Q2 2020 TripAdvisor Inc Earnings Call
Good morning, and welcome to trip advisor second quarter 2020 earnings Conference call. As a reminder, today's conference call is being recorded at this time I would like to turn the conference over to Tripadvisors, Vice President of Investor Relations Mr. well Lyons. Please go ahead.
Thanks, Karen good morning, everyone and welcome to our call. Joining me today is our CEO, Steve copper and our CFO for its kind of it.
Last night after market close we distributed and filed our second quarter 2020 earnings release. It made available our shareholder letter on our Investor Relations website, located at IR Dot Tripadvisor Dot com.
In the release, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call.
Also on our IR site, you will find supplemental financial information, which includes reconciliations certain non-GAAP financial measures discussed on this call as well as other metrics.
Before we begin I'd like to remind you that this call may contain estimates and other forward looking statements that represent management's views as of today August seven 2020.
Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances.
Please refer to our earnings release as was our filings with the FCC for information concerning factors that could cause actual results could differ materially from these forward looking statements.
That helps called <unk>.
Thank you will and good morning, everyone. Thank you for joining the call.
As you saw from our results and described in our shareholder letter that we posted last night.
Second quarter was one its historic proportion given the impact to code Cobot 19 pandemic is having on our business in on the travel industry.
Significant year over year impact persist well be on courage like gradually improving trend since April.
Monthly unique users on Tripadvisor sites progressed from 33% of last year's comparable period in April to 60, 70% of last year's comparable period in July.
Revenue improved from 10% of last years period in April and make to approximately 30% of last year's comparable period in July.
She won't Q2 was challenging we have emerged from our industry's darkest updates.
I remain confident that won't make take time to be on the even along the way it will eventually slowly which are.
In the meantime, we're executing well on what we can control streamlining our operations to preserve cash leveraging or platforms differentiated strengths to help customers and redoubling, our strategic efforts to trust future opportunities emerge from the strong position on the other side of this fantastic.
Now before turning the call over the aren't.
I want it again extend thank you to all frontline workers medical professionals, the everyday heroes, working hand, or local grocery stores or delivery services.
It's more employees I'm grateful for your tireless hard work during this difficult period.
Do you have demonstrated the books your talent and your resilience I'm pleased with how we have come together to execute on our important initiatives that serve our stakeholders.
First.
Thank you, Steve and good morning, everyone in the face of this unprecedented uncertainty during Q2, we took swift and concerted action to preserve cash and maintain our solid financial position.
First related to expense management, we are tracking in line with a targeted discretionary and workforce related savings levels that we discussed with you three months ago.
I'll note that these cost savings I'm about to reference do not consider depreciation amortization restructuring and related reorganization costs as well as stock based compensation.
So specifically our expenses were $104 million lower in Q2 compared to Q1.
53 million of this was due to variable cost, which came down roughly in line with revenue and $51 million was from savings from previously announced discretionary and workforce related cost measures. We expect annualize savings will be more fixed discretionary and workforce related costs.
We'll be in excess of $200 million this year versus 2019.
Positioning us very well as we entered 2021.
Variable costs are expected to be lower this year as well driven by reduced marketing spend and lower expect revenue, but it will go up again as revenue recovers.
We are executing as a leaner and more fully focused organization now and we're pursuing our highest business priorities. We believe the steps we've taken position the business for better flow through as consumer travel demand returns in a revenue recovers.
As for liquidity, we had close to $700 million of cash at the end of June.
And in July we completed a 500 million dollar a bundle. This offering has provided us with launched a long term debt capital and together with our credit facility ample liquidity to withstand even prolonged cold but scenarios.
We believe our actions to streamline operations conserve cash and raise long term debt capital half the business appropriately capitalized now and positioned for covenant compliance even in the event of a prolonged downturn.
Looking ahead significant year over year impacts persist and near term visibility remains low that said, we expect revenues revenue declines will improve and EBITDA loss to narrow meaningfully in Q3 versus Q2.
We remain cautious, but we believe we have taken the necessary steps to ensure we can emerge from this can dynamic and solid financial as well as strategic shape.
With that we will open up for your questions.
Thank you to ask a question you need to press star one on your telephone to withdraw your question press the pound Keith.
We ask that you limit yourself to one question and one follow up and then re queue.
First question comes from Deepak Mathivanan with Barclays. Your line is open.
Hey, guys. Thanks for taking the quest and Steve.
I understand that it's still an early days, but can you talk about how user behavior is different in the new home page what products are getting more traffic and is engagement different too.
One product versus the other compared to the prior experience and then the second question as you mentioned in the latter that you know the traffic in European markets recover faster than U.S.. Obviously, you asked was all lead to reopen in many states and many European nations are still in that reopened mode right now.
What do you think the traffic or I can vary you note was driven to be faster in Europe for you is it a function of product mix in Europe more towards restaurants attraction.
Can you provide a little bit additional color there. Thank you.
Oh sure do you guys. Thanks for the questions Hi, so to start on a on the home page look were.
As we've talked about our overall message of helping travelers on the considered trip you know what trip that really matters to people we needed to move the focus away from Hey, It's a hotel price comparison side. We're just review site to really focus on a little bit of inspiration.
A little bit of guides little bit of more personality on the site showcasing all the different things we do so yes, we did see.
Some shifts from from categories. So away from things like flights, it's a small piece and more towards the overall exploring geography is the nice thing is Oh, we saw an immediate uptick in repeat rate people that team in on the home page were more likely do come.
Back because the experience was just better.
Hi categories shifts beyond that.
Probably more related to hold it in terms of the type of trips that people are taking our clearly much more domestic they tend to be shorter duration and they're moving away from urban centers and towards.
The outdoors the beach the.
Places, where social distancing, it's so much easier and that's I think that's probably less our home page. We design then obviously the circumstances around us.
To your second question the European markets recovering faster than the U.S.. It's all about safety. Our surveys are showing this when travelers feel comfortable that they can go somewhere they will soon European markets or opened up because caseload frankly, the chance of contracting the virus. So.
Much lower people are feeling much more comfortable traveling hi, hi, the U.S. has not been shining in that regard and so while we had opened up early or not locked down as hard we're paying the price now in terms of cases on the wise and so many states and that's put a damper Oh my.
Meaningful damper on the the travel rebound Oh post initial outbreak so I.
Oh, no surprise I think you'll you'll see a very uneven recovery different geographies, mostly depending on a case loaded and where the hot spots emerge.
Got it thanks, Steve.
Thank you. Our next question comes from Brad Erickson with Needham and company. Your line is open.
Hi, Thanks, just a couple from me sort of first relative to the improving traffic levels. You gave a into July the revenue declines are obviously lagging that somewhat just curious if that's a gap you expect to meaningfully narrow as early as they Q3 year Q4, or do you expect those two items to remain.
Pretty far apart for the foreseeable future into next year.
And then the second question. It's just when you think about call. It medium term priorities is the goal to of the business right now to drive a rebound to revenue as fast as possible or is it getting.
I'm going to be citing more was getting back to profitability or a combination there I've just talked about your philosophy here in the medium term. Thanks.
Thank you Brad this is Ernst good morning.
First of all on the lag between traffic and revenue that you identify yes. Indeed, we see that people are going back to our sites to.
To look and investigate travel ahead of the actual conversion, which is is down from a from a year ago and that is quite natural if you think about it people start to look around and.
Our waiting to get comfortable to book and so I think we will throughout the year, we will see a lag between these two two indicators, but traffic is a leading indicator.
People are coming back now.
And the improvement has been.
Significant since since April may as Steve said in his opening remarks that has a good sign and leading indicator how quickly that gap will close is really difficult safe for us, but we're anticipating that gap will remain.
For awhile, but hey revenue has improved 10% April may.
Versus last year now, 30% in July so where we're taking that.
In terms of medium term priorities of course, we're focused on making sure we're ready for us for a recovery and we're able to serve.
Consumers as they are getting more willing to travel and book.
But we're also focused on the priorities that we have before when coated.
Finally is it goes away and we want to come out of this crisis, a stronger than we were before.
We've highlighted in our prepared remarks, and our shareholder letter some areas member investing not surprisingly experiences and died not surprisingly a working on our one trip advisor experience working on some new revenue streams that we've identified on the more on the direct to consumer side.
So we the team is fully focused on that.
Trying to capture both revenue recovery near term and and our long term opportunities.
Got it thanks.
Thank you. Our next question comes from four Lloyd Walmsley with Deutsche Bank. Your line is open.
Hi, Thanks for taking the question going back to the kind of craft revenue recovery gap.
You are you seeing are you seeing commercial engagement lag or is it also a function of advertisers being slow to come back and are there anything you can do to kind of steeped in the bid curve to get them bidding up again or maybe maybe even using your in booking path to monetize traffic if it's advertisers aren't willing to pay.
Hey, what it's worth and second one would just the to the extent you can if you can give us an update on.
Some of the July trends on a segment level any anything you can share with us across some of the various segment.
Hi, Thanks Lloyd this is Steve I'll take the first one I.
Hi.
So as a pandemic kit I, it's pretty obvious to everyone that cancellation rates on the downstream bookings that a that we're providing to our partners would spike as people change so.
Hi.
The recovery of that where people are now booking.
And our clients are not sure whether the cancellation is going to happen naturally causes our clients to be nervous about paying top dollar if right now on a CPC basis. If in fact, a user is going to cancel so yes, I surmise that it's rational behavior.
In this unknown period for.
For Cpcs for what we get paid.
To lag as bookings recover.
We believe as our clients.
I see the trends of consumers staying after they are making the reservation and fulfilling its actually taking the trip then they'll be more confident that the cpcs. They pay us will in fact be turned into profit.
They're side at which point Cpcs go up in our auction and it comes kinda back to back to where things were.
The question of but with the sub question, Hey, could we use our own instant booking as another way to leverage the auction, yes, we've been doing that during this pandemic.
And we.
Enabled us to.
A team continued to deliver for our traveling the song on all the.
Bookings up they want to do even as some auction players routine has to step back in the auction you know back in April for instance.
Earned.
Yeah on the second question you had the July trends on the more segment level.
The the areas of the business that are recovering.
The fastest or head into in the recovery for us our.
Our restaurant business, the Fourq reservation business, which has performed very strongly in.
The Oh in wake of of restaurants opening in Europe, and so that's clearly the ever an area, where we're ahead right now a rentals is another area that has performed relatively strongly compared to others segment level. Obviously, the fourq will hit our experiences and dining segment will benefit our experience in dining segment.
Rentals is in our other segment.
Tells comes behind that.
And that's obviously in our H. him in P. segment.
And then experiences which has seen very good.
Traffic recovery, but not yet the the booking recovery that we've seen in other parts of the business that that will also hit experiences in dining so within experiences dining there was a bit of a to track in terms of recovery with restaurants ahead and and experiences behind.
Okay. Thanks, guys.
Thank you next question comes from Niveen keen with Trust your line is open.
Yeah, Thanks, a lot.
Two questions.
Hitting about consumer demand doing a much heavier towards alternative lodging.
During the recovery, how does that affect a korean yards, which I'd auctions.
And then secondarily expedia talking about boosting advertising efficiency and performance channels, how does that are factored into.
Okay.
Oh, thanks to be Guy.
Sure. So yes is we're saying alternative lodging or for rentals has been faster to recover than hotels. It. So smaller part of our overall business. So we were.
Less benefited by that by that ship, but of course hotels.
There are on the rebound out with and we'll continue with the absolute Lions share.
Of the lodging market space.
So the question.
Hi.
Oh I'm sorry, the second part of your question was.
Hi.
Well he has a.
Change off and efficiency targets and how that might affect.
Yes, so we've seen.
Our major OTI a clients.
Talk about wanting to be more efficient in their direct marketing spend you know for years and years, what we've always found is that there.
They're interested in buying high quality traffic traffic that converts on their side and that's what we've been known for we've been doing this for quite a while our partners.
At that were pulled out of our auctions we've been.
We have strong relationships with all of them.
And that's been a win win for everyone.
Certainly understand or clients desire to.
Only a win over the consumer to go direct to their side, but at the end of the day trip advisor does so well we had a leisure trip the trip that matters to them that tends to be a higher price point, then hey, I just I just need to a roadside hotel next to my next business meet.
Thing itself.
So you know the type of traffic that we have is pretty hard to find anywhere anywhere else. It's an auction. So it requires lots of people to play Unfortunately.
We do have a chains, we do have.
All the major into days in most of the second tier 30 protease on the platform as we always have been so there's always some ins and outs there but.
But I'd characterize the auction is healthy and currently responding to it.
The change in cancellation and truly just.
Coated dynamics.
And maybe maybe a really good question, Steve So oh.
On the on the new what that offering the dependent on typically.
Is that a display advertising photos or that often focus how should we think about it.
But we have a larger and sort of meaningful hotel solutions business, where we're addressing challenges word helping individual hoteliers and hotel chains reached the eye balls that are on our site.
Help them grow their business, we have another product coming.
It is truly aimed at the the million plus lodging.
Leveraging the the traffic we have the reputation.
Let me provide for these hotels and their ability to put more heads and beds. So I wish I could be more specific but but you'll learn soon and again just think of it as another product in the product line and as we move forward.
Look to bundle a bunch these products together to help hoteliers in.
More ways.
I guess in the way we report revenue will hit the yet the hotel revenue line not the north to display and corrects line.
Got it.
Thanks.
Thank you. Our next question comes from Tom White with D.A. Davidson Your line is open.
Great. Thanks for taking my question, maybe a high level one.
Are you, Steve I'm, no or a few more months into the pandemic just curious whether you think the situation here, it's gonna have any kind of lasting impact on.
Some of the traditional hotel food chain. If you will specifically curious whether you think larger hotel chains kind of emerge on the other side of this thing and it's stronger market position relative to the independence and small chains and and how does that impact.
Definitely trip advisor and then just a quick follow up on monetization or the auction.
I think one of your peers is expanding with a C.C.P.A. offering.
On top of CPC offering is that something that a that you guys have considered why or why not.
Thanks, Tom I two good questions there so I.
And this is oh, so it's just kind of.
Personal opinion I guess when when you look at the growth in alternative lodging rentals at the moment I think it is an opportunity where a lot of people are trying that alternative for the first time, so there's probably post pandemic a little bit of an accelerated share shift in the lodging category.
And some more the alternative.
Launching pieces and trip advisor like everyone else is a is looking to kind of grow the selection not on our site I think that's a bit more on the edge is when you look on.
The chains versus independence.
We we spoken with a number of independent Theres, certainly struggling the 10 or whether they're a franchise.
Owner or.
We're truly independent getting demand through these tough times it's.
It's really tough and so when we look a bit further out and say who might not make it through the cycle obviously the.
The chains will some of the Indies may not in so that could tilt the balance a bit more towards the chain as it relates to trip advisor I don't see any particular impact in that we serve the.
Our travelers the biggest lever for the growth of our overall business is getting more quality travelers to return to our site and figure out where they want to go and it did frankly doesn't matter all that much to us whether that's in India franchise owner or.
We're fully change though.
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All right to the to the question on the auction CP.
We've had a variety of deferred payment mechanisms for for many years. So we call our model a traditional CPC.
People pay on the clip but.
But we've certainly had CPGA in Hep C.P.A. as an alternative method, where it works for the clients and where it works for us normally clients prefers cpcs. So they can directly control and.
Where they sit in our auction, but in major uncertain times like we saw.
A month ago, I'd say, it's easing now, but whether its major uncertainty and acclaimed doesn't want to take the risk of bidding at a CPC level, but is happy to pay on a C.P.A.. We can certainly accommodate that have accommodated that as well so nothing fundamentally change our auction just ships alone.
The the risk around.
If the cancellation happens is it.
On trip Pfizer's dime or the client dine in exchange for a more control over auction placement I expect that for us and perhaps for others that will end up slipping back over over the next few quarters for clients that are on SCPA now to move back to CPC, but.
We're we're modestly in different dawn on our end.
Great. Thank you.
Thank you. Our next question comes from Schalit Korea with RBC capital markets. Your line is open.
Okay. Thank you.
Steve what is your view on how differently trip advisor will be position post go but not really next year, but call. It a couple of years from today is similar to your current strategic investments come to fruition. So maybe the companies that are positioned in terms of product offerings. The companys ability to engaged users that are maybe input costs.
Or company something else altogether, or what do you think will be will likely be.
The most impactful change related to trip advisors positioning first go but a couple of years from today. Thanks.
Thank you wish Atlanta for Oh for that question I, we're investing quite a bit right now in changing the way that trip advisor, let's goes to market with our offerings, but also how.
How we're actually serving our traveler. So you know in our shareholder letter kind of we outlined I or at least three of those points or part of the most consumer focused.
Or one trip advisor vision really talks about how we're changing and you can see then or homepage already changing how we're hoping travelers plan a much more complete trip focusing again on those trips that matter and that's something a unique in the industry you don't have.
ER or the other travel sites thinking holistically about what's going to make a fabulous vacation. This not just the hotel it's not just the flight it's the things you're going to do the place since you've been eat the guide the new experiences you can find.
Anything memories the.
The the opportunities to really experience that destination.
And because trip advisor has so many of those components already on the site with a ton of photos tonic content great forums, you wonderful community to help guide you or opportunity is to bring that together for the travelers in a way that weve never done before and would certainly be really difficult for any.
One else to to try to reach so I.
Aiming for that trip that matters.
The vacation that your tweeting memories for bringing our content together kind of 0.1, we want you to experience that you want you to fall in love all over again.
Part of that comes into.
As where we were known and make most of our money historically on hotels, how do we shift that over to the experiences category in particular on trip advisor because it is such a compelling part of making that trip memorable what's the amazing thing.
To do and so sure we might sell some airport transfers and.
And then into ticket to museum, what we care about is the story worthy experiences. What did you can have returned from your vacation and really explain to your friends Wow, Paris was amazing because and you know share that experience that you book, where did you find that.
Experience I've looked at on trip advisor and that's that that that's that word of mouth. That's that component that we're looking for to grow our experience and dining segment for as Youre as part of that considered trip.
And then third I Oh.
I'd be remiss, if I didn't touch on our direct to consumer.
Paid offerings. So here, we're looking at the hundreds of millions of travelers we have on her site each and every month, even in the middle of the pandemic.
And we're thinking to ourselves what are the other products and services that we can offer directly to them.
Helping them plan the trip take the trip get a deferred experienced deliver something of value to them and we've launched two already one was.
Insurance product in partnership.
And so it's a insurance for the whole year as opposed to just this one trip something were pretty good position.
To offer another is.
A community of expert trip designers, so as us almost an agency service for someone that doesn't want to do it all themselves. It's a great product to be able to say.
I'd like an x. I'm going on vacation I'm going to go on a a trip to Hawaii I'd love to be able to talk to somebody who's been there likes the things I like and it's a great matchmaking service you can certainly find more about the product.
But just as an example, it's two services.
Direct to consumer paid offering leveraging the traffic on our side and as we've shared in the shareholder letter. It's the first of a set and what we think it's a potentially large opportunity in terms of tapping into the travel audience that is already on our site with the news.
<unk> products and services to help them have those magical trips and so.
Stacking all the way up when we think of emerging from the pandemic.
Vaccines available for Lookout, 2022, and say what makes trip advisor really differ than.
Pre cobot times.
Folks on our site or playing a complete trip, we're helping them at different stages. The journey. It feels like a more integrated experience. That's the one trip, but sort of version experiences are a lot more prominent more story worthy were merchandising then we're really helping you find what is perfect for you on this trip.
And were surrounding you with another set of direct to consumer or.
The paid services the trip designers to help you plan insurance or Neil several more that we'd love to bring to market that.
Help you in one way shape or form.
Have a have that perfect.
Thank you Steve that was helpful. If I may just could you. Please expand on B to C. I did read into shareholder letter you their subscription or other direct to consumer paid offering so what would this be.
A subscription product how do you plan to monetize.
This offering going forward.
Sure So I mean.
Happy to expand a bit super early days of course.
But we haven't paid insurance product. It's you know I forget the exact price call it $130 a year and we're offering you coverage for all the trips that you take and you can find that on Tripadvisor, we contextually market. It where we think it's appropriate and it's great product. It's it's actually kind of hard to find somewhere else we didnt.
Build that one we're not getting into the insurance business ourselves, but we're trying to tapper audience.
The consumer is a is buying it through our sites so.
Direct to consumer more meaningful.
And more in line with.
With our brand, but again.
Well, that's not a great time to launch any new product, but we launched anyways is our Ah.
Is our WRECO product in this you go through a process to indicate what type of tripped you're planning to take we offer a match to a number of different travel agency or travel agents. We told them trip designers that are great at this sort of.
A trip and we have a monetization mechanism that's.
Essentially matchmaking, the so with consumers will put in their credit card, though.
By the connection the travel agent is.
At their disposal and it's a great match, so again a bit more on the luxury end, but a lot of people don't want to spend the time that they know they should when theyre going to be go to when they're taking a couple of thousand dollar vacation and paying a.
Hundred dollars something upfront fee to get that level of expertise to have that magical trip. We're in a wonderful position to provide that service you can extrapolate further and say.
Hey are there guide the trip advisor could offer.
That had specialized information that was so valuable that someone would would would pay a 20 dollar subscription or 20 dollar one time before you can imagine other programs that could get exclusive but seats exclusive benefits exclusive something rather than.
Got you as a consumer would be willing to pull out your credit card for so there's less content angle, there's a discount angle there say.
Benefit exclusive benefit angle there is.
[music].
The higher end concierge level service while in market.
My point is mostly we have this tremendous audience bigger than any other travel sites that are self qualified by being on our site as being interested in having usually.
Great trip, a trip that matters to them how are we.
How what are the set of services.
That we can offer that can't that someone we'd be delighted to pay for it because they're about to take the strip and and it's going to make it that much more special.
We share now because we've actually launched a couple of products in this category, we're thinking thinking a bit as the category.
[music].
And of course will be sharing more as.
As we launch.
Very helpful. Thank you Steve.
Thank you. Our next question comes from Jed Kelly with Oppenheimer. Your line is open.
Great.
Thanks for taking my question interesting on the direct to consumer offerings, you're thinking about just a follow up I.
I guess can you kind of site.
If you know like what the tradition, what the commissions earned from traditional travel agents is bad. It is there an opportunity to get more through that transaction was a direct to consumer offering and then my second question is just around the alternative accommodation providers seems like they.
Ben leading the recovery in travel.
Is there a way how do you think about sort of getting that more engaged on your platform. The verbose. The RBS I mean, how how do you think about that thank you.
Hi.
Sure. So I looked at the to your first question that traditional travel agent, it's still a big market. There are commissions on all the things they book on behalf the traveler.
Their model is moving from a completely free in some cases to an upfront fee in other cases were reasonably agnostic on on the revenue model. We just know that as in whether we charged in upfront fee to do this matchmaking service, which is our current model.
Or whether we're through another mechanism tapping into.
A piece of the commission.
Designer or the travel each added is doing the hard work of really figuring out what the traveler. Once we simply recognize that we have amongst our pre co Libya 400 million unique users a month on the site.
Some small percentage, but it's still going to be a big number of those people would really be much better served and would love to be well served by a trip designer. So how can we help our traveler.
By presenting the best trip designers and then whether it's a finders fee or piece of the commission. There's there's a big transaction that's going to happen, we'll have kind of earned a piece of it by by making the connection that trip designer is going to be.
Recommending obviously hotels that are amazing on trip advisor, but also bookable experiences on trip advisor because that's what those types of considered trips want to do.
We're not we wouldn't be requiring a trip designer to book through us, but why wouldn't they because we have fabulous supplies. So again it.
It drives back to how.
The trip advisor offering focusing on that considered trip whether to do it yourself person on our website building out nitin, where rebooking things independently or a hand off to an agent who is going through those same steps for them. It's a nice way for us to capture a bigger portion of the market rather than.
Someone who potentially is using trip advisor and then contacts and age and offline in which case, we we lose all credit for for those bookings and lose all influence in terms of.
Helping to guide them to the to the best experiences that are offered on trip the best restaurants that are offered opera.
To your second question on a.
Rentals I.
I do think that alternative accommodations in general.
Was an important category is an important category and we'll continue to grow as a category that is important to our travelers. So I.
We will not be building up our own supply we will not be focused on trying to engage is what you could say is yet another vacation rental player in the space, but rather be partnering with.
Other firms that already have established relationship. So that we can focus on what we do best which is bringing a tremendous audience looking for accommodations and yeah, and our our secret sauce or magic in the equation or value add is.
Help understand when a travel it would be better served by an alternative accommodations instead of the traditional hotel and make sure that is whats centers. So.
Think of it is how can trip we think of it is how can trip advisor has the best supply in that category without investing more being in the supply business.
And therefore.
Leveraging our demand for which we still have a ton of and we expect to.
To be back and we are back in growth mode now well as were recovering from the pandemic.
Thank you.
Thank you. Our next question comes from Brian Fitzgerald with Wells Fargo. Your line is open.
Thanks, guys Steve.
Wanted to try to sell anew generally when consumers travel closer to home.
We think you tend to see shorter durations less expensive accommodations versus when they travel are there is that a valid point, but are you seeing things change near term with more local travel coming back first replacing bigger international trips.
Our the consumers trading up versus what you would normal quarterly ordinarily see in the shorter trips in terms of ration or property class.
Anything you could.
Well, it's about propensity to spend would be helpful.
Sure I can offer just sort of a couple of nuggets.
Absolutely the trips or are closer to home international.
Waters shot so.
You have some countries, where we're actually seeing year on year, the same or even more domestic travel than before I don't know that that's a long term trend versus hey, I can't take that international trip. So I am.
Staying within my country.
[music].
The trips in general are shorter so you're right there and when we look at 80 hours versus a year ago. They have dropped at least the.
Stay on trip, so sorry, not technically what I'm, referring to is not technically average daily rate, but.
The amount that the user.
Is looking to spend on our site is down versus a year ago, and so that it mdrs could be up but the trip stake could be shorter I don't I don't have that level of detail at my fingertips, but the overall spend on the part of the traveler is down.
Year on year.
And then are they are they willing to spend more on.
Low, but just sleeper sleeve inventory comparison or are they are you seeing them that price elasticity are they willing to spend more for.
Vacation rental in rural areas this year versus that same place last year.
Good question I don't have in answer to that I do know we are seeing more vacation rentals in those world locations being booked than previous year again, no surprise there as people look for space and then try to avoid the big cities, but I can't give you would.
The point on price one can just no yep, okay. Thank you and it's tough to.
To know, how that's going to play out but it could be indeed as yours are speculating that just budgets to shift.
In a different way spending domestically, we're spending more domestically. There's one thing that I wanted to point out, which I think as is going to be obvious to most of you.
One impact is people are taking trips by car more than the did before and pick fewer flights I just wanted to point to point out that.
We a trip advisor have never been really dependent on a flight revenue. So that's that particular trend is not impacting us as much we made about 2% of our revenue last year was impacted by flights, it's a pretty small slice of it.
As I piece that part of it of the shift people tickets your flights as not impacting us that much.
Thanks, Steve Thank you aren't.
Thank you. Our next question comes from Heath, Terry with Goldman Sachs. Your line is open.
Great. Thank you very much Steve as you.
As you look at the opportunity on the other side on the supplier side, obviously, Chris trip is.
Almost equally if not more important too to suppliers.
Hotels to operators.
As you are to your consumers that use you too to plan there their trips as your evolving the.
Offering and creating these new offerings for people, who are finding their trips anything that that you're looking to do or any opportunities that you see in this environment to deepen your relationships with suppliers directly create more direct revenue opportunities with those suppliers either through new offerings, new technology investments in those areas, but.
That you want to see made.
Hi.
Yes. Thanks.
Thanks for the question I as I alluded to we are kind of launching a new product. This quarter that is aimed directly at.
Hoteliers primarily targeted at.
Indies or sort of GMV.
Of properties looking to leverage their reputation their prominence their.
Ability there their status on trip advisor to help turn that into.
More bookings for them to get to get more demand. We think our current suite of demand based products the ability to buy and I'd only add business advantage subscription with your phone number you where else but also.
Our sponsor placement offering of being able to.
Yes.
Yes, the top of the of the hotel list to be able to pull more traffic pull more the eyeballs to individual properties is pretty compelling as individual properties seek to move demand for route.
We have some other.
I'll call it somewhere in between ideas and plans.
That we feel could be more meaningful for.
For our supply relationships, none of the okay level, but at the individual property in chain level.
But those are a bit further off and of course will.
We will share when they're closer to coming to fruition.
But.
I only.
Give me the teaser or I mentioned in passing only because we are.
Quite aware and feel like part of our financial success is dependent upon hoteliers looking to us as a great source.
Of both high quality leads and incremental demand that they were not otherwise going to see and one of our best assets remains the traffic that we have on our side highly qualified traffic and our ability to to bend the demand curve on behalf of hoteliers if they have.
Property that are interested in eyeballs that are on our site.
And so yes, we do have more offerings pointed in this area.
And just curious if you I mean it is the end result of that or is the goal there.
Diversifying the revenue side of things so that.
Trip advisor exiting this environment that we're in right now is sort of less dependent on the OTA partners that you have now it more have.
In a position to have sort of a broader more hopefully more stable set of revenue streams coming out.
Hi, Yes, I also.
Yes, what what you say is true I, just you would more as.
As we like all companies Seo search for our growth opportunities, but are the assets that are unique to trip advisor and having the reputation we have the number of customers and how do we travelers and and how do we best serve them and then.
And that's the trip that matters is bringing together the consolidated.
You have the travelers to help them plan all the different aspects, which is from our perspective will include matching them with.
The right experience with the right restaurant.
The right hotel and therefore on the supply side, helping those hoteliers experiencing restaurant operators get access to those travelers in a way that.
It is essentially ROI positive for them and so that matchmaking capability at.
It's a stretch to say one to one level, but.
At a level that's mid true, that's providing any measurable incremental benefit to our suppliers.
We think it's a great place for trip advisor to go it doesn't happen to be the auction, which is dominated by the OTA is but of course, we love that auction and the more our overall strategy succeeds in terms of bringing more people back to trip advisor for the consider trip the regular.
She is going to benefit the individual hoteliers, both bidding for incremental demand in the auction as well as all the other products, we offer as well as our experiences business like it all benefits as more travelers come back, but our focus is much more around the an auction revenue streams.
When when we think about the supply side of the house.
Great. Thank you see.
Thank you next question comes from Doug Anmuth with.
P. Morgan your line is open.
Good morning to Safavian for Doug. Thank you for taking the questions first phone for you Steve just looking at your experiences businesses are experiencing business.
Sure. So five is holding up given the slower pace a recovery there and whats tests are you taking to ensure that you have.
Hi, once consumers come back to Experis, It and then to maintain your leadership position in this vertical and the second loan for ours.
Looking at margins as the pace of recovery occurs by segment revenue mix likely at the front during the recovery.
Think about the shape of recovery relative to revenue and then looking out longer term fusin margin kind of the front.
Compared to free coffee 19 levels, given the introduction of newer products like the CMBS B and maybe the revenue mix looking different.
Thanks, Dave I'll I'll take the first one I.
We have Oh jeez at last count was north of 300000 different products selling their experience space no one individual product was.
So import or so compelling and if you think about the types of experiences offered theres usually.
Multiple choices. So we have a number of people that provide amazing.
Probably the tours of Palm pay for instance.
That's great. Unfortunately.
We would predict that some of our current suppliers aren't going to make it through the pandemic.
But it seems to us unlikely that.
All of the suppliers in a particular category will.
We'll go out such that we won't be able to provide the choice that are travelers are looking for so at at the end of the day it would be.
Yes.
We feel the pain. It's terrible thing you have already experienced players go out of business, we don't think many.
Oh, you know the bigger establish ones will from conversations we've had.
Right.
But I'd be surprised if that had a material impact on or business simply because we have so much supply already on the platform and there so often.
Multiple choices for any individual activity on our site such that if one is no longer able to participate.
There's.
Theres a backup player. So I think we're we're fine in terms of the supply in addressing the demand that are travelers already have site.
On the point of up margin recovery day I.
I think the most impactful.
Issue here is that we've taken a substantial amount of upper fixed and discretionary cost this year, which we don't plan on bringing back as the revenue.
Recovers or only.
Bringing back in a in a small way.
And we've quantified it's going to be 200 million plus.
Of cost fixed and discretionary cost that we've taken out year over year by the end of the year. So that's that is significance as revenue comes back we will have.
A leaner cost structure.
To support that so that alone.
If revenue comes back the same level. It was in 2019 is going to give us better overall.
Margin in the future.
And then within sort of segments and other pieces I think generally variable cost.
Anything between sort of.
Revenue in contribution margin.
Not really going to change that March.
We don't expect.
Our longer term or take rates to to to be impacted in any meaningful way. So.
Think about contribution margins at some point getting to the same level, but with a lower fixed cost base and that's the lowering of fixed cost has happened across all segments not particular to any 20 segments. So what should be benefiting or whole segments really longer term of course.
We have seen that we have had enjoyed high margins in.
I'm tells me and platform.
Target to continue to have very high margins, there, but then experiences and dining we've always run sort of around breakeven.
We continue to invest in that in that business, but if you look over a longer term years ahead.
We would expect that deserves to become more profitable too and so if you look longer look longer out more profit contribution.
We expect to come from from experiences and dining as as the most important mixture, but as I said nearer term next year or so most impactful thing that we've done has taken a.
Hello fixed cost.
Great Thanks vertical or both.
Thank you. Our next question comes from Kevin Kopelman with Cowen and company. Your line is open.
Great. Thanks, a lot.
Most of my questions have been asked the I'd have one follow up could you could you give any color on.
On your efforts and kind of vacation rental and alternative and just a little bit more color and how I you've seen.
The growth in demand for that category pull out on tripadvisor. Thanks.
Sure Thanks, Kevin Hi.
So we did.
Rentals in restaurants are the two categories that have been bouncing back the fastest.
As people were certainly worried the most about social distancing think a month ago.
Rentals was the clear go too.
Yeah, that's from our perspective, that's very much pandemic related.
We're stronger in a traditional rental setting.
As in Standalone home in a.
In a more rural or beach type.
Environment, So again.
Pretty predictable given a co bid, but not necessarily a.
Harboring or of long term change in terms of consumer behavior. So as I mentioned before were.
Mostly interested in expanding our supply through partnership through direct outreach to address the traveler demand that we have on or site do better job integrating this is.
Next year not immediate.
Integrating alternative lodging into more of our overall launching sort.
But we're not particularly taking a pandemic view on it we're taking a this is.
It's been recognized as here to stay a great alternative to traditional hotel for many years and it's just part of our overall strategy of addressing.
Are helping travelers buying the type of launching that that best suits their need for that trip that matters and we recognize.
The broad category of alternative lodging absolutely plays an important part in that and we'll be there to that.
For travelers.
Thanks, Dave.
Okay.
Thank you and our last question comes from James Lee with Mizuho Securities. Your line is open.
Yes, Thanks for taking my question Steve.
I wonder can comment about.
Dotcom CEO, joining board and maybe help us understand them what are the implications here.
What can you talk comparing to the table and what can you learn from the company their backs.
Thanks, James Thank you for the question.
We're thrilled to have a couple of new board members.
Joining us this year, a great from a C tourists and chain from the trip Dot Com group by.
If you know them you know they both bring a wealth of travel industry knowledge from a.
Operational from a strategic and operational perspective in very different aspects of of the space.
Tourists.
Great personal experiences on the business travel and.
Travel agency side with his holdings, obviously knows the overall industry extremely well and Jane operating a top global okay with interesting global ambitions with their trip dotcom as well procedure points of sale. So.
I couldn't be happier having these to.
On our board kind of in our camp going forward and.
Okay.
Hi on your question on Jane in particular, you know, we've we've teamed up in our joint venture in China. So.
The trip Dot Com group can use our brand and trip advisor does see and to really augment the the.
The leadership position that see trips already has in the market focused mostly on outbound travel where trips advisors content footprint is extremely strong and so taking this content.
Nothing other crypto come group properties of the trip Dotcom group.
Operational excellence inventory pricing capabilities, bringing that onto the.
Or pieces of that onto the.
Trip advisor Dot CN point of sale, that's why we did the JV and that's why we think it's a great opportunity offering us.
Upside exposure to the China outbound market, which we had been missing as part of our story and then again as industry experts being on or board helping to.
Guide Us I love, having them up on or board. So.
Clearly one of those kind of win win with.
Wonderful opportunities.
Turning on a regular basis.
Great. Thank you.
Thanks.
Thank you and there are no other questions in the queue I'd like to turn it back to Mr., Steve Kaufer for closing remarks.
Terrific. So thank you everyone for joining the call and then just want to reiterate my thanks to all trip advisor employees all around the globe. You can this are doing an amazing job I'm really proud of how you come together in this virtual environment, but still we are pursuing our strategic objectives were so.
Putting all of our stakeholders.
In these in these challenging times.
Our investors I want to reassure you that we're working hard not only to recover from this crisis. This moment in time, but really to emerge stronger than before and as I outlined several my comments earlier, how does trip advisor look different than when we went into the in house.
It looks different than the pre coated the trip advisor pre code the times.
We always take this approach of of maximizing our long term shareholder value.
We'll get through this time and time again travel has rebounded and travelers have come back we will continue executing our strategy in the short trip advisor plays an influential role with consumers and partners worldwide in this recovery and beyond.
Thanks, everyone and they say please.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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