The TripAdvisor Effect

Since it began as a user-generated hotel review website 16 years ago, TripAdvisor has grown to become the most visited travel site in the world. That’s a remarkable achievement and one that hoteliers around the world have become keenly aware of when designing their marketing strategies.

Over the past three years, however, TripAdvisor itself has morphed to include both metasearch and booking capabilities. It now stands poised to possibly become the third largest online travel agency (OTA), competing with Expedia and Priceline, along with their slate of other travel booking brands.

This represents an opportunity, but also a threat to major hotel chains and independent hotels. On the other hand, TripAdvisor is walking a thin line in trying to balance its business in user-generated reviews, metasearch and bookings without offending its major constituents—major hotel chains and online travel agencies.

We sat down with Susan Helstab, former executive vice president of global sales and marketing for Four Seasons Hotels and Resorts, who retired in late 2015 and now runs her own consulting firm, Helstab Advisory Inc. Susan is a keen observer of what’s been going on in the online travel space, having been in top marketing posts with Four Seasons for 28 years.

Morphing From Content to Booking
man-laptopSusan says that when TripAdvisor began it was all about user-generated reviews. “It was a content platform that was created by the people who were staying in hotels,” she says. “Because of its perceived relevance, it very quickly became the most visited travel site on the Internet.”

Over time, according to Helstab, Four Seasons discovered that almost every booking that came to it from any channel had a TripAdvisor visit attached to it, either in the planning phase before booking or ultimately after the booking because guests were looking for other kinds of information that would enhance their stay. “I was a really big fan of TripAdvisor,” she says. “I felt that once they got up to a critical mass of hotel reviews, you could put some store and credibility behind those user-generated reviews.”

Four Seasons began highlighting TripAdvisor hotel reviews on its relaunched website in 2012 in order to become completely transparent with its customers.  It made it possible to read reviews without leaving the Four Seasons website and demonstrated the company’s desire for transparency with consumers and its confidence in the experiences of its guests.   In addition, “what we found at Four Seasons is that of all of the websites on which we were doing pay for click advertising, the best conversion actually came from TripAdvisor,” Helstab says. “TripAdvisor generated the highest return of any third party site.”

But TripAdvisor needed to monetize, Helstab says, so it decided to morph first into a metasearch site and more recently into a hotel booking engine that competes directly against hotels’ own websites and the online travel agencies. “That’s when for a hotel company the real conflict of interest started to be set up,” she says. “A hotel company is trying to maximize online revenues on its own website as well as its presence on TripAdvisor and other sites to be as efficient as possible in the money that’s spent.”

How Hotels Work With TripAdvisor
people-hotel-lobbyAccording to Helstab, hotel companies have begun to develop strategies on how to work with TripAdvisor as it further develops into a metasearch and booking site. “TripAdvisor walks this really fine line, because traditionally it is the revenue per click that they use to monetize their business, and that revenue comes from hotel companies and all of the suppliers that are now part of the larger TripAdvisor website,” she says.

Helstab says ultimately the greatest margin for TripAdvisor is not going to come from the metasearch business where they refer bookings to the OTAs. Instead, it’s going to come from the business that they are able to book directly with the hotels.

For hotel companies, according to Helstab, the challenge is that cost of sale has been increasing faster than average rate since 2009 during the recession. “Hotel companies are looking to reduce cost of sale to the extent that they can, while making sure that they are represented in all of the key places where people are shopping for hotel rooms,” she says.


Don’t Jump on TripAdvisor’s Bandwagon
familyIn the end, Helstab urges caution for hotels before jumping on the TripAdvisor bandwagon. “My advice to hotels would be to stand back and watch how it plays out, because there’s nothing to say that TripAdvisor will be able to make this transition successfully,” she says. “They are playing this incredible dance trying not to cannibalize the revenues they are getting from OTAs through the metasearch business and the direct business that they are getting from hotel companies.”

In fact, there’s already some evidence, based on TripAdvisor’s recent quarterly results, that there has been some cannibalization of the company’s metasearch business to its direct business. “That’s very dangerous for them,” says Helstab. “They don’t yet have the consumer following as an e-commerce engine. And it will take heavy investment for TripAdvisor to be able to do that. They also are playing with fire when you go up against all the other OTAs and metasearch companies, even Google. TripAdvisor has to be prepared to go toe to toe in that battle, and I’m not sure they are going to be a winner in that.”

As always I welcome your feedback on what’s changing in the luxury market today. I look forward to getting your comments. Let’s keep the conversation going!