Q3 2024 TripAdvisor Inc Earnings Call
The New Year's Day
Speaker Change: Good day and thank you for standing by. Welcome to the TripAdvisor's third quarter 2020 Forward Conference Call.
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Speaker Change: Please be advised, but today's conference is being recorded. I've been now like to hand the conference over to your first speaker for today.
Speaker Change: Vice President of Investor Relations. Angela, please go ahead.
Angela: Hey, Felicia, thank you and good afternoon everyone and welcome to Trifid Biser's third quarter, 2024 financial results call. Joining me today are Matt Goldberg, President and CEO and Mike Noonan, CFO. Earlier this afternoon after a market close, we filed and made available our earnings release.
Speaker Change: and that relates to find reconciliation of non-gap financial measures to the most comfortable gap financial measure discussed on this call.
Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management views as of today, November 6, 2024.
Speaker Change: Tripod vibes a disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our violence with the SEC for information concerning factors that click call as actual results to differ materialings from these forward looking statements. With that, I'll turn the call over to Matthew.
Matthew: Thanks, Angela, and good afternoon, everyone. Our financial performance this quarter reflects the strong execution and operational focus of our teams across TripAdvisor Group.
Matthew: As we continue on our multi-year journey to transition from optimizing legacy offerings to scaling strategically focused growth drivers, we have the benefit of a diverse portfolio that we're managing for growth and profitability.
Speaker Change: For the third quarter on a consolidated basis, we delivered 532 million in revenue, flat to last year, and in line with our expectations. Given the anticipated headwinds in our legacy hotel meta offering, offset by healthy growth, at Viator and the 4th.
Speaker Change: are adjusted EBITDA came in at 122 million with all three of our segments delivering profitability, which gives us confidence in how our teams have delivered and to reaffirm our full year estimates. Michael provides more details in his section.
Speaker Change: I'd like to take this opportunity to reflect on the meaningful progress we've made and the opportunities ahead. I'll also cover how this comes together as we think about 2025.
Speaker Change: starting with the experiences category.
Speaker Change: Our ambition is to extend our leadership position in this large and expanding market with our scaled global platform and attractive financial profile.
Speaker Change: This is one of the most exciting opportunities in travel, given the secular tailwinds, low online penetration, and the growing recognition of experiences as the most meaningful and important part of travel.
Speaker Change: This positions experiences to grow faster than the travel industry as a whole over the foreseeable future.
Speaker Change: We still have much work to do, but with our unique assets, some of the most trusted brands in travel, sizable, high-intent audiences.
Speaker Change: The deepest source of supply online, extensive third-party distribution, and the review platform of choice for operators, we're confident in our leadership position.
Speaker Change: In the Viator segment, we've been balancing growth and investment to drive scale and contribute an increasingly larger share of revenue and profit to the group.
Speaker Change: As a reminder, this includes contributions from the Viator and TripAdvisor B2C points of sale, as well as our B2B offerings for operators and third-party distributors.
Speaker Change: In Q3, revenue was $270 million, growing 10% year-over-year, and gross booking value, or GBV, grew 9% to approximately $1.1 billion. Adjusted EBITDA was $30 million, or 11% of revenue.
Speaker Change: We believe we're still in the early innings in the experiences category with meaningful, distinct advantages to serve travelers.
Speaker Change: The TripAdvisor brand is one of the most trusted brands in travel and its largest and fastest growing audience comes to the site to discover and book experiences.
Speaker Change: Its broad reach and position in guidance and planning helps capture upper funnel travelers at the start of their planning journey.
Speaker Change: The Viator brand is well positioned to capture high-intent travelers further down the funnel as the leading experiences marketplace with the most scaled source of supply and a strong foothold with US travelers.
Speaker Change: While each of these brands serves different audiences with unique products and distinct marketing strategies,
Speaker Change: The scale we've reached allows us to unlock new opportunities across product, supply, data, and geographic expansion that leverage our combined assets and capabilities.
Speaker Change: We've made good progress with our priority investments at Viator this year. Year to date, we've seen higher than average growth in bookings from direct and other low-cost channels, which reflects our increasing scale and our progress in building awareness beyond search.
Speaker Change: We continue to improve the products across the board, such as landing pages tailored to traffic sources that have improved the user experience and yielded conversion wins.
Speaker Change: Our effort to drive more bookings to the app is working. App bookings in Q3 grew faster than any other Surface, and the mix of app bookings has almost doubled since 2022.
Speaker Change: We're seeing strong and stable repeat booking growth, which combined with large cohorts of new customers that we expect to mature into repeat travelers, gives us confidence in our durable foundation for future growth.
Speaker Change: We're also increasingly leveraging generative AI to improve our product and customer experience.
Speaker Change: Not only are we using the technology to better assist customer service agents in serving travelers, but we're also leveraging Gen-AI to provide better product recommendations that drive higher conversion and generate communications for agent follow-up.
Speaker Change: shifting to brand TripAdvisor where our teams continue the work to transform the business and shift from our historical reliance on the profitable but pressured legacy Hotel Med offering.
Speaker Change: This transition is reflected in Brand Trip Advisor's Q3 financial performance.
Speaker Change: with revenue of $255 million, a year-over-year decline of 12 percent, which was within our expectations, and adjusted EBITDA of $87 million, or 34 percent of revenue, which came in above expectations due to the timing of certain investments. Mike will discuss this further shortly.
Speaker Change: Our strategy is to address these well-known headwinds by innovating around travel planning and guidance, still one of the most labor-intensive and time-consuming parts of travel.
Speaker Change: We believe we're uniquely positioned to solve this pain point for travelers with our trusted brand, high quality content, and extensive data. And our indicators of traveler engagement with the new products we rolled out this year only strengthen our conviction.
Speaker Change: Our monthly active users, or MAUs, have stabilized and returned to growth year-to-date. And importantly, our engagement trends in monthly active members and app users have continued to improve quarter-by-quarter.
Speaker Change: We see the benefits of this growth among our most engaged users in our channel mix, where our direct channel has added more MAUs than any other year to date, achieving more than 30% growth versus 2023.
Speaker Change: As I've noted in prior quarters, we continue to see our strongest performance against these metrics in the U.S. market, where we typically launch new products first, and we increasingly see fast-follow markets outside the U.S. following a similar trajectory.
Speaker Change: Of course, this progress in our engagement strategy must translate to financial impact at scale.
Speaker Change: This means continuing to grow these audiences, innovating in our product, and particularly in our hotels and experiences marketplaces, and actively managing the structural headwinds in hotel meta.
Speaker Change: We continue to shift our focus and resources to the areas where we are differentiated and have the highest conviction about future growth.
Speaker Change: Our execution will center on a few key pillars.
Speaker Change: First.
Speaker Change: We're focused on growing our mobile app through a host of UX changes that have already resulted in higher engagement and repeat rates, evolving our trip planning feature, and optimizing conversion in our hotels and experiences booking capabilities.
Speaker Change: As we continue to scale in-app hotel booking in the U.S., we're seeing higher click-through rates, four times better monetization per booker, and significantly higher experiences revenue and review and photo submissions versus in-app meta.
Speaker Change: Second, we're focused on accelerating experiences growth by more effectively serving the diverse global demand we see in Brand Trip Advisors funnel.
Speaker Change: This includes improving discovery, cross-selling on hotel detail pages, and expanding supply partnerships in new categories and geographies.
Speaker Change: We're also leading with experiences when we launch new guidance features like our chat-based AI assistant on destination pages, which is designed to help travelers navigate the best of our billion-plus reviews, forum posts, and other guidance content to find the most relevant things to do.
Speaker Change: Finally, we're focused on rolling out new membership enhancing features including rewards, promotions, and an achievements program that are driving higher conversion and meaningful uplift in member contributions.
Speaker Change: This also includes member-only capabilities like AI-powered trip planning and in-app hotel booking as well as leveraging our proprietary data to deliver more personalized cross-category recommendations to each member.
Speaker Change: Now, turning to the dining category, where we see ample opportunity for growth as evidenced in our Q3 results at The Fork, the segment's best financial performance on record.
Speaker Change: Revenue accelerated sequentially to $49 million, or 17% year-over-year growth. Adjusted EBITDA in the quarter was $5 million, or 10% of revenue, a significant improvement from last year.
Speaker Change: This is a strong trajectory and we're well positioned to sustain the momentum.
Speaker Change: We have a defensible position as the largest dining reservations platform in Europe, serving both diners and operators.
Speaker Change: Our unit economics continue to improve through a combination of marketing efficiency and sales productivity that are driving healthy growth in new and repeat diners, as well as our restaurant base, providing a strong foundation for the future.
Speaker Change: Continuous product improvements at the fork have positioned us well on both the B2C and B2B fronts, each of which are delivering strong growth.
Speaker Change: For diners, our user experience, largely on app, is increasingly personalized with more relevant content and AI-powered review summaries, tailored onboarding flows and special offers, which are driving better conversion rates.
Speaker Change: We've also strengthened our B2B offering to provide more value for our restaurant operators, which is driving an uplift in ERB usage and accelerated growth.
Speaker Change: Our upgrades include AI-driven predictive analytics, better service and table views, mobile optimization, and enhanced revenue management insights.
Speaker Change: Following our recently announced Vodafone partnership to introduce new diners to the fork, we continue to gain traction with strategic partners as a trusted dining brand with a strong consumer value proposition.
Speaker Change: We recently entered into a relationship with MasterCard and will work together to provide premium restaurant experiences across Europe and preferred treatment for MasterCard cardholders utilizing the fork pay.
Speaker Change: While this won't begin to scale fully until next year, this is a testament to our brand value and reliability in our payments technology.
Speaker Change: To further enhance this collaboration, MasterCard will also become the title sponsor of our annual event, the Fork Awards.
Speaker Change: Throughout 2024, we've delivered tangible evidence of the progress we're making across multiple categories in each of our segments, which we believe will set us up to deliver our desired financial profile going forward. This is a critical input for us as we solidify plans for 2025.
Speaker Change: While it's premature to provide specifics, I do want to take the opportunity to share some thoughts on our emerging priorities for the coming year.
Speaker Change: First
Speaker Change: We will utilize all of our group assets and capabilities to extend our leadership and experiences Leveraging our marketing scale brand value across geographies and b2b relationships with distributors and operators
Speaker Change: Even with all the talk of normalized growth rates and travel, we believe this category will continue to outperform the industry with solid double-digit growth, contributing a higher mix of our overall revenue and profit, and enhancing our group financial profile.
Speaker Change: Second.
Speaker Change: We expect TripAdvisor to be increasingly focused on a streamlined set of priorities, including further differentiating our brand and content around planning and guidance, driving booking growth in our experiences and hotels categories, especially in-app, and enhancing our membership offering to reward engagement and drive monetization.
Speaker Change: We believe these priorities are most critical to translate our strategy into a sustainable, long-term financial profile.
Speaker Change: Third
Speaker Change: We'll begin to build on the strong foundation at the fork.
Speaker Change: growing both diners and restaurants, continuing to improve our products, and driving diverse revenue growth across B2C and B2B as we maintain this year's momentum, delivering growth and profitability.
Speaker Change: And finally, we'll ensure that our operating model supports our growth agenda across the group by balancing investment and profitability, including managing operating costs, as we continue on our transformation journey.
Speaker Change: As always, we're monitoring what's happening on a macro level, although its future impact is difficult to predict. We continue to see healthy search data and strong consumer intent to travel and book experiences, with overall stability in booking windows and average length of stay.
Speaker Change: We've observed some bifurcation of intent between higher and lower income travelers, but regardless of the fluctuations we may see periodically, I remain confident in the durability of growth in leisure travel.
Speaker Change: This is a sector that has continued to adapt, change, and grow over the long term.
Speaker Change: Across TripAdvisor Group, we are well positioned for enhanced growth as we continue to build trust with travelers, innovate our offerings, and as the experiences category continues to emerge as an increasingly central and durable part of the travel budget.
Mike Noonan: With that, I'll turn the call over to Mike.
Mike Noonan: Thanks, Matt, and good afternoon.
Mike Noonan: I'll start with a review of the quarter, and then we'll provide our outlook for the remainder of the year. As a reminder, all growth rates are relative to the comparable period in 2023, unless noted otherwise.
Speaker Change: Third quarter revenue was $532 million, reflecting flat growth and in line with our expectations.
Speaker Change: Adjusted EBITDA was $122 million, or 23% of revenue, and meaningfully higher than expected due to brand supervisor contribution, which I will cover in a moment.
Speaker Change: Turning to segment performance for the third quarter.
Speaker Change: BrandTripAdvisor delivered revenue of $255 million, a decline of 12%. Performance was in line with expectations, which anticipated a sequential step down.
Speaker Change: In branded hotels, revenue declined 17% to $151 million, driven primarily by hotel meta.
Speaker Change: As anticipated, we witness a softer pricing environment in Hotel Meta, particularly in the U.S., which stepped back immediately from prior quarters, but we believe is reflective of the overall normalization of travel trends.
Speaker Change: For the quarter, overall volume trends remained under pressure year over year and continued to be our largest headwind, but were better than we witnessed in Q2.
Speaker Change: Revenue declines in Hotel Meta peaked in July and then saw consistent improvement throughout the quarter.
Speaker Change: median advertising revenue grew 5% to 40 million. Growth in our off-platform sales and creative offerings from our Wonder Lab studio and programmatic advertising offset declines in direct advertising revenue.
Speaker Change: Experiences in Dining Revenue was $51 million, a decline of 7% driven by the ongoing transition to self-serve sales model and a restaurant B2B offering and a sequential deceleration in Experiences Revenue.
Speaker Change: In Experiences, performance this quarter is driven primarily by Brand TripAdvisor's segment-specific marketing strategy to emphasize profitability.
Speaker Change: Finally, other revenue declined 19% to $13 million, in line with expectations. We continue to de-emphasize our flights, car rental, and vacation rentals offerings to focus on initiatives more aligned to our stated strategy.
Speaker Change: Adjust the EBITDA at branch or provisor with $87 million or 34% of revenue.
Speaker Change: Year-over-year de-leverage of approximately 400 base points was related primarily to higher headcount costs as a percent of revenue despite lower lower headcount dollars year-over-year due to lower hotel meta revenue
Speaker Change: Relative to our outlook in August, we came in higher than expectations due to operational outperformance, normal quarterly true ups of certain expenses, and the decision to delay certain growth of investments until 2025.
Speaker Change: While the delayed growth investment was a benefit to Q3 adjusted EBITDA, postponing it also reduces our expected Q4 revenue and adjusted EBITDA versus the outlook we provided in August.
Speaker Change: Turning to Viator, Q3 revenue grew 10% to $270 million and gross booking value, or GBV, grew 9% to approximately $1.1 billion.
Speaker Change: Visor point-of-sale growth for GBV outpaced total GBV growth while brand TripAdvisor point-of-sale grew below total GBV growth.
Speaker Change: Bitore segment growth is a function of different growth and profit priorities between the different points of sale, which is reflected in the relative growth rates.
Speaker Change: As Matt mentioned, we believe our unique assets
Speaker Change: Brand TripAdvisor's broad reach and large upper funnel combined with Vytor's ability to capture high intent travelers as an OTA
Speaker Change: provide us a distinct advantage as we look to capitalize on this large market opportunity.
Speaker Change: Viator adjusted EBITDA was $30 million or 11% of revenue.
Speaker Change: Year-over-year margin leverage of over 400 basis points was driven by higher contribution profit and lower fixed and discretionary expenses as a percent of revenue, which include brand marketing and people costs.
Speaker Change: While we continue to see healthy growth in our paid marketing channels, our direct channels, beyond search, are growing faster.
Speaker Change: We continue to drive strong growth in repeat bookings, and this growth has been consistent quarter over quarter.
Speaker Change: Importantly, repeat bookings come with lower marketing costs than new bookings.
Speaker Change: At the fork, revenue was $49 million, or 17% growth, and 15% in constant currency terms.
Speaker Change: Growth was driven by a combination of both bookings, volume, and pricing, despite headwinds from Olympics and Eurocup, as well as strong growth in our B2B revenue.
Speaker Change: Sequential acceleration was also due to a benefit from the Vodafone partnership we noted last quarter and higher B2C revenue due to some incremental marketing spend in the quarter.
Speaker Change: Our B2B business.
Speaker Change: while a smaller contributor to overall revenue at the fork is growing faster than a reservation revenue as we capitalize on our product investments to drive an enhanced value proposition to restaurant operators.
Speaker Change: Importantly, the team continues to drive greater efficiencies, particularly through reduced restaurant acquisition costs.
Speaker Change: Adjusted EBITDA at the fork was $5 million, or 10% of revenue, an improvement of 12 percentage points year-over-year, and represents the highest margin the business has ever achieved.
Speaker Change: This leverage is primarily due to lower fixed and discretionary costs, which include people and brand marketing costs.
Speaker Change: Now, turning to consolidated expenses for the quarter.
Speaker Change: Cost of revenue was 9% of revenue, an increase of 100 basis points, primarily due to higher viatory transaction costs as a percent of consolidated revenue and higher cloud and media production costs at BrandTripAdvisor.
Speaker Change: Sales and marketing was 51% of revenue and was flat as a percent of revenue year-over-year.
Speaker Change: De-leverage from Viator and the forked sales and marketing costs as percent of consolidated revenue is mostly offset by leverage from Brandtrip Advisor.
Speaker Change: Technology and content costs were 14% of revenue, approximately 100 base points higher, primarily due to higher cost of brand supervisor and Viator in support of product development to advance their respective strategies.
Speaker Change: G&A expenses percent of revenue was 10% flat year-over-year as percent of revenue.
Speaker Change: The Q3 year-over-year increase in share-based compensation of $7 million was primarily due to differences in vesting schedules for our employee equity grants, resulting in additional expense recognized in Q3 2024 versus Q3 2023.
Speaker Change: SVC expense was impacted primarily due to a one-time acceleration of the vesting period of our 2020 company-wide equity grants.
Speaker Change: to two years from four years, as disclosed during 2020, resulting in a lower-than-usual run rate for Q3 2023.
Speaker Change: Thank you.
Speaker Change: Now, to cash and liquidity.
Speaker Change: Operating cash flow was negative $44 million and free cash flow was negative $64 million, reflecting our typical seasonality.
Speaker Change: Other drivers of the year-over-year decline were changes in other working capital including seasonally lower deferred merchant payables and last year's refund of approximately $49 million related to the 2009-2011 IRS transfer pricing settlement.
Speaker Change: We continue to expect net cash inflows of $50-$60 million in the next 12 months related to the 2014-16 IRS Transfer Price and Settlement.
Speaker Change: The total net outflow of the 2014-16 IRS Transfer Pricing Settlement is expected to be approximately $100-110 million in 2024.
Speaker Change: versus the net cash outflow from the 2009 through 2011 IRS transfer pricing settlement of approximately $60 million last fiscal year.
Speaker Change: We ended the quarter with nearly $1.1 billion of cash and cash equivalents, an increase of $45 million from December 31, 2023.
Speaker Change: During the quarter, we had no share repurchase activity.
Speaker Change: Although we have not terminated the program, we have been in the past and may continue to be limited in our ability to purchase shares in the public market due to ongoing consideration of a variety of potential strategic alternatives.
Speaker Change: We will continue to look for opportunities to repurchase shares, taking into account our capital needs, market conditions, and other relevant factors.
Speaker Change: Thank you.
Speaker Change: Turning now to recent trends and our outlook for Q4.
Speaker Change: In October, we saw positive trends in Vitor with meaningful acceleration from where we exited the third quarter.
Speaker Change: At Brand Trip Advisor, our October performance was in line with our third quarter growth rate with Hotel Meta performing largely consistent with where we exited the quarter, which was an improvement from early Q3 trends.
Speaker Change: Given what we've seen quarter to date, our full year 2024 revenue and adjusted EBITDA on a consolidated basis are in line with our previous outlook in August.
Speaker Change: We expect high single-digit revenue declines at BrandtripAdvisor, while Viator and Fork will deliver revenue growth higher than expected in our last update.
Speaker Change: For consolidated adjusted EBITDA, we expect 100 basis points of deleverage year over year.
Speaker Change: As a result, we expect a sequential acceleration of consolidated revenue growth in Q4 to low to mid-single digits year-over-year.
Speaker Change: At Brand Trip Advisor, revenue declines are expected to be flat sequentially, while we expect FITOR to accelerate sequentially to mid-teens growth and the FORC to accelerate sequentially to mid-20s growth.
Speaker Change: For a consolidated adjusted EBITDA margin in Q4, we continue to expect due leverage year-over-year.
Speaker Change: We expect Brand Trip Advisor margins to be approximately 20%, which is primarily due to lower revenue in branded hotels combined with the lapping of last year's cost actions that drove lower people costs and other discretionary costs.
Speaker Change: For Viator, we expect margins in the high single digits, and for The Fork, we expect margins roughly flat with Q4 of last year, as we are making some incremental growth investments that will largely benefit us next year.
Speaker Change: With that, I'd like to turn the call back over to the operator to begin Q&A.
Speaker Change: Thank you.
Speaker Change: Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Thank you Thank you.
Mike Noonan: The first question comes from the line of Ben Miller of Goldman Sachs. Ben, please go ahead.
Ben Miller: Thanks so much for taking the questions. Just on brand trip margins, can you expand on some of the drivers of the margin performance in Q3 and the qualitative puts and takes as we look out into next year? Understanding it sounds like some of the investments were pushed out a bit. Thanks.
Speaker Change: Yeah, hey Ben, it's Mike.
Speaker Change: Yes, so for Q3, there were a couple of puts and takes in there that we want to call out and be transparent on. I think when we saw the outperformance, it really was driven by three things, all of relatively equal weighting. One, we certainly did see some outperformance across the assets at Brand TripAdvisor.
Speaker Change: but two, we saw some normal kind of quarterly accruals that we adjusted that we see in the normal course of business and three, we did have some market investments that we did build into our forecast.
Speaker Change: that we ultimately ended on not executing on. And really that's a result of us.
Speaker Change: being very thorough in our testing.
Speaker Change: and making sure that we continue to have very high conviction in the dollars we roll out.
Speaker Change: These marketing investments were really in social, mid-funnel, that we are still very excited about. But we're going to make sure we get it right before we roll these out and we move into 2025. And again, as I pointed out, it did have a knock-on effect as we think about Q4 as well. Too early to think about...
Speaker Change: the impact of margin for 2025. That's the work we're doing right now, but again we want to make sure we're transparent with the Q3 movement.
Speaker Change: Great and then just as a follow-up I was curious if you could expand on some of the early early learnings from launching the bookable hotel inventory in the app and just any color you can share on what adoptions look like or penetration of the member base that's that's actually engaged and made a booking
Speaker Change: Yeah, thank you, Ben. It's Matt. We're excited about what we're doing in the app, and we think that we're taking a differential approach to this, and, you know, as we engage with the ecosystem, we're getting good feedback. And so while it's really early, we're seeing some promising signs as we roll out.
Speaker Change: members have demonstrated that they really have a preference for hotel booking over the Metta product.
Speaker Change: when they're presented with a booking option and that results in higher revenue per booker which is multiples higher than a meta shopper.
Speaker Change: We're also seeing a strong propensity to repeat.
Speaker Change: are five times higher than new users. And so when somebody books, they actually want to book again.
Speaker Change: and these shoppers are also engaging with other categories as well. So hotel bookers drive material, incremental experiences revenue.
Speaker Change: and they also engage more, they create more trips, they leave more reviews.
Speaker Change: and so our testing is showing that we can meaningfully drive higher levels of conversion which is already grown since we launched it and as we scale we're not only holding that conversion we have identified opportunities to even drive that conversion higher so early but feeling good about it so far.
Speaker Change: Great, thanks so much.
Speaker Change: One moment for next question.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question comes from the line of Richard Clark of Bernstein. Richard, please go ahead.
Richard Clark: Hi, good afternoon, thanks for taking my question. I guess if I look at your slide deck you've put out with the release there on slide 15, it looks like you're expecting online experiences.
Richard Clark: as a market to grow by about a 17% CAGR. But fire tours, bookings, just growing at about half that at the moment. So just wondering how you're balancing sort of growth versus profitability in that business and whether you expect you can kind of catch up to that, what you're putting out as the market level of growth for online experiences.
Speaker Change: Hey Richard, Mike, I'll answer and Matt can chime in.
Speaker Change: Yeah, I think we we all agree that, you know, the experiences as a category.
Speaker Change: is expected to grow faster than overall travel for the foreseeable future for some of the obvious reasons around offline-to-online penetration and moving more online and just general awareness of the category.
Speaker Change: So we are excited about the kind of long-term growth nature of the category.
Speaker Change: You know, I'd say a couple things around experiences for us at large and really as it comes through at Viator. You know, one, when you think about our growth rate this year, I would say our growth rate we're pleased with and a lot of it's very expected.
Speaker Change: as we've come through a period, particularly last year, where we lapped
Speaker Change: Some meaningful price increases throughout this system.
Speaker Change: Again, you know, we knew that this year was in line with how we were expecting to grow. And then secondly, which we've talked before, you know, our segment revenue at Viator is a mix between a lot of different market strategies, particularly at one of our larger channels being TripAdvisor.
Speaker Change: and as they really manage for profitability, they are growing at lower rates than what Viator is.
Speaker Change: So that's a bit of the history. I think as we look forward, a couple of things. We are pretty pleased about the reacceleration we're seeing in Q4.
Speaker Change: Some of that clearly is an easier comp on some of the Mideast activities last year, but we're also seeing good demand.
Speaker Change: and the optimization work we're doing on that brand as well as the opportunities we have to lap this year and move into the work we're doing across the product at Viator as well, which is funnel optimization, supply extension, etc. So we feel very strongly our ability to capture and play in a meaningful role and grow in line with the industry.
Speaker Change: The only thing I would add is I think industry growth rates right now, the last report I saw was in the 10% range. And so if you look at that, online is going to grow faster than offline and OTAs are going to grow faster than online as a whole. And we think we're really well positioned with the assets that we brought, as I discussed in my prepared remarks.
Speaker Change: So we feel really good about the growth trajectory for Viator.
Speaker Change: And the last thing I would say from a technical perspective, Richard, is that I think that growth rate includes APAC, which is obviously growing at a faster rate than our target markets.
Speaker Change: and Michael Noonan. Thank you.
Speaker Change: Thank you.
Speaker Change: Understood, and maybe just as a follow-up, you mentioned that there was some restrictions maybe being placed on your ability to buy back shares at the moment. Just any extra color on what that might entail and any timeframe on when that might be resolved.
Speaker Change: Yeah, Richard, let me let me try to respond to that one to the best of my ability.
Speaker Change: You know, obviously, given our limited participation, we just wanted to be clear that there are a variety of reasons at any given time why we might be limited in our ability, and one of these reasons is the ongoing consideration of a variety of potential strategic...
Speaker Change: alternatives. But, you know, we really can't get into any of the details more than what we've said.
Speaker Change: We will always look for opportunities to repurchase shares, taking into account our capital needs, market conditions, and other factors. I'm sure you can understand it's very challenging for us to comment any further than this. I hope that's helpful to you.
Speaker Change: No, that's great. Thanks very much.
Speaker Change: One moment for our next question.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Naveed Khan of B. Riley Securities. Naveed, please go ahead.
Naveed Khan: Thank you.
Naveed Khan: Great. Thanks so much. So, Matt, on your commentary about 2025 and sort of high level
Naveed Khan: Outlook for experiences to grow like solidly in the double digits.
Naveed Khan: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: If I ever kind of think about balancing growth and profitability and...
Speaker Change: your ability to kind of continue to show margin improvement. What's the right way to think about that specifically for Viator? And then in terms of things you're doing in the TripAdvisor app, maybe just talk about rewards. How are you thinking about that? Is it pretty limited testing you're doing or what are you seeing so far with respect to that? Thanks.
Speaker Change: Yeah, so let me kick off and then Mike can add on 2025. You know, what I was talking about, and what I said was, you know, we believe that the category is going to have solid double digit growth. We also believe that our participation in the category can contribute a higher mix.
Speaker Change: drive that. Mike, do you want to add anything on Viator before I move on to TripAdvisor? No, I think you covered it well. And again, these are all the investment and growth choices we're working through now, Nouved. But again, I emphasize what Matt said around belief in the category and our assets there.
Speaker Change: Yes, so I think you asked about what we're doing with the TripAdvisor app And we're really excited about how the app is progressing and I think I've said this a couple times in the past But you know when I pick up the app, which I do just about every day you know it continues to evolve and it looks very different than it did just a year ago and
Speaker Change: We are continuing to scale in-app booking for hotels for members. We think that the use case of doing it in context...
Speaker Change: with Trip Planning is proving to drive engagement and monetization. We're doing a lot to leverage AI there and of course, all of that drives us into the ability to drive bookings of both experiences and hotels.
Speaker Change: Now, the rewards piece is a really important piece, and it's a component of what we've said for a long time, which is a free membership.
Speaker Change: is going to be an important part of our engagement strategy. So we've launched the first elements. It enables travelers to earn rewards.
Speaker Change: and that's different than trying to do something that starts with discounting. And that's, I think, one of the reasons that the ecosystem has responded really well is because we're allowing travelers to earn cash back when they make hotel bookings. We have the ability to do that across categories. We're also testing first-time booker offers to incentivize trial. And of course, we're seeing higher levels of conversion with the associated repeat. So we feel like that is a really exciting part of what we are delivering. And we're going to continue to test and learn as we scale this out. And this is something we feel really excited about. So watch the app space from here.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: One moment for your next question.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Ron Josie of Citi. Ron, please go ahead.
Speaker Change: This is Robert. Thanks for taking the question.
Speaker Change: First one is on VITOR. How do you guys call that strong growth and repeat bookings in the quarter?
Speaker Change: Can you maybe just elaborate on Biodor's direct traffic trends, and then perhaps talk to how you expect Biodor's advertising spend to evolve heading into next year?
Speaker Change: Yeah, hey, it's Mike, I'll address this. So listen, I think our repeat growth rate has been fairly consistent.
Speaker Change: for several quarters now, which we're very excited about. It goes back to what we've been talking about for some time, which is the flywheel of new user acquisition and then working really hard to give those users a great experience and get them to come back to us. And genuinely, when they do that over time, it becomes cheaper and cheaper. I would say, you know, when we think about our, I think your question was more around direct costs,
Speaker Change: You know, I think we have been doing that at very consistent ROASes, which we, you know, we're excited about, and it proves that we're able to continue to
Speaker Change: perpetuate that flywheel. So again, an important part of what we're doing, we realize that
Speaker Change: user acquisition or new users and repeat users.
Speaker Change: They come to us through many different channels, and we have to be where they are and where they're seeking. And, again, we will look to acquire the highest intent as we possibly can. On your second question, repeat that again for me, please.
Speaker Change: Yeah, the second question is just how you expect advertising spend to evolve at Viador into 4Q and then into 25 as well.
Speaker Change: Oh, I got it. Thanks.
Speaker Change: Yeah, so, you know, 25, we're in the plans of thinking through strategies and looking at, as it goes back to Nived's question,
Speaker Change: you know, growth and profitability and what those look like. And we have a lot of choices to do that. You know, I think we've been driving very, I think we believe very good, strong growth this year through our diverse marketing strategies. I think, you know,
Speaker Change: You know
Speaker Change: you know, traffic acquisition will continue to be an important.
Speaker Change: part of how we will acquire new and repeat users.
Speaker Change: I think we're going to continue to do more and experiment with more outside of traditional SEM.
Speaker Change: like mid-funnel and social, connected TV, et cetera, and that will continue, we think, be a bigger part of our spend going forward. So I think, I guess, we have very good teams.
Speaker Change: we've got to go where where the intent is and we'll continue to find those pockets of tent in the lowest cost we possibly can and feel good about the team's doing it.
Speaker Change: I mean, the only color I want to add is that, you know, this is all about this flywheel, right? It's going and finding the right customers who are going to be high intent.
Speaker Change: get them onto our product, particularly the app where we're putting focus. And I referenced, because you asked about direct, I referenced that we're making real progress there in the fastest growing surface for bookings, and it's almost doubled since 2022. And that's because the product is doing the work. So we've got to lean into getting the product to do the work. And then, of course, we need to think about how we enhance supply so that flywheel gets rolling. And we feel really good about the progress we're making and our ability to continue to lean into that in a way that will drive the continued accelerated growth that we're starting to see here in the first part of this quarter.
Speaker Change: Thank you very much.
Speaker Change: Great, thanks a lot.
Speaker Change: One moment for your next question.
Speaker Change: The next question comes from Trevor Young of Barclays. Trevor, please go ahead.
Trevor Young: Great, thanks. First, just tying into some of the earlier questions around U.S. experiences in particular, it seems like a large competitor is aiming to scale meaningfully here in the U.S. in that category. How is that impacting trends at Viator, or are you seeing any impact from that at all?
Speaker Change: And then second one, just to your comments on, you know, international and building inventory there as one lever to flex on the go forward, how should we think about potential order of magnitude of investments to help scale in certain international markets and how that's going to impact, you know, margin trajectory in Viator next year and beyond? Thank you.
Speaker Change: Thanks, Trevor. We've seen competitors getting more vocal about their intentions to, you know, aim to take share in our home market. And that's no secret. And, you know, we've seen the investment that comes along with it, you know, to an extent, you know, it helps the category as a whole, because
Speaker Change: As travelers become more aware of the experiences category, we think that that's a good thing in general because we're going to participate in that growth.
Speaker Change: But we really think it's important to address our opportunity with discipline and get the right balance of how we think about...
Speaker Change: market share growth and profitability. I think the market is certainly...
Speaker Change: large enough to support, you know, multiple players. It's not a zero-sum game. We feel really good about our progress.
Speaker Change: and I think it really helps because we have not only that strong foothold but the largest operator base and you know really higher highly rated products which we think position as well and of course You know we're taking advantage of the scale demand that the brand TripAdvisor brings and we can continue to test and learn how to grow the relationship between These two two brands and I'll I'll kick off on the on the geographic expansion point You know we we do think there are opportunities to leverage both brands to think about adjacent international markets
Speaker Change: You know, we can go and look beyond the U.S. consumer. We already have.
Speaker Change: meaningful pockets of demand, and frankly TripAdvisor, the majority of its traffic is ex-U.S.
Speaker Change: and there are pockets of demand there that we are not meeting today.
Speaker Change: The TripAdvisor brand is relevant. We know that Viator brings some of that supply. We think we can partner and acquire other elements of supply. And I think it's a little early to talk about levels of investment for 25 because we're doing the work now. But I think you will see that be a growth lever and one that we will go after in a thoughtful and disciplined way. But we're excited because we can see real growth opportunity.
Speaker Change: One thing to add to that, you asked specifically about international inventory, I would say a couple things.
Speaker Change: make sense as our North American bookers spend most time in Europe.
Speaker Change: US a second and then we have other inventory really throughout the world that we're you know we're proud of
Speaker Change: I think we're, as Matt said, we're going to let the data of our users tell us where to build and focus on where we focus our supply, and that could be a lot of different things, you know, our users.
Speaker Change: can tell us that building supply out in certain regions, maybe not inside the biggest cities is very interesting. As Matt said, we have a very interesting opportunity, I think, when you think about EMEA, since we already have a very large supply base there. Do we think more deeply around acquiring EMEA bookers in the region? I think that's something very interesting. We are very focused across investments and experiences around supply.
Speaker Change: letting data tell us where to go and where to build out for the supply, building out in the app and the product experience, and thirdly, you know, smart acquisition, which we do think we can get efficiencies on as we move into next year.
Speaker Change: And I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Great. Thank you both for all that.
Speaker Change: Yep. Thanks, Trevor.
Speaker Change: One moment for your next question.
Speaker Change: The next question comes from the line of Jed Kelly of Oppenheimer. Jed, please go ahead.
Jed Kelly: Hey, Greg, thanks for taking my question. Just going back to some of the things you're seeing in Brand Trip Advisor, can you help us parse out what's being driven by normalization? And then are you seeing anything from the SEO headwinds that some other companies have called out in Google? And then on experiences, just if I kind of try to understand your comments, are you planning on higher investment to reaccelerate growth into 25 for Viator? Thanks.
Speaker Change: Thank you for joining us.
Speaker Change: Yeah, I'll start. So, on BrandTA, you know, there's really, and I'm assuming you're talking about Hotel Meta, Jed, and if you want to expand on the experiences piece, please just let me know, but on Hotel Meta,
Speaker Change: You know, there's really not, there's no incremental we're calling out this call. I think it's well understood around, you know, headwinds.
Speaker Change: both in the paid and freed side with the TravelSERP.
Speaker Change: I think we have been, and have been saying for some time, managing this asset for profitability, which we continue to do. But we also continue to find areas to innovate and create a better product for our operators as well.
Speaker Change: But, you know, I don't think that we foresee that necessarily changing, but it's all about, you know, how we manage this appropriately and think about, you know, scaling the growth investments that Matt alluded to earlier. You know, on experiences...
Speaker Change: I think if your questions around your writ large investments you know I just alluded to earlier yeah I think we have
Speaker Change: You know continued have had good in sizable investment in the in the in the category at Viator We continue to believe we have a lot of opportunity particularly in supply and the app
Speaker Change: continue to accelerate the flywheel of smart acquisition into supply, give them a great experience and have them come back. I think that
Speaker Change: A lot of that investment is going to depend on, you know,
Speaker Change: locations and targets and where we want to geographically expand, if any, and these are the things we're wrestling with or going through in our planning process. I would just say there's a lot of great opportunity we see in front of us and we have to be, you know, disciplined in how we approach it.
Speaker Change: Yeah, the only thing, Jed, that I would add that's mad is...
Speaker Change: You know, when we think about how we manage through some of those known traffic issues
Speaker Change: You know, our history is to be one of the best in the world at optimizing SEO. And I think that we've got a fantastic team and they do a great job. So, you know, that's going to continue and we're going to continue to optimize that.
Speaker Change: Let's face it, it's exactly why we put the strategy in place.
Speaker Change: So we can address those known issues and really engage people and get them coming and repeating and using our apps. So that feels really good. On experiences, you know, we see multiple growth paths ahead.
Speaker Change: There are source market opportunities beyond our foothold in the U.S.
Speaker Change: There are supply categories.
Speaker Change: where we are underpenetrated. There are geographic opportunities through partnership. And of course, there's also B2B opportunities, additional services for operators and partners. So we see a lot of opportunity there and we're doing our planning now, but I gotta tell you, there is a lot of excitement and enthusiasm about how we're positioned and what 2025 will bring.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Thank you for watching. See you next time.
Speaker Change: The next question comes from the line of James Lee of Mizzouho. James, please go ahead.
James Lee: Great, thanks for taking my questions. One is on overall kind of broader travel trends in general. You guys noted staple booking windows and length of stay. I was wondering any key differences by geo, maybe in the US, Europe, and APEC? Are you seeing any changing in terms of buy, you know, consumer behavior in terms of trading down? And my second question is more on MAD. I think you recently commented in the SCID conference that, you know, TripAdvisor is shifting from arbitrage economics to engagement economics. Can you maybe a little bit elaborate on that progress and investment you need to make to transition your business? Thanks.
Speaker Change: Thanks James. All right, you've given me real work to respond to these very detailed and excellent questions, you know
Speaker Change: On the macro, overall leisure demand is clearly stable and travel intent remains healthy.
Speaker Change: You know, our survey suggests almost three-quarters of travelers intend to travel this winter. And, you know, we are seeing and have expected travel to normalize.
James Lee: But booking windows are holding mostly flat. There's some nuance by region, there's some nuance by domestic and international, so we see domestic booking windows have ticked up marginally, international booking windows
James Lee: have contracted very slightly but we think these things are are you know very slight likely a function of normalization
James Lee: experience is booking windows are flat. Length of stay has increased year on year, but it has moderated from earlier in the year. But, you know, there's marginal growth overall. We don't see clear trends of trading down. There could be some bifurcation, as I mentioned in my prepared remarks.
James Lee: in travel intent between high-income travelers and middle- or low-income travelers. There may be some slowdown in family travel, but
James Lee: Look, Hotel Clastar is stable, and frankly, while price per night growth has trended lower, the declines are moderating in recent months. So I think the macro signals are just hard to predict. We've got normalizing inflation, maybe recession risk is declining, and traveler concern in some of these areas seem to be subsiding as well. So I think that's the picture.
James Lee: It feels stable and healthy.
James Lee: In terms of our shift from arbitrage economics to engagement economics
Speaker Change: Thank you for asking. We are making progress on Brand Trip Advisors' strategy. It's important to remember we're in the middle of a multi-year strategy, and we started off clearly by getting ourselves in a position to deliver and test and learn. We then moved into delivering our product improvements.
Speaker Change: and scaling those improvements.
Speaker Change: and we are driving engagement and of course that is what we are looking to scale to financial impact.
Speaker Change: But we feel really good that we have stabilized and returned to growth our monthly active users. We like the quarter-to-quarter improvements we're seeing in monthly active members.
Speaker Change: and app users. And as I said, we can see that strategy progress in North America where we've been rolling out our product work, and it's fast following in non-U.S. as we roll out further. So it feels like we're in progress, and of course we are all impatient to translate that into financial performance at scale.
Speaker Change: Great, thanks so much.
Speaker Change: One moment for our last question.
Speaker Change: Thank you very much.
Speaker Change: The next question comes from the line of Kevin Kopelman of TD Cowen. Kevin, please go ahead.
Kevin Kopelman: Great. Thanks a lot. Could you give us your early thoughts on 2025 for brand trip advisor and how you're thinking about managing the growth versus the margins in that segment?
Speaker Change: Hey Kevin, it's Mike. I'll provide a few things. Yeah, so when we think about, I'll take a step back, we think about growth in 2025. You know, we're obviously still early. We're working through our plans.
Speaker Change: and we very much think about our consolidated results as a portfolio.
Speaker Change: You know, we see really nice growth prospects for both Viator and the fork that we've talked about.
Speaker Change: For TA, this is a continuation of our strategy, which we are getting through the midpoint of right now. And this year was a...
Speaker Change: very big and important year for a lot of product development. And we did a lot of great work developing our planning tool, revamping our app. All of these things we're very excited about.
Speaker Change: And so we think about next year, I think there's two basic things we look at one, we have to acknowledge we would expect there to be continued structural headwinds in our core meta business.
Speaker Change: or we certainly would say, you know, would expect volatility there. And then it really turns to how we think about our strategic investments.
Speaker Change: meaning the app, booking capabilities, and experiences.
Speaker Change: experiences on TripAdvisor. And as Matt just said, we have, you know, tremendous excitement around what we can drive in these investment areas. And so as such, it's really balancing...
Speaker Change: level investment.
Speaker Change: and expected growth.
Speaker Change: We really want to be able to scale the right way with high conviction. It's the reason why, you know, we pushed some of the Q3 investment into 2025 because we continue to really iterate and want to get that right, which we are.
Speaker Change: And so I think, as we think about, certainly...
Speaker Change: ambition is to return to growth as quickly as possible, it's really around investment levels around that. When you think about some investments that are more LTV based, leaning into faster growth is more investment and more upfront expense. And so I think these are the things we are putting together as we speak.
Speaker Change: to think about that very important balance between growth and profitability, but we do believe.
Speaker Change: And what we've done this year, the foundation we've laid, the experimentation work we've done, gives us a very good base to think about how we get back to growth, you know, in the next few years. I don't know, Matt, do you have anything to add to that? Yeah, I think that's good.
Speaker Change: Thanks Mike and maybe just a quick follow-up. Yeah, is there anything to call out on the comps with regards to some of the changes that have taken place at Google that may have affected TA in the coming quarters?
Speaker Change: Yeah, I think Kevin, you know, Google continue to do what Google does. I don't think we really
Speaker Change: We're not calling anything new or incremental this quarter. They've continued to do a bunch of analogous and updates through the year. Our teams are really good at sourcing through those, particularly on the SEO side.
Speaker Change: And, you know, as a brand, TA is a brand that has some of the deepest and most connected content out there. You know, we continue to do really good work around that. But you know, Google continues to put paid ads in the SERP.
Speaker Change: That's a headwind to SEO, and it's an opportunity on the paid side. On the paid side, we continue to think about relevancy, how we acquire high-intent traffic at TA, but with the right cost.
Speaker Change: We've been very disciplined in how we think about our ROIs and that spend. We'll continue to do so as we manage that asset that way, particularly as we want to set ourselves up for thinking about scaling the growth asset that I just mentioned.
Speaker Change: https://www.youtube.com.au
Speaker Change: Yeah. Thanks, Kevin.
Speaker Change: Bye-bye.
Speaker Change: Thank you. This concludes the question and answer session. I would now like to turn it back over to Matt Goldberg, CEO, for closing remarks.
Matt Goldberg: Thanks again everyone for joining us today. We look forward to closing the year strong and finalizing our plans for next year. Until then, travel safe.
Speaker Change: Thank you very much.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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