The company was founded in 2000 by Stephen Kaufer and Langley Steinert. TripAdvisor increased its revenues every year for the past five years except for 2016. According to its 10-K financial report, this is attributable to its hotel-based segment of its business. Non-hotel based segments increased in 2016. The hit in revenue is less than one percent. Management blames several items for the decrease, including increased competition, terrorist events, and macroeconomic changes for the cause of this decline.
People mistakenly believe the company started as a review site for travelers. It did include a button on its website that allowed visitors to leave reviews about their travel experiences, and the concept took off.
The company was bought by IAC, whose principal owner is Barry Diller. It later spun off several travel-related companies into Expedia, Inc. In 2010, TripAdvisor spun off on its own, away from the Expedia group of companies.
How the Company Started
TripAdvisor started as a way to digitize travel guides. Since it allowed visitors to write reviews about their travel experiences, this feature took on a life of its own. It became a core feature of the website because of this.
There was venture capital startup funding in the amount of $3.3 million.
Competition is one of the biggest challenges faced by the company. Expedia and Priceline outspend TripAdvisor on marketing by a wide promotion.
According to an article by Streetwise.co, Expedia is shutting out TripAdvisor from access to some of its data access. Conversely, it is allowing Kayak (owned by Priceline) access to that same data. It may be that Priceline and Expedia are colluding to push down TripAdvisor.
A big problem the company faces is false positive reviews left by the hotels in an effort to sway users to stay in those hotels. Companies that allow reviews on their websites will face this challenge often.
Why it Works
The company is part social media channel, part review site. It does have other features for booking plans for trips, but it has evolved into many different facets. User-generated content in any capacity always has the potential to grow with the user base.
When users see their contribution on a website, they are sure to share it with others. Another great feature about user-generated content is it doesn’t cost the company any money. In this day with content being king, that is a great position to be in.
User-generated content also attracts advertisers. These advertisers know of the sharing potential from those users. It’s not unheard of for someone to post a review and then show their friends. This makes it a first-hand review coming from someone they trust.
According to the company’s website, it claims to be the largest travel site. Some reports show that TripAdvisor tends to find the lowest deals and sometimes even finds deals on Expedia that Expedia doesn’t find.
Much like its former parent Expedia, Inc., TripAdvisor buys up websites that fit into its core business models. If they see others are performing business functions that are lacking in TripAdvisor, it scoops up the company to integrate that functionality.
Steve Kaufer is still the CEO. While that is not a requirement for a successful company, it is telling that he has staying power. This shows he believes in his brand and does what it takes to make it work.
TripAdvisor offers an affiliate program paying 50% commissions. This is a generous commission by any measure and will likely attract many members to promote the brand.
The affiliate program supports deep linking which allows affiliates to link to just about any page on the company’s website and still get credit for the commission. In many affiliate programs, affiliates must use predefined pages to sell. Deep linking is a departure from that constraint.
The company offers marketing tools for its participating vendors on its network. This has the dual benefit of helping those companies while boosting revenue for TripAdvisor. Some of the tools are available for a fee which further contributes to the company’s bottom line.
The company uses its data to offer industry insights to its network. This can help the participants when marketing on their own behalf.
TripAdvisor has a Cost-Per-Click business model for advertising on its websites. It’s partners, such as hotels, would display their banners on TripAdvisor’s website. When visitors clicked on those banners, TripAdvisor would get paid. This occurs on every click, whether customers book with the hotels or not. This is a significant revenue stream for the company.
According to HomeAway.com community board (which ironically is a subsidiary of Expedia), people feel that Expedia is too cluttered and that TripAdvisor offers a better user experience. Users also claim that Expedia is good for quick bookings of various legs of the trip, whereas TripAdvisor is more about a good vacation experience.
Other reviewers enjoy using TripAdvisor for the reviews alone and don’t participate in booking travel through them. They felt that booking via the airlines was often cheaper.
According to Glassdoor.com, the company rates well with employees. Stephen Kaufer has a 79% approval rating. One user specified that the company has a highly competent management team. Many users state that the work/life balance with the company is good.
In a commentary section of The Chronicle, back in 2014, there was an interesting case concerning a British couple who used TripAdvisor to book a hotel. They hated the experience and posted a negative review on TripAdvisor.
The hotel charged the couple an extra 100 pounds for doing so. The hotel stated that it was in their fine print that guests would be charged for any negative reviews posted. [Source: Elyria Chronicle-Telegram, Schensul, Jill, “Charged Couple Tripped by TripAdvisor Review”. Advice & Travel, December 14, 2014.]
TripAdvisor maintains an award for Certificate of Excellence. This is an award to hospitality providers who consistently earn high reviews from TripAdvisor’s user base. It is not easy to obtain this award, and even when you do, it doesn’t mean you will have it forever. It’s a great way to keep hospitality providers shooting for higher standards.
Lessons Learned By The Business
- The company did not disregard the possible entry of search engines into the travel booking space. They took these developments seriously and worked with this constraint.
- In this industry, the company has to maintain strategic partnerships with many players. This can even include competitors. The challenge is when the competition starts to collude which there may be some evidence of that happening.
- The company is using the advantage it has in being a social network, which is something its competitors are not strong in. They can utilize friends’ activities and posts to find common traits within those relationships.
How Other Businesses Can Learn From This
Don’t bite the hand that feeds you. This seems like a common-sense item, but TripAdvisor was compiling and publishing its Dirtiest Hotel lists for several years. They discovered that hotels were not fond of this practice, which caused the listed hotels to withdraw support.
TripAdvisor has changed the practice to only focus on positive ratings for its lists. Of course, customers probably appreciated knowing which hotels were not up to par.