TripAdvisor moves profitable—for TripAdvisor
09 MARCH 2015 6:11 AM
TripAdvisor wants to make even more money from its place in the travel industry.
It used to be that TripAdvisor was a trusted ally to the independent hotel world. It gave hotels the opportunity to be valued solely on merit based on past clients’ input. Given the immediate and now dominant success TripAdvisor has, it now wants to make even more money from its place in the travel industry.
The business listing
The only offering in the past was a paid business listing. This listing gave access to respond to guest reviews and gave potential clients direct information. There lies the value proposition in the business listing; direct bookings are more profitable than ones made indirectly through third parties such as Expedia.com or Bookings.com.
TripConnect truly enhances the user experience for travelers to understand the best option for them. The feature allows specific dates to be entered, and rates are then displayed. Positioning of the rates is determined by the bid amount.
The functionality follows you around the site, saving your dates even when you navigate from hotel to hotel. Rates displayed feature no-name online travel agencies as well as the biggest players.
After offering ads to only third-party OTAs, in late 2013, TripAdvisor gave hoteliers the ultimatum: Advertise your rates with us or you lose the booking to third parties. Unlike typical pay-per-click ads, TripAdvisor has implemented minimum-bid thresholds per click. For a property we consult with, a minimum bid for Iran was $1.25—which in my opinion is about $1.21 more than it's worth.
TripConnect and paid business listings
Once a traveler lands on your paid business listing featuring your property, TripAdvisor happily sells TripConnect ads there on “your” paid page. I have pressed representatives of TripAdvisor for statistics, but those are closely guarded secrets.
I then spoke with a former e-commerce director at a major OTA, and he said its strategy was simple: The company is willing to lose money to acquire the traveler as a client. It’s happy to spend as much as $2.80 per click for someone with specific dates. It’s worth it because of the lifetime value of a client.
Despite the additional revenue TripAdvisor now collects on these TripConnect ads, it sees the value of its pages increase. At a separate property we consult on, the TripAdvisor bill increased a full 50% for just the business listing. This excludes any additional revenue it collects from its PPC TripConnect product that we participate in. Its view after my pressing: It is either worth it for you, or not. Your decision.
This left me feeling hollow inside. The overwhelming feeling of an ugly monopoly has surfaced, and it is just getting started.
Introducing TripConnect instant booking
Not too long ago I was fuming on Twitter about TripAdvisor direct bookings:
This was after noticing that TripAdvisor was now accepting credit cards on my behalf, on my paid business listing. In partnership with its own OTA, Tingo.com, TripAdvisor was offering rates for one of our properties. This was just a warm-up for its plan for even more revenue.
Congratulations hoteliers, now you can forget the TripConnect campaign and leave it to TripAdvisor to accept booking on your behalf.
Our understanding is that the cost of this will be 12% of room rate. It will simply invoice you monthly for advertising. Bookings will come into your reservations department with the client’s contact details, including email address.
Given the company’s past, there is no reason to not expect that percentage to rise. Given its latest invention of showing listings first “Just For You,” you will soon have the “opportunity” to pay your way to a higher spot.
TripAdvisor has steamrolled everyone. This is a disruptive change to the entire travel ecosystem and even has implication to Airbnb with direct booking on individual units.
TripAdvisor is the big kid on the block now and wants its cut.
The future of TripAdvisor looks very profitable ... for TripAdvisor.
Sam Trotter is portfolio eCommerce Manager at Boutique Hospitality Management. Besides focusing on website revenues, Sam dives into how technology can positively influence a hotel's business. A self-confessed data junky, Sam Trotter provides news and analysis on website design, applications, marketing programs and other digital trends that are or will affect a hotel's business. To continue the dialogue or for the latest technology news that impacts your hotel, follow him on Twitter or LinkedIn.
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