Q4 2019 Earnings Call
Good morning, and welcome to Tripadvisors fourth quarter and year end 2019 earnings conference call.
As a reminder, today's conference call is being recorded at this time I'd like to turn the conference over to your trip Advisors, Vice President of Investor Relations Mr. will Lyons. Please go ahead.
Thanks, Scott Good morning, everyone and welcome to our call. Joining me today are steep copper CEO, It's kinda center, CFO and chief experience and brand off certain Lindsay Nelson.
Last night after market close we distributed in filed our fourth quarter and year end 2019 earnings release, and we made available our shareholder shareholder letter on our Investor Relations website located at IR Dot Tripadvisor dot com in the release, you'll find reconciliations of non-GAAP financial measures. The most comparable GAAP financial measures discussed on this call also Warner IR site, you'll find supplemental financial.
Information, which includes certain non-GAAP financial measures discussed on this call as was other performance metrics.
Before we begin I'd like to remind you that this call may contain estimates and other forward looking statements represent management's views as of today February 13 2020.
Advisor disclaims any obligation to update these statements reflect future events or circumstances. Please refer to our earnings release as well as our filings with the FCC for information concerning factors that could cause actual results to differ materially from those forward looking statements now here Steve.
Sure if you thought before we open the call if your question.
Thank you will and good morning, everyone.
As we outlined in our shareholder letter shown during 2019 hotel walks in trends persist in Q4 or financial results were in line with or lowered expectations.
We've taken action in or three important focus areas.
Typically we've continued to focus on driving revenue growth outside of the hotel auction.
The adjusted our cost structure to support continued strong adjusted EBITDA and free cash flow.
And we bought returned a total of 540 million to capital to shareholders through special dividend and share buyback.
We also closed two acquisitions that Burger, both real fast growing restaurant offering in Q4.
More recently, we reorganized to align teams warmer one trip advisor vision. These changes bring together and streamline the trip advisor use earn shopping experience leveraging our differentiated people, how we're planning consumer value proposition.
I would argue travelers one could be a trip that's really important to them come to us to plan that entire trip. We therefore expect or non hotel auction revenue will drive the lions share of our future growth.
We expect Dnbi revenue alone will exceed the hotel auction in 2020 and over the coming years the relative sizes. At these revenue lines will reduce the hotel auctions influence on our overall result.
In summary, we only enhances our position in an attractive in competitive travel market and clearly differentiating our differentiating ourselves from every other travel company. We continue to have strong unique assets and our progress makes us optimistic about or future.
I'll now open up the call for questions.
As a reminder to ask a question you'll need to press star one on your telephone.
Please allow yourself one question and one follow up.
To withdraw your question please press the pound <unk>.
Please standby well, we compile the Q any roster.
Our first question comes from Deepak.
That's a van and wed.
Barclays. Your line is open.
Hey, guys. Thanks for taking my question two quick questions supposed to can you talk about that trends in hotel auction business. During Fourq you wish this quarter.
In fact get wars or was it largely stable.
Your commentary on the revenue growth employing in chicken DAF 2020 depend on village, what's being politically stable or can you do it.
<unk> largely given the comps and then the second question a little bit ammonia.
Can you comment on what you're seeing from the current all matters impact so far in terms of traffic and maybe the old <unk> partner bidding activity related to that how are you thinking about that in the guidance too. Thank you.
Sure I'd be back to Steve Thanks for the question.
I would tell auction was stable Q3 to Q4, the but it's still challenged.
What we're doing about it is building direct relationships with their travelers and you can see that increased membership rigs.
With this direct relationship we're getting more repeat traffic and a higher percentage of our revenues coming from these members and that's good that's great for our long term health bar business.
Perhaps just as important more focused on extending this relationship we have with the traveler beyond hotel yield to help them on on the full trip.
So you're going to can't Cuno hotels important what you should definitely consider any number of the tours that we offer to really make that that trips special and how about some restaurants and and all that stuff is working as you can see more travelers on for the bars are booking experiences than ever before and her median reservation businesses.
Are there they're growing double digits.
In terms of this you know impact later in 2020 look we always assumed some continued Google headwinds, but but nothing dramatic nothing like that is baked into our plan.
To your second question the krona virus.
I wouldn't have to believe it's part of our softer start in the and the hotel auction for us.
And we do see some unexpected or new cancellation levels in Asia, but we're not that exposed to Asia as an overall part of our business. So we're watching it closely we might see a point or to a low single digits impact.
But at this point Oh, it's there were watching closely.
It's not that material to us.
Got it.
<unk>.
You bet.
Our next question comes from Lloyd Walmsley with Deutsche Bank Your line open.
Hi. Thanks. This is Chris on for would I believe you guys had called out exiting the year at 30% booking growth in the experiences business. So can you just talk a bit about how you're thinking about the shape of bookings growth this year.
And then separately we've seen some press that indicates you guys maybe a in the process of flexing the pricing lever in the experiences business was curious if you guys could give us some color on how that's factored into the guidance for a in D. segment revenue to accelerate this year. Thanks.
Sure thing, Steve again, I, So we're super bullish on our overall experiences in dining segment and experiences in particular I Oh.
Internally, we change things around to really focus both on the trip advisor opportunity, which has been growing strongly as we told you I to help centered around the traveler and whether that travelers looking at a hotel or restaurant or an experience help that traveler finished that considered trips.
So we look at bookings growth rate on 50 buys her as a as remaining strong when we look at Biod tour, which is the other part of our change we're adding a bunch more focus on that platform and with that focus as a pure play for experiences. We're excited about it's a re accelerate.
Question in terms of bookings growth and overall focus for the year.
Hi.
In.
In terms of though the pricing question I.
Oh, our market place had grown dramatically over the past several years and we discovered that there were parts to the marketplace that frankly weren't they are to a number of suppliers given different suppliers had.
Some different margins on the platform and we wanted to fix that we.
Firmly believe in a barrel marketplace for all of our suppliers and a fair marketplace is going to give the best results for travelers no matter where the traveling.
And I don't think that's Oh, a big impact on overall financial but it is important for the health of the marketplace.
Got it thanks.
Our next question comes from that time with Suntrust. Your line open.
Yeah. Thanks, a lot a couple of questions. So on the yen decide.
Should we think about Oh.
The potential for organic growth in 2020, <unk> and their business and how is the restructuring window effect a revenue growth and then I'm on the on the hotel side.
As they think about your commentary on the diesel you saw in <unk> in January.
What are the primary factors for that went up in partners pull back spending.
Hi, Annabel this is ernst thanks for your questions first on the experiences and dining Oh, we have made to impressive acquisitions, they're going to help with the reacceleration of growth that we highlighted but we are as Steve just said also very bullish on the organic prospects we have in the business.
On the dining side, we've seen continued strong performance from via our they've been able to continued to Oh, I'm, sorry, awful lot frechette, they've been able to continue their organic growth and we expect them to do continue their organic growth as they have been they're pushing deeper into a secondary and tertiary markets. Other cities they are making.
Progress on loyalty of their customers repeat your rate to their customers are very solid a piece of the business.
Well, we experienced the site as Steve what you're saying, we see opportunities as well, we see an opportunity to integrate.
You experienced the business deeper in the overall trip advisor offering and benefit from being able to offer experiences not only to people on the experiences pages, but also on other parts of their travel.
Hi, it's where we believe we can reinvigorate the positioning in the growth of that business and so we feel very good about the overall.
Back to that you asked about restructuring impacts, yes, we have taken out some costs out of the experiences business in particular, a it within the <unk> segment, we have got come out of a period of about three four years of significant investment more than doubled our cost in experiences for instance in last few years to build a supply base, which.
We have done very aggressively and we are very happy with now and build like our system for a larger scale and we feel we've come out of that investment cycle, and we're now pivoting towards focusing more on the demand side, which is less labor intensive than the the burst in the <unk> in the supply Bill has been so we felt we could take out some costs.
Oh, we don't believe that's gonna have a meaningful impact on our ability to execute a issue for the rest of the year.
That's helpful and then on.
On the other hotel the auction piece can you just some color on the D. So.
Yes, sorry, the the deceleration we saw early in the year Oh, the on the hotel side not so much due to a partner bidding levels, but more to an overall the continuation of the Google trends, but maybe an overall travel spending a and corona virus the impact that we've seen in a and we've seen that decelerate versus what we saw in Q.
Sure.
As we look ahead of course, what we're focused on Super focused on and on the hotel business is making sure. We are we grow the non auction lines. We have some ambitious plan for 2024, our hotel b to B business, which was growing double digits last year and we have aggressive growth plans for for this year and of course, our media business lens. He's on the line She's got talking later more undoubtedly about our.
Media business, but we see a reacceleration of our media business well into 2020, and these will offset some of that the pressures we've seen in the auction.
Our next question comes from shut a.
Hi, Jerry I'll with RBC capital markets. Your line is open.
Great. Thanks, two questions. Please first.
Member growth accelerated for the sixth consecutive quarter I believe that's up from the letter and in the fourth quarter could you provide a little bit more context around member versus non member trends. So how much more do they spend or how much more do they engage what is their demographic profile versus nonmembers any any contacts there and then second.
Your fiscal year 20, Guy calls for experiences in dining to be higher than options revenue.
I don't believe you breakout auctions, but any context on a you know how big that is as a part of a deep deep branded hotels wrapping it should we assume 70, 80% of that revenues auction. Thanks.
Sure. Thanks, whether this is Steve I'll take the first question I.
Member growth does continue to accelerate that's a lot of Oh fresh users, who had been coming by or side I haven't found to a reason to log in and and now they're doing so that allows us to reach out to them again through our CRM efforts I, we added 50 million as me.
Indicated in 2019 and reap pace.
Going into 2020.
Hi numbers do come back more no surprise there there are a higher percentage of our of our overall revenue is down coming from members as I said I and while we're not kind of ready to share specific numbers about increased monetization rate I every great business.
Builds its loyalty based upon people view themselves as members signing in is one that reviewed but just coming back domain, Greg coming back for more and more of their travel for purchases.
Critical to this kind of focus of ours and it really is a focus.
Goals.
Is that considered trip and helping them.
I am not just with the originally started on for trip advisor, but the rest of that travels cycle. They started on a restaurant and become a member that's fantastic. We can help them with the experience with the hotel with the flight et cetera.
That's right up to your second question. The are a trip advisor branded hotels line that consist of two meter main components the auction as well as our hotel BT business without putting a finer point on the split between the two you're correct to assume that a large majority of that revenue today is in the isn't the auction.
The other part the B to B Hotel business is the part that is growing it's been growing last year, we expected to grow nicely. This year as well so as we overtime, we see a within the hotel line the auction.
Be less impactful and especially less impactful, but in the overall hmm Pete revenue line.
Our next question comes from Brad Erickson with Needham and company. Your line is now open.
Hi, Thanks, I guess can you just give any kind of a finer sense of what promoted listings video ads stuff like that ended up being financially last year as you've gotten started I guess that might one might be for Lindsay and just kind of how big of a contributor we should expect that to be here in 2020.
And then also can you just given the updated monthly active users on the site in Q4.
Well this is Steve could you clarify the promoted ads that it's not really terming. We use are you referring to ours sponsored placements or most our media business or media business at <unk> <unk> <unk>.
The sponsored placements I guess is what I was getting at the piece of the business I know small, but I think it was roughly doubling last year just send the wondering if you got there and kind of how much are contributor that becomes in 2020.
It was a <unk> again, another nice growth rate for that product, it's very popular product.
For our cloud for our customers a significant part of the growth that we've seen this year in our hotel B to B was as a result of our continued growth in sponsor placements. We expect that to continue to grow into 2020, I thought the only growth area in a and b to B in 2020, we have.
Some new products that we're building out that are I'd be to be products for our hotel base a sponsor placement plus other products. We see continued to drive a hotel b to b.
Revenue next year.
In terms of a in terms of overall you a users the decline of the users narrowed in Q4, we had little over 380 million users. In Q4 Q4 of course is a seasonably low number for it for users compared to Q3. The point remains that we have huge scale and.
The overall you use is only a fraction of what we really look at we look underneath we look at membership growth. We look at the quality of these users.
And we've highlighted in our in our prepared remarks, a few of the a great green shoots up you're seeing there were particularly excited about being able to grow membership because membership members just have a better ability for us to to market to especially on email, but they also tend to be much more loyal and much more higher revenue generating so we look underneath and.
We look at the underneath the trends underneath the 380 million users and we're actually quite pleased with where that's trending.
Got it thanks.
Our next question comes from Brian Fitzgerald with Wells Fargo. Your line is now open.
Thanks, guys I had a couple of questions with the around the engagement on a trip advisor media manager and then some color there on the mix and dynamics between.
Ramping endemics versus non endemic clients and then.
Related question with with a trip advisor connect a at your new self serve all off platform kinda audience extension media solution. What are the puts and takes there for advertisers that maybe we get a holistic view of our travel marketing spend an ROI in one place in one dashboard and we don't have to hassle with managing multiple deals.
Piece would they get better rates, there versus going directly to a DSP can you can you give us some color there on tripadvisor connect.
Yeah. Thanks, Thanks, Brian for the question to take it up and now I mean, we remain pretty optimistic about the potential of the display business given as an app downtime or talk about and we're also.
Pretty proud of the ramping environment and the opposite first party data.
Peculiarly in a world where identity authentication winds user base, it's getting harder and harder for many other publishers on that basis very much connect with our investment around numbers. That's the more lockett members more people, we have a deep understanding of and the better weekend attribute and on behalf of our marketing partners.
So to your question around here, but either connect the challenges many markers have a once you identify a high value audience. How many continues remarket sort of conversation why that audience, whether they're on trip advisor or off platform. So that the product that meets that demand, we're seeing and a lot of interest in that product and is already.
Starting to grow quickly, particularly.
With both <unk> and non endemic advertisers or does that give you.
Hi.
Out a year or the leading indicators that we continued to pay attention to as to whether or not a weekend a growth double this isn't a three to five here is and.
Whether we're growing our new customer base, we added over 200, new advertisers in Q4.
We also increased our average deal size.
We grew average deal by about 20% and I think that that there's a pretty remarkable achievement to not only continue to greater customer has to be able to maintain pricing integrity and the overall I feel volume and the impact that each of those deals. We've also increased our programmatic business relative to the overall growth in the market I programmatic.
It's now for US grew by 100% and we continue to grow Monetizable inventory and Oh prophesied and increased celebrate so when you think about this back from a market.
And your question around the self service platform. We believe that we have great solution for enterprise partners do multiyear deals, particularly around exclude exclusive data relationship. But we also think we can serve that small and medium sized business through the south our platform and if you look sort of the other vertical on.
The matrix, we believe weekend.
I mean, the sort of highly transactional programmatic buyer, but also introduced high tide solutions like branded content like sponsorship and so far on the market has been a reaction pretty positively.
Great. Thanks Lindsay.
Our next question comes from Tom White with D.A. Davidson Your line open.
It's actually feel free to be on for.
So the letter you talked about conversion gains green shoppers.
Got it.
Just hoping you could just elaborate a bit on your initiatives, Aaron how you're driving better conversions and experiences.
And maybe you talked about the 10 products rolled out in Q3, how those are performing if it you've touched on some of those really in the called just Wesley anymore color. You can give a finished product pipeline would be great. Thank you.
This is Steve I'll take the experiences conversion I might ask you after I finish to towards the second question I've.
So with experiences.
It's a.
Two part answer on trip advisor, we're getting better and better at helping travelers no matter, where they are in the funnel discover the experiences and make it very easy for them to buy the right experience around that point of interest so if its a.
Hey.
Buckingham Palace is it a guided tour is it a skip the line is it a private tour, what's the best experience, but what's the best thing that we can offer to help sell that particular attraction on my end tour. The fact that we have so much more choice and that we're improving.
Our ability with the streamlined extremely methods to actually complete the purchase I still a bunch of low hanging fruit that we're excited to tackle a that we started on over the past several quarters and have a rather robust road map.
To help our travelers on that particular point of sale I reiterate the focus that that our recent changes or allowing us to pursue in terms of helping the traveler throughout the trip on trip advisor I makes us extremely bullish given the hundreds of millions of travelers on or site.
In England consider drip and then on by a tour occupying the mindshare around being the place to go to have that magical experience, whether I discover buys were one I mean destination or whether I'm, a planner and picking out the absolute best hike or tour or bad.
It can experience or or whatever.
Could I ask you to repeat the second question.
Yeah.
And then.
So you when you're Wesco, you're talking about 210, new product launches you rolled out.
Over a over Q3, just want to get anymore color on how those are performing.
Or what your product pipeline looks like for 23.
I don't think we referred to 10 products, we had launched a couple on the AD side that linseed covered in the last.
Answer and certainly.
There are different AD units on our site.
Different than a rectangle or we have new home page placement that we've been talking about.
I give the short answer is it's all part of the mix that makes us comfortable with continued with our estimation that will still be able the continued.
We are executing on or plan to double our media revenue over the next three to five years.
We're not sure any one product is going to be a break away hid.
So our strategy is really to focus on our audience segmenting it for the right buyer and leveraging the fact that we have so much first party data, which is becoming scarcer across the media universe.
And our next question comes from Jed Kelly with Oppenheimer. Your line is now open.
Great. Thanks for taking my question in the prepared comments in the segment both seated diners bookings.
Mentioned they grew over 30% AD revenue in that segment I think grew 20% ex FX can you just talk about what the gap is between your key K.P. eyes, and the overall revenue growth.
Yes.
Seated diners and bookings are up obviously volume indicators, particularly in <unk>. It experiences and we've highlighted this before this year, we've made a push into a new products with a lower ASV. So they have lowered our our revenue per booking.
And that may be a short term impact as we just signed up more new customers with offering them more attractively priced lower HIV products.
But that has been the main driver and experiences side on the on the dining side there has been less of a shift between.
Mobile the between volume and pricing year over year.
As we look forward into next year, we've seen opportunity for both of those segments to keep driving volume, but also have opportunities to keep driving a O V as well and so we look ahead and we believe this is a great. Both of these metrics are great leading indicators for what we can do overtime.
And then on experiences and on the cost rationalization as that impacted how you're thinking about your overall marketing that product in 2020.
The cost us real rationalization I want to be very clear has been on the back of a number of years really deeply investing particularly in supply growth and overall platform growth over all the overall scalability of our platform. We've been growing as you could have been able to CNR statistics bookable products very aggressively.
Triple digit.
Type of growth that we've seen we feel now we're in a very good place. We've made a big spring. We thought there was important to make a big spurt.
Of available inventory.
We have that now we're shifting now towards the less labor intensive activity of pushing on the demand side. So we have lot of initiatives that we're driving to stimulate demand and we've shifted our focus that way it doesn't have direct implication.
On how we can execute on that side, the fact that weve tapered our expenses on the other side.
Our next question comes from Eric Sheridan with you've yes. Your line is now open.
Thanks for taking my question, maybe two if I can first of all the auction dynamics, we get a little additional color on whether its advertisers adjusting budget.
How much of it is macro industry issues versus pricing dynamics versus budget dynamics that you're seeing the auction and how you're maybe the assumptions, you're making looking out to 2020 on how those those might change from what you saw in 2019 and then on experience is.
Could you help frame how you see the competitive landscape in experience is playing out from 2020 beyond just a lot of players in in travel, albeit probably not at the scale you guys are up today, if inventory trying to go after that opportunity. So how do you see the competitive landscape playing out, especially reflected in trying to continue to scale inventory of choice for concern.
Super some experience its thanks so much.
Okay, our guidance I'll take the first didn't see will take the second one in terms of the auction.
There's been a number of factors at play the macro we believe it's important to continuation of Google is important the overall.
Willingness to transact of of users is important of course advertisers are adjusting their budgets accordingly.
When you run there are other platforms. This is sometimes a little bit difficult to tease apart, but we we put it into buckets of some of these external headwinds that have come in on overall travel spending by consumers.
As the most important driver.
And on the experiences side I, that's all remember 80% of the bookings are done off line and so when you look at with the trip advisor brand lens on we have so many of those travelers already on our side our job is to match that traveler demand either in planning mode.
In destination, we don't have to pay additional dollars to get those travelers it's a clear.
A clear advantage we have over basically every other competitor in the attraction space. When you look at via tore I, we did supply footprint certainly in the markets, where we are strong we're sort of a.
Clear leader clear player I with all of the heavy not all but most of the heavy lifting already you've done in terms of building supply footprint in infrastructure. So when you compare biod, where is closer to standalone entity versus their head to head competitors certainly.
Hi.
We believe we stand ahead, and we stand tall, we have better supply we have a ton of traffic we have more.
More direct traffic more more brand awareness is really quite a good story that we plan to leverage going forward.
Hi.
Great markets bring lots of competitors, so we're not particularly nervous about other pure play attraction players were certainly watching carefully.
Because the market is so big and and as such nice growth opportunities.
Our next question comes from Michael and with Piper Stanley. Your line is now open.
Hey, good morning, so related to the indeed segment in particularly looking at experiences it sounds like there's a high degree of confidence to continued growth there and you talked about new ways to engage and convert users but are there also just certain regions or categories that just may have more opportunity for growth or less penetrated that you're looking into it.
I guess along those lines are there also then areas where supplies maybe less robust today that you're particularly working out thanks.
Hi, Yes excellent question, there's certainly a plethora of opportunity around the globe and so we do have to focus in on certain areas, we're not trying to.
Do everything in every geography.
Yeah.
So naturally we go where we already have a good supply footprint and or a great traffic footprint, particularly on the trip buzzer point of sale. So that we at least come with either a strong supply footprint or a strong demand footprint as opposed to having to start from scratch in in either.
Sure.
That's pretty much how you can see our product strategy, our supply strategy and our demand strategy rolling out between trip advisor and buy at we're leveraging either the supply or demand footprint.
And there will be other players we recognize that that grab a foothold in a market that we're not.
Particularly strong in at the moment.
Okay.
However, our overall considered trip with our current audience.
Where we can bring the demand if we don't have the supply ourselves we cut the supply relationships with somebody else, perhaps there's lots of different ways to do what's right for our travel.
And Steve answer his question, mostly for experiences, but if you look at the dining side. They are exciting opportunities there as well and these two acquisitions that we've been making our supporting data as well lafourchette with this transactional business has been able to grow in the footprint that they've had within Europe, because there's still underpenetrated.
But the acquisition with book a table that we've made allowed us to more deeply penetrate the UK and Germany, which were to white spaces for four Lafourchette, which is very exciting lafourchette will now be a truly band European player and able to leverage the scale associated with it last year earlier last year, we made an acquisition in South America as you know which is another.
Our growth market that we're focusing on so on the transactional business. There's lot of growth opportunity had geographically, but also deeper penetration within market that we had of US and then the other component of that this of restaurants as you know is.
The.
Products that we're selling through restaurant restaurant tours on a trip advisor which is.
Our restaurant services business that we've been able to grow very nicely. The other acquisitions. We made single platform is an ability to add more product to the salesforce that is selling this two restaurants on trip advisor and so it's highly synergistic we bought a company that was.
Not growing as part of the platform that they were on a but we are able to take that and put that on top of the salesforce that we've created and and and offer more product to the same restaurant. So another area product product additions product proliferation. Four restaurants is another nice gross area on the trip advisor restaurant services side.
Our next question is from Justin Patterson with Raymond James Your line is now open.
Great. Thank you.
Sure expand on the redesign of the trip advisor up and change the user experience and not that long ago. So I'm curious how best to redesign compared to the last what you're trying to solve and how we should think through the business I'm back.
On the second question is on experiences Steve I think you just said 80% of attractions are still booked offline where would you say the industry is and that shift from offline to online and what can you do to accelerate that shift to convert more more bookings online like so much.
Oh that's.
I think two part or I'll ask lynsey to handle the first and you'll see how it dovetails nicely with the SEC.
Thanks, Mike further question about the App as we shared a few months ago, we've been in the process has overhauling the app.
For about two quarters now we have about two quarters more to go on and you can appreciate these products are not only about where the consumer but also how we manage the back end services that support I don't react but will also improve the web arm experience overall, our ambition is to create world class a consumer products and that includes.
Later planning frames, but also to shop and okay.
Well, there's a lot to love about the current out we think there's a lot of areas of improvement to not only make it much more light weight, but also just much more reactive and personalize and intuitive for the traveler, we recognize that the travel planning process happens across many surface and sometimes that happens on your phone sometimes it happens on your desktop.
Sometimes you want to exchange emails with your travel partner to compare the best hotel or I really exciting tour and we don't make it easy to hand off the process are we really want the app to be that sort of in in your pocket hub for all of your travel planning and Nolan.
It also youre on destination companion, where you can not only organized all of the things that you touched on Tripadvisor, but also discover great deals I last minute opportunities or a recommendation from traveler like you.
I would say that the most important thing to take away for this group is just the importance of personalization and ongoing member communication.
We recognize that not every traveler is the same it's important that we don't have a blend instruments experiences that we believe that on the back of the membership opportunity, which is why we seek when the focus on membership in advance of the launch of the up that the more large.
Users, we have that more questions. We ask that these are the more information we have about what your travel preferences are a better recommendations and merchandising we can do across any category Entre advisor and and we believe that the combination of data collection with a membership and the delivery of that on through the new experience.
Not only going to increase engagement and repeat users, but that will ultimately drive revenue because each app user will be given an app experience that is tailored to their preferences and we're pretty excited about that.
And as you can imagine downloading and and being a frequent use or the app is an ultimate sign of loyalty and so when we look at that 80% offline experience purchase I had a chunk of it is I have no reason to book in advance and also.
For the Buzz run by a tour are now, giving you a reason.
Because of convenience you can always cancel 24 hours.
Before the thing there is a prepayment methods, there's potentially deals and there's just the convenience of buying through a C channel like trip advisor will provide torn advance and then for all those things that Youve put on your wish list.
Not ready not because you don't like the tour, you're just not sure if you're ready to take it now you're in destination you open up all wrapped in there. It is in that exact same format and now you're ready to buy because heaven forbid. It's now sold out and with the App continued push notifications, telling you that.
Hey, inventories getting limited or now's, a good time or your some three other things you might want to do.
Imagine it down the road how incredibly helpful. It can be to have a travel agent to travel Wizard in your pocket, giving you recommendations based on where you are with the weather is like the things that we've learned about you to just make that in destination travel experience so much.
Easier so much better and that's a sign of loyalty that we feel we're in a great position to deliver to be clear that is not a Q3 lontra Q3 launches the beginning of the App. It's it's a new surface, we're very excited about it.
It's the the what I talked about was the several your vision of how.
The traveler becomes super loyal to us because of all the services that were providing both in planning in destination.
Great. Thank you.
Our next question comes from Dan Westcott with Morningstar. Your line is now.
Hi, Good morning, guys. Thanks for taking the questions too if I may so the first one on marketing expense, which saw some pretty strong leverage in 2019, how should we think about your ability to continue to optimize channels and the impact to your increasing loyalty member base and the App relaunch might have on direct traffic in 2020 and beyond and should we think about marketing expense leverage potential.
Say again in 2020, and then just regards that Google it looks like it might be tussing, placing some organic links above its a matter in some markets if that were to become prominence how might that impact our business. That's it for me. Thank you.
Thanks, Dan This is Ernst our marketing first we've gone through.
A serious effort as you know over the last two years and improving the efficiency of our marketing on the hotel side.
We're through that cycle now so going forward on the auction side, we expect to marketing to.
Grow with with demand grow with overall revenue volume or the same actually for growth businesses for experiences for dining.
We see marketing grow with a with overall volume.
To your point of.
Channel diversification and will a re reinvigorated app help us actually lower marketing cost that is definitely a potential not baked into our numbers at the moment or our forecast at the moment, but that is definitely a potential that we are able to reduce our dependence on some of these paid marketing channels.
And this is Steve with regard the test that Google seems to be doing putting an organic link.
Above some of their placements, we'll see how it goes.
Far far too early to tell whether that a.
I know effect or for a modest positive, but its little hard for me to believe that would be meaningful lift from what I've seen so far.
Great. Okay. Thank you.
Our next question comes from Lee Horowitz with Evercore ISI Your line is helping.
Great. Thanks, so much of the question I'm, just just one if I could I'm on the reshuffling of the management team in the alignment in the experienced business focusing on bias towards a product then experiences on trip advisor as is the only kind of standalone business.
I was just the right timing to seemingly break these two businesses somewhat apart given that you've tried to integrate them a little bit more closely over the last couple of years.
Hi, Thanks Lee for the question the excited to answer I.
We had a plan many years ago. When we first bought by a tour first turning it into a marketplace from very curated selection growing supply doing it geographically and leveraging the demand that existed on the trip advisor in the by a tore platform and we needed to teach ourselves how to best merchandise experiences having.
Being kind of from the trip advisor side not in that business for.
Previously and so the one team I say that was responsible both for trip advisor and for via tore I was leveraging all those new learnings for out effectively so experiences to to travelers.
With several years now.
Getting that into our DNA, we're now able the split it often say four trip advisor we've got the merchandising down let's now tackle how is how inexperienced is part of a key consider trip and that's a little bit of a different muscle that very unique to trip.
Advisor because of all the traffic we have across all the verticals.
So reorganization apply a focus towards helping that traveler on trip advisor no matter, whether they're looking for a restaurant a hotel.
Oren experience flip it back over to buy a tour now we have an opportunity as a pure play OTI a four experiences to really build up both.
The brand the focus on the merchandising and just divide to a point of sale leveraging our third party relationships, which there are quite a few and focused from a.
A set of consumers are looking for just the best thing to do while they're in destination or beforehand, and while some may go to trip advisor, which will be great for true Buzz for media group, there will be a said that or just looking for a pure play experiences offering and we want biased toward have all.
The the leverage to a twin in that space.
So it's kinda like it was always part of what we thought would happen and I think we timed it well in terms of.
Being able to have both sides learned the merchandising learned the best practices and then enable each brand to to chase its audience and the other component of this reorg of course is focused on T.A. and the overall Ta platform, which is really important to us we have developed T. A very attractively vertical by vertical there's a huge.
Security that we outlined in looking at the consumer much more holistically and with great hires that we made with Lindsay and Konica, we feel we have the right plan in place right now it's actually affect that.
Great. Thanks, so much.
Our next question comes from Doug.
With JP Morgan Your line is now open.
Thanks for taking questions.
It's cheap assets can you just give us some more color and how your brand campaign will evolve in 2020 tons, while optimizing and reducing some investments viewed as helpful.
Quantify 19, and 20, and then separately just on the at least flat.
EBITDA in 2020 relative to 90, just talk more about some of the bigger puts and takes there and just how we should think about topline growth. That's all contemplated in the guide thanks.
Yeah. Thanks, Doug I'll give you a little bit a big picture color on the brand campaigns.
Last year, when I joined we initiated a brand transformation I mean, I think about what it means to transform a brand, especially when it's iconic a trip advisor. It's not just about a paid marketing campaign, it's about how do we define and reset how we think about the target customer the role, we play with and travel and ultimately defined strategic.
And this creatively what it means for us to be the world preeminent people Howard guidance company. The first external signal that transformation with a very exciting moment for US a couple of weeks ago, where we relaunched the visual identity of the company, including as simple as the case.
And of the iconic Folly logo and consumers will continue to see rolling up based not only across the platform, but also all of this house that we own and operate over the next couple of months, we will be end market and April with a with a pretty high impact, but a targeted city campaign, where the company.
He wants to out at home for the first time I'm, particularly in major transit had like airports and some ways and train station.
We will continue to think about what our communication strategy as a for the first half a year for NFC look into the back half right. Now we are acutely focused on the channels that we actually own and operate that we don't pay for as we talked about earlier, we had an enormous.
Very valuable audience, historically, we haven't necessarily taken advantage of that audience I'm using open inventory to merchandise and promote our businesses such as the growing experiences opportunity on tripadvisor as people have a big focus there. The second is CRM at Tcs is sort of a simple acronyms that what it means that for all of the.
These new members either people, we can enacted communicating directly and CRM at the channel has been very fast growing for us not only in volume, but efficacy and we expect to double the revenue contribution from that channel this coming year and that extends its course into push as we continue to grow app downloads even in advance of lies.
Again, I said coveted audience that we have a direct line entail from there we'll look to the back half as we identify what our specific campaign objectives are and as we have an understanding.
How the business is doing well put our back half media plan together and Alex.
<unk>.
As you can tell from what Lindsay says.
TV marketing as we've done in previous years is going to have a less of an overall weights in the into the way we go to market with our brand.
The other ways, we go to market with the brand as Lindsay I was lines are going to be more efficient and effective we believe and so we're looking at a reduction year over year in our overall brand budget from last year. It's one of the areas, where we've seen strong cost efficiency for the for the upcoming year.
In terms of your second question on the puts and takes in or at least flat EBITDA.
Outlook for 2020, let's start with with N D. India is a source for profit growth in 2020 for us.
Not only does the topline continue to develop very nicely. We're also seeing improved margins N. D. This this upcoming year, it's partly from the scale. We are achieving in dining is partly from the scale. We are achieving in experiences and as you know as we've outlined we've taken some cost out of the experiences business as.
Well and so that combines two.
A meaningful profit improvement for the year.
The other part of the puts and takes is our hotel auction the pressure on the hotel auction is pretty some challenges on the profitability of that particular line item and then thirdly, we have identified other cost savings areas that we've outlined in our in our prepared remarks as well there are three theres experiences there's other areas of the business where.
With that are less strategic or we can take some efficiency were taken some cost out and then the brand marketing I just just talked about were partly reinvesting.
About half of it the savings of $80 million off our run rate that we're creating we're reinvesting in growth areas of the business in a restaurant business in particular, but also in building capabilities around our core experiences Lindsay Linzess area as well as the hotel b to b, partly reinvesting, but taking some efficiency so that all together.
Combines in in our outlook for the year of at least flat EBITDA.
And our next question comes from Nat Schindler with Bank of America. Your lines out then.
Yes, Hi, guys was wondering.
I don't know if it was really clear we answered, but I think sort of asked.
What portion of the.
Hotel brand to a trip advisor branded hotel revenues auctions, because I'm trying to clarify your guidance.
Yes, I'm trying to figure out how much of India is going up and then if you could give at least some partial direction on how much of the MD growth is acquisition related.
In terms of the auction as a percentage of the T. a branded hotel I said, it's a it's a large majority we're not breaking it out but it's a large majority and shred it was pretty some percentage on it and directionally she's correct in thinking it's a large majority of that business.
In terms of yeah, he Andy inorganic contribution so we made two acquisitions.
Last last year, a standalone businesses in a in 29 team.
They created about 50 million five zero million dollars of revenue.
With flat, but bottom line is with no profitability.
The component in Q4 of our Q4 financials was very de Minimis. We made these two acquisitions at the very end of of the year at the end of December and so it didnt have a meaningful impact at all on Q4.
Going forward, we're looking at these two assets as.
Incredibly powerful contract.
Add ons to the overall dining business.
As a standalone businesses they were actually growth challenged but we think we can reinvigorate that on top of our platform.
And it's going to be a part of what we do next next year organically as we have said a number of times. We also believe weekend.
I mean, if we continue growth were in parts accelerate the growth that we've seen before.
Okay and one other clarifying question what other than auction is in a trip advisor branded hotel just for clarification and then my second additional question is if you can you go back over the last it's about two years you're in the margins.
Kinda fluctuated wildly and they seem to correspond with.
The inverse fluctuation in your hotel weapon.
Hotel margins.
Have you done anything to change over the last couple of years your attribution marketing between those because obviously someone comes into your side because coming in for multiple reasons.
It's somewhat subjective what they're coming.
First part of your questions about a that line of hotel revenue two main components auction at the other is hotel b to B services, which split between subscription services as well as sponsor placement services. So hotel b to B is the other component there.
There is there's been no reallocation of expenses over the last years, we're marketing expenses between the segments. So thats not a driver.
The core there's no the correlation that you're identifying I don't think is there there have been very specific reasons. Why are you Andy margins came down over the last year to now up again, and we talked about that in significant investment cycle. We've had over the last two years is specifically in our experiences business business and a shift from supply growth to demand growth now in the upcoming yeah.
Sure.
This is Steve if you look back I, we had wanted to diversify our business over the past five years and with our acquisitions of Lafourchette and by a tour. The subsequent set of acquisitions.
And the investments that we put behind them at the expense of margin over the past several years you can see that.
It paid off pretty much as we had looked for in terms of rolling the overall.
On it and so now we're sitting here.
Yes, with the hotel auction, that's challenged but a growing hotel viewed to be business, a growing media business, a growing experiences business a growing restaurant business as we.
Successfully with still lots more to come but successfully moved the core focus of our overall business from hotel auction to a much more diversified and growing set of segments.
Our next question.
Sorry, her last question comes from James.
With Mizuho Securities. Your line is now open.
Great. Thanks for taking my questions earns just want to follow up on the contribution of an acquisition.
For the restaurant reservation business is it fair to say that the additional contribution is in line pretty much what the growth of the restaurants supply they added.
On the acquisitions here and it also for Steve I think over last couple of quarters, you've been speaking very highly of your news feed product I was wondering any new learnings there any new improvement until features you plan to ask for 2022 increase.
The engagement of Oh travelers on your website. Thanks.
So to your first question that math is probably too simplistic that you have I've outlined it is going to make an.
A contribution as I said these assets Standalone have been growth challenge, but we can integrate them into our platform is going to be somewhat difficult going forward to fully tease apart how much the acquisitions have delivered and how much we've done with it as part of our overall platform, we see acceleration of growth in our overall in the line. These acquisitions are going ahead.
Yeah.
But also other lines organic growth lines, we see very important opportunity as well.
And this is Steve the list is quite long in terms of additional product enhancements in 2020 to help drive engagement.
We talked a lot already about members, we talked about new App experience, you talked about better able to help the traveler planned out and save all the different things that are looking to do and present that in a more convenient way and enable travelers to share that with with their traveling companions all in the engagement.
Category to the the feed question, though that we had launched the future still there everything's to gets posted it helps and different types of content contribution we like all that it's just kind of one of them. Many things in 2020 that we expect will be helping to drive engagement.
And at this time I'd like to turn the call back over to CEO, Steve Kaufer for any closing remarks.
Terrific. Thanks, everyone for for joining the call with us today.
In closing, we're executing on our plan and I look forward to updating everyone on our continued progress next quarter. Thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].