a hospitality industry friend after its spin-off from Expedia.
Unfortunately, today TripAdvisor is still a foe of the industry. TripAdvisor has to make a clear choice today: continue their anti-industry, pro-OTA and one-sided pro-travel consumer policy and business model; or dramatically change its corporate attitude toward the industry and business model.
TripAdvisor needs to transform itself into an industry friend and it needs to do this fast. It needs to overhaul its business model and make the site industry-friendly and advertiser-friendly. It must dramatically improve its perception in the industry and site usability, and invest in online self-serve campaign management technology to enable micro-campaign management for the highly-fragmented hospitality industry. The “Show Lowest Price” functionality must have a better interface with the CRS-s of its advertisers and open it to smaller and mid-sized hotel companies, independent hotels and resorts.
If it fails to do that, in my humble opinion, TripAdvisor will end 2012 more like a 600-pound gorilla and by 2014 will be reduced to mere 400-pound-gorilla status.
About the Author:
Max Starkov is President & CEO of HeBS Digital (Hospitality eBusiness Strategies), the hospitality industry’s leading direct online channel strategy, full-service digital marketing and website design firm (www.HeBSdigital.com)
This article is Max Starkov’s latest contribution to the “Successful eMarketing” blog on HOTELS magazine’s website.
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