TripAdvisor, Inc. Q4 FY2020 Earnings Call

Good morning, and welcome to TripAdvisor’s Fourth Quarter and Full-Year 2020 Earnings Conference Call. As a reminder, today’s conference call is being recorded. At this time, I would like to turn the conference call over to TripAdvisor’s Vice President of Investor Relations, Mr. Will Lyons. Please go ahead.

Thanks, Liz. Good morning, everyone, and welcome to our call. Joining me today are our CEO, Steve Kaufer, and our CFO, Ernst Teunissen. Last night, after the market closed, we released and filed our fourth quarter and full-year 2020 earnings report and made our shareholder letter available on our Investor Relations website. In the report, you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. On our Investor Relations site, there is supplemental financial information that includes reconciliations of certain non-GAAP financial measures as well as other metrics. Additionally, I want to mention that the comments regarding cost and cost savings mentioned on this call do not take into account depreciation, amortization, restructuring and other related reorganization costs, or stock-based compensation. Before we proceed, I want to remind you that this call may include estimates and other forward-looking statements that represent management’s views as of today, February 19, 2020, 2021. TripAdvisor disclaims any obligation to update these statements in light of future events or circumstances. Please refer to our earnings report and our SEC filings for information about factors that could cause actual results to materially differ from these forward-looking statements. Now, I’ll pass the call to Steve.

Thank you, Will, and good morning, everyone. 2020 was a challenging year, but I’m fundamentally optimistic. Inflection curves have been declining, vaccines are being distributed. And from what we see on our site and here in our research, travelers are all eager to get back out and explore the world. As we described in our shareholder letter, we made a bunch of tough decisions last year. We also shored up our liquidity, to work helping customers make the best of the current situation with initiatives like travel safe. And most importantly, from my perspective, we prepared TripAdvisor to emerge as a stronger, more focused company when travel comes back. And I'm really proud of what we accomplished. We soft launched our new TripAdvisor Plus product in record time. We're focused on making the core experience TripAdvisor more engaging and personal for all travelers, and we've got some great teams in place growing our exciting restaurants and attraction businesses. We entered 2021 excited about the important role that TripAdvisor can play in the recovery. Based upon our historical reputation as a trusted guidance platform, but also because of our new initiatives that are ready to help travelers take amazing trips. Let me also take a minute to thank everyone at Trip for their commitment during this past year. Know that your hard work is what has positioned our company to help hundreds of millions of travelers get back out on that road again, and all that makes 2021 look like a pretty exciting year for us. Ernst, let me turn it over to you for additional thoughts.

Thank you, Steve, and good morning, everyone. Our fourth quarter mirrored most of the financial themes of our previous 2020 earnings calls that we've done, less in our control, of course, has been how COVID has continued to impact revenue, with all of our business lines very much impacted again in Q4, but uneven stories by geography and type of business. For instance, our restaurants revenue performed very strongly in Q3 as most of European restaurants were open. And then take a step back again in Q4, with most of Europe locking down. And restaurants might be among the first revenue lines to actually benefit again when Europe reopens again. Consistent financial themes that have been more in our control are driving significant cost savings, ensuring a solid liquidity position and laying the groundwork for compelling and profitable growth when the pandemic finally subsides. On the cost-saving side, we more than achieved our target of $200 million of fixed and discretionary savings in 2020 versus 2019. We entered 2021 a more efficient and leaner company. Of course, the reduction in variable costs, mostly performance-based marketing was actually significantly larger even than $200 million, but most of that expense will return. But the $200 million of savings we have achieved, we're very proud to have achieved and we think the majority of that we will be able to keep us safe at least going forward. I want to point out one thing in our Q4 financial results is that the majority of the sequential expense increase in Q4 versus Q3 was due to an increase in our full-year compensation expense. As such, $12 million of that Q4 expense is not indicative of the underlying quarterly run rate that we take with us into 2021. While we anticipate prudently increasing investments as the pandemic eases and revenue and demand comes back, as I said, we expect that the majority of these 2020 fixed cost savings will persist in 2021 and beyond. And our fundamental linear cost structure positions us for operating leverage, better margins as revenue returns. We've also strengthened our liquidity position again in Q4. We renegotiated our credit facility to extend maturity to make 2024 and to extend our leverage covenant holiday for part of the facility, and both of these have provided us with increased financial flexibility. With over $400 million of cash at the end of December as well as $500 million of additional available borrowing capacity under our credit facility, we believe we are very well capitalized. We have been throughout this pandemic and are right now focused on driving customer value across our diverse revenue lines, and we're getting ready to catch the wave when travel inevitably bounces back. So in summary, despite uneven travel recovery trends in Q4 2020, and in early 2021, the current backdrop makes us increasingly optimistic that travel could come roaring back as early as the second half of the year. More importantly, we have positioned the company well in terms of future growth potential and margins. With that, we will open it up for your questions.

Our first question comes from the line of Lloyd Walmsley with Deutsche Bank.

Thanks, guys. Couple, if I can. First, Steve, could you give us a sense for where you are in terms of establishing key relationships with OTAs, hotels, other kind of companies to directly build up supply of kind of discounts and perks for TripAdvisor Plus? And what is the roadmap for adding new benefits for subscribers of TripAdvisor Plus? And then, second one would just be, can you give us a sense of how the unit economics work? How you're kind of providing the discounts? Who's funding those and what the puts and takes are for you guys, for a hotel supplier, or an OTA for participating in that? Thanks.

Certainly. Thank you, Lloyd. That's a great question. When we discuss TripAdvisor Plus, it represents a significant benefit for everyone involved. Travelers enjoy fantastic discounts and perks, enhancing their travel experience. For TripAdvisor, we benefit from the subscription revenue and hope to establish a strong recurring revenue stream. Regarding hoteliers, as you mentioned, we have shifted our approach. Instead of taking a commission, we encourage hotels to provide discounts directly to customers. If they previously paid a percentage to other distribution channels, they can now offer that same percentage as a discount through TripAdvisor directly to Plus subscribers. This way, Plus subscribers receive the discount along with the additional perks, creating an attractive offer for consumers. Hoteliers can provide packages at comparable or lower costs than other channels. For hoteliers, there are several advantages: access to our exclusive club on TripAdvisor, better visibility for their properties, and the potential for attracting higher-end guests who may stay longer. The distribution costs remain competitive compared to their other channels. From TripAdvisor's perspective, we don’t incur significant costs in delivering this service beyond basic customer support. Our revenue primarily comes from the subscription fees for TripAdvisor Plus. When subscribers return to book other services, like attractions, we earn a margin even after providing discounts. Travelers will continue to use TripAdvisor for planning other parts of their trips, solidifying our position as the preferred planning tool for these subscribers, contributing to our repeat business. In response to your second question about our roadmap for new benefits and subscribers, we plan to expand across the U.S. and introduce additional benefits at that time. We have a clear strategy over the next year to enhance offerings that will help transform travelers into more savvy ones. We are starting with hotels and experiences because these are commonly booked on our site and offer significant savings, but our ambitions extend well beyond these categories. Our ultimate goal is to create an affordable travel subscription that appeals to everyone, enhancing the travel experience for all users. We believe this will be a compelling offer.

Thanks. Good luck. Very, very interesting product. Excited to see it unfold.

Thank you very much.

Your next question comes from Richard Clarke with Bernstein.

Good morning. Thank you for taking my questions. I want to start with your guidance for Q1 regarding revenue comparisons to pre-pandemic levels and how this might look compared to Q4. Could you provide insights into different geographies and components? What trends are you observing? What's declining and what's improving? Additionally, I have a follow-up question about your mention of an additional $12 million in costs. What does that entail? Is it related to bonus accrual for the full year, and where did those one-time costs originate?

Richard, I'll address those questions. Thank you for them. Regarding the first quarter, several factors contribute to the differences in revenue streams between Q4 and Q1. Europe significantly affects our business currently, especially due to the lockdowns which have broadly impacted our operations there. Our fork business, particularly in the restaurant sector, is heavily reliant on Europe, so this is having an effect. As the lockdowns persisted throughout Q4 and are expected to continue into Q1, this is the basis for our guidance for the upcoming quarter. However, we noted that February showed a marked increase in activity, indicating some improving fundamentals in the business. This is encouraging for the remainder of the quarter and the first half of the year. Nonetheless, the ongoing lockdowns in Europe are contributing to our cautious outlook for Q1. Regarding the additional $12 million expense in Q4, which we suggest should be excluded from the run rate in your analysis, this was an extra cost in compensation. It was tied to bonuses we accrued throughout the year, reflecting a lower bonus percentage. By the end of the year, we decided, in consultation with our Board, to raise it, although it remains below 100% for the year. We want to clarify that while this expense affects our Q4 P&L, you should account for $12 million less if you're calculating a run rate for the quarter and projecting into the next year.

That’s very clear. Thanks very much.

Your next question comes from Naved Khan with Truist Securities.

Thanks a lot. Maybe a quick follow-up on Trip Plus. And maybe I'll start with a clarification. So if a participating hotel that's giving perks to the members is booked through an OTA, would the traveler still receive the perks? Or is it only on direct bookings? And then can you just maybe give us a sense of the size of the beta? What percentage of the traffic that’s eligible is getting exposed to this? And how should we expect that to grow as the year progresses?

Certainly. Thanks, Naved. It's Steve, and I'll take that. To answer your first question, all perks and discounts are available to travelers who subscribe to TripAdvisor Plus and then complete their booking on TripAdvisor. We have established a solid booking process where we store credit card information to facilitate easy transactions. We aim to create a habit where travelers recognize a great deal, like a $250 discount for a five-night stay, which is close to our average savings. After paying the $99 subscription fee, travelers still come out ahead financially. They can then utilize similar discounts on future trips, having already paid the subscription fee, which translates into savings that they can spend on new experiences found on our platform or anything else they desire. Regarding the beta rollout, we are still in the early stages and are excited that it is live. Currently, it is available only to a U.S. audience, and we anticipate expanding it to more of our U.S. traffic in the first half of the year, followed by other English-speaking markets later on. We see significant potential with TripAdvisor Plus, having noted 160 million instances since 2019 where travelers showed enough interest in specific properties to utilize our meta auction and redirect to an OTA or direct supplier. This represents numerous opportunities for TripAdvisor to showcase attractive discounts and perks through the subscription, encouraging customers to sign up, recoup their costs with their first purchase, and enjoy benefits throughout the year. Our audience consists of repeat travelers who are likely to return to TripAdvisor multiple times annually. Therefore, it doesn't require a high conversion rate to identify an audience that is enthusiastic about this product, especially with 160 million opportunities available.

Got it. A quick follow-up if I may. As you plan for a recovery that takes hold as the year goes on, any plans to increase your ad spending in advance of that? How should we be thinking about your ad spend in relation to the bookings that happen ahead of time?

So I would say we have so much traffic on our site today that we don't feel a need to reach out to market space on non-owned or paid channels. Of course, our paid marketing or regular performance marketing will grow as traffic returns. It's really just a function of our kind of standard operating procedure. When it relates to Plus specifically, again, I talked about that 100 plus million number of people who are already potentially Plus clients. And we don't need to reach outside of TripAdvisor to talk to those folks. Ernst, do you want to add anything?

No, I think that's correct, Steve. Outside of the business, as we've said before, is the marketing expenses mostly going to be variable with revenue?

Your next question comes from Tom White with D.A. Davidson.

Thank you for taking my questions. I'd like to ask two. I appreciate the insights on Trip Plus, Steve. It seems like the platform is moving towards becoming more transactional. I'm curious to hear your thoughts on the initial efforts to transform TripAdvisor into a transactional website, specifically the lessons learned from the Instant Booking days and how those will inform the current rollout. Also, could you provide an update on your progress in utilizing customer data? You’ve mentioned this in previous calls, and I would love to hear how those initiatives are developing.

Thank you for the question, Tom. From our experience with Instant Book and previous transactions on TripAdvisor, we learned a lot about functioning as an effective transaction platform. When we launched Instant Book globally, we successfully facilitated numerous bookings with the help of many partners. However, the challenge we faced was that we didn't provide a strong enough value proposition for users to choose TripAdvisor over other options available in the market. Looking ahead to TripAdvisor Plus, it has similarities to Instant Book since the transactions still occur on TripAdvisor, but the message is different. We're presenting it as a subscription service that empowers travelers by offering immediate benefits such as savings or room upgrades, making it an easy choice for users. While TripAdvisor Plus may not have the same frequency of use as Amazon Prime, it offers clear, immediate advantages, such as saving $200 or allowing users to opt for a private tour instead of a group tour. Additionally, we're enhancing the non-transactional aspects to assist travelers during their trips and provide support when issues arise, with plans to expand these features over the years. We’ve already demonstrated our capability in the transaction space with hotel bookings and have successfully sold experiences on TripAdvisor for many years. Regarding the second question about our use of customer data, it plays a crucial role as we roll out trips and offers to existing members and contributors who already have a relationship with us. Our media business's targeting abilities continue to improve, allowing us to create more effective campaigns for our advertisers using the advanced capabilities we've been implementing, some of which are already live, while others are still being developed.

Great. Thanks for the details, Steve.

Thank you.

Your next question comes from Mario Lu with Barclays.

Great. Thanks for taking the question. I’ve another one on Plus and one on alternative accommodations. So the one on Plus just wanted to take a step back, can you talk more broadly about the genesis of the product? I just wanted to share your thoughts on why you think TripAdvisor is uniquely positioned to succeed with a subscription product versus say the traditional OTAs. And then secondly, on alternative accommodations. They're continuing to gain share versus hotels within the travel industry. So just curious to see if anything has changed in terms of your strategy in this category to either ramp up supply or add more partnerships to show more listings in this category. Thanks.

Certainly. Thank you, Mario. You asked two great questions. Firstly, regarding the Plus offering, we've been analyzing traveler behavior on TripAdvisor for many years. People come to our site seeking guidance, and we generate revenue through advertising. Although this has built a substantial business, we've always been aware that we are sending travelers away to book elsewhere, which means we can lose credit if they don't book immediately. While our meta engine helps users find good prices, it doesn’t necessarily provide a better deal or travel experience compared to what they could find on their own. Travelers want enhanced experiences and better value for their money, and we have a large number of travelers visiting our site for various types of trips. We saw an opportunity to offer genuine discounts and perks that customers can't find through traditional booking channels or other meta sites. By placing this behind a subscription model, it allows us to offer these benefits to users willing to pay for membership. Our initial surveys indicated strong interest in such a product. We believe we can effectively market this subscription to our existing audience, as shown by the 160 million visits in 2019 from users planning expensive trips. We selected a membership price of $99, equating it to a 15% discount on a typical $750 purchase. We can easily educate our audience about this subscription since they're regularly engaged with our site. Additionally, hoteliers have been receptive to offering discounts and perks through this model, as it can represent a lower distribution cost compared to their existing channels. We've begun enlisting hotels, and our direct sales force is actively signing up additional properties. On the traveler side, we've seen that users are already comfortable making transactions on TripAdvisor, which demonstrates trust in our platform. This subscription is an added product to complement our current auction offerings. If users don’t find their ideal property through Plus, they still have the option to click off to fulfill their needs elsewhere. Before the pandemic, we served over 400 million unique visitors each month; considering that we serve roughly a billion travelers annually, securing 10 million subscriptions would represent less than 1% of our traffic, translating to substantial recurring revenue. While this won’t happen overnight and we have plenty of supply to sign up, there's significant market potential. We have the capability to reach users shopping on our platform, and we believe that post-COVID, travelers are ready for subscription products. Overall, this is not a matter of one side winning over the other; our approach enhances options for travelers while allowing us to pass some commission back to the customer in a way that is challenging for traditional channels to replicate. Great. The second question. Absolutely, we see alternative accommodations continue to grow. We had a pretty good last summer on our site for our rental inventory. It's just a smaller piece of our overall pie. And so we do look to grow choice. We do look at some point to be able to integrate in the rental experience into TripAdvisor Plus because much of those travelers are also planning rental stays. We don't have anything kind of new to report at the moment. But please understand, we are keenly aware of consumers interest in this type of inventory. And the fact that we have a hotel auction that gets inventory from lots of different places, obviously, we have a rental, not really an auction, but we have a rental display that also gets inventory from multiple sources and we do look to expand that over time.

I want to emphasize what Steve mentioned about our broad platform, including rentals. It's important to note that during the pandemic, the rental business experienced growth due to specific travel trends. People have been taking more local trips instead of flying or driving long distances. Although we've seen significant developments this year, I anticipate a return to more typical travel behaviors once the pandemic is behind us and people feel comfortable traveling by air and staying in hotels. Therefore, I would advise against overestimating this trend for the long term.

Okay. Thank you, both.

Your next question comes from Jed Kelly with Oppenheimer.

Thanks for taking my question. I have one about Plus and another regarding current trends. So on TripAdvisor Plus, how are you planning to ensure there’s enough supply and what actions are necessary to mitigate potential churn? Additionally, when booking a hotel, will the Plus option be highlighted if I pay $99 to access savings? Also, regarding recent trends, we've noticed a decline in traveler numbers in the U.S.; have you observed any improvement in traveler interest over the past few weeks?

Great. Thanks, Jed. I'll address the recent trends with Ernst. Your question pertains to our approach to supply and how we can avoid natural churn. Were you inquiring about churn related to hotels or to customers?

The customer side is showing some improvement.

We are addressing the supply side by utilizing traditional discount aggregators to bring over 100,000 properties online rapidly, offering them attractive discounts and perks that have already been negotiated with hotels. This helps these properties stand out. Additionally, we have been signing individual hotels through our direct sales team. We have a substantial inventory of lodging available on our site, and while many travelers focus on more expensive trips, we are reaching out to those properties and demonstrating the value of joining our platform without requiring long-term contracts or guaranteed discounts on every room. Hotels can adjust their offerings to suit their needs for increased reservations. In terms of churn, travelers in our beta mix will notice a variety of hotels available through our Plus program, with more options expected as we increase partnerships and direct sales. There are no current challenges with availability, providing us with plenty of opportunities to meet consumer demand. We foresee that when a traveler considers hotels in a city like Miami, they will notice Plus properties due to the discounts and perks advertised. To avail these offers, they must subscribe to our trip subscription. While they can choose to book through traditional online travel agencies at regular rates, our TripAdvisor Plus rates provide better discounts, making these hotels appealing choices. Once customers purchase a subscription, it lasts for a year, during which they find numerous ways to save on hotel bookings using our discounts and perks, including 10% off attractions. Most Plus subscriptions tend to pay for themselves with just one purchase, and we anticipate customers will take multiple trips annually. With every additional trip, they experience further savings. At the end of the year, we could remind them of the total savings from booking multiple hotels, prompting them for a $99 renewal, thereby creating a compelling reason to continue their TripAdvisor Plus subscription. While there will always be some churn, our target audience typically travels more than once a year. Since the subscription cost is often recovered with the first purchase, it’s easy for us to ask if they plan to take at least one more trip in the coming year. If they agree, and have had a positive experience, they are likely to continue.

Regarding your second question, we did notice a soft start in January. However, February showed improvement, with revenue increasing more than what is typically seen from January to February, which is a positive sign. We are also observing a market increase in searches over the past 90 days compared to the previous three months, which brings some optimism. February is definitely off to a better start than we anticipated or than what we experienced in January, although the performance varies across different businesses. The U.S. market has been performing reasonably well. In January, we noted that our North American hotel auction was about 50% of the previous year, while Europe was significantly lower. This illustrates the contrast between the U.S., where there are relatively few travel restrictions, and Europe. We are hopeful that as travel restrictions ease, the rollout of the vaccine continues, and the number of cases declines in Europe, we will see improvements in trends for both North America and Europe.

Thank you.

Your next question comes from Eric Sheridan with UBS.

Thank you for the question. I believe we've covered the Plus topic already. Moving back to your perspective on the recovery, can you share your thoughts on how your position in the broader marketing funnel might evolve as demand begins to rise again? Will you be a leading or lagging indicator in this process? Additionally, how are discussions evolving with your advertisers regarding how they may leverage the platform post-COVID compared to 2019 and earlier? Regarding the local and experiences aspect, do you think significant efforts are needed to increase inventory scale or to inform travelers and consumers about your offerings, or is it primarily dependent on the reopening of demand for recovery in those sectors over the next few years? Thank you.

Thank you, Eric, for those great questions. Addressing the scope of the recovery is indeed challenging. We’ve noticed that traffic on TripAdvisor, reflecting people’s planning or thoughts around trips, hasn’t decreased nearly as much as actual travel. This suggests we might be a leading indicator of consumer travel interest, as people are still searching and returning to the platform. Although there's a drop in unique users, it’s significantly less than our revenue drop because bookings haven’t fully resumed yet, but people are still dreaming of trips. As we anticipate, especially in the second quarter, with vaccination schedules being set in the U.S., people may feel more enthusiastic about planning their trips. Knowing their vaccination dates can trigger that excitement. From a marketing angle, businesses that aim to engage with customers considering summer trips should take advantage of the attention that our platform is currently receiving during these planning moments. Ernst, would you like to add anything?

Yes, I would add that when we analyze our business by each segment, we've noticed that restaurants adapted much faster than other areas last year. In the third quarter, once restaurants reopened in Europe, our business rebounded to 2019 levels, and in some countries, it even exceeded that. I anticipate this sector will perform well. Experiences, on the other hand, have been slower to recover and are expected to continue lagging. Additionally, regarding our hotel auction, due to our different revenue recognition methods compared to OTAs, we may recognize revenue sooner than they do. We record revenue upon the actual click, while OTAs recognize it based on stays, which could serve as an early indicator for our business rather than a lagging one.

Currently, the main issue is demand rather than supply. There aren't enough people taking leisure trips to engage in exciting activities. However, once leisure travel picks up again, especially among our core audience in Western Europe and the U.S., we believe we have the necessary supply in place. We are continually adding more options, but we don't see supply as a restriction. Our focus is on increasing demand and showcasing the appealing experiences available in tourist destinations. Through Viator and TripAdvisor, we believe we have adequate visibility and audience engagement, with enough travelers who should be booking experiences. We need to encourage them to commit to booking online instead of waiting until they arrive at their destination. The situation is different when considering supply in Asia, but for our key markets, the challenge is primarily getting travelers back into the habit of booking trips that include experiences. For example, currently, not many travelers in the U.S. are visiting the Vatican for museum tours. When that demand returns, we will be fully prepared to meet it.

Thanks so much for the color, guys.

Thank you.

Your next question comes from Kevin Kopelman with Cowen.

Thanks a lot. Just a quick follow-up. Could you talk a little more about the initial learnings from the beta test on Plus? What initial conversion rates are you seeing and what would be a realistic goal over time? Thanks.

Sure. So that, of course, is why we do a beta, we look to learn. And it's out to a decent portion of our U.S traffic so that we're getting daily subscriptions, we're watching where we are in the funnel. It's too early to really talk about the conversion rates of where we're at and we don't honestly know what the right target is. We certainly would hope that the discount in the perk would generate a pretty compelling reason to go into the funnel, hey, I can save $300 here, that's pretty exciting. And then, again, we have the content from the hotels when making the transaction fairly straightforward. We're happy to store your credit cards, make it easy to come back. And then knocking down all the reasons why people who either get stuck, or there's extra friction in the flow. But the core value proposition, I get a early check in, late check out, I get a food plate in the room, I'm saving $200. This sounds like a really simple reason to book on TripAdvisor to subscribe to TripAdvisor Plus. And that's sort of, if you will, replacing a user was going to click off to the hotel site or for an OTA for just that particular trip And we feel like it's a better value for the traveler to book that TripAdvisor Plus offering. It makes economic sense for us. And the hotel is happy because it's a less expensive distribution channel. So again, win-win-win all around. And we will be out of beta relatively soon as we look to expand the opportunity to both learn faster, and just help more people start to realize the benefits of Trip Plus in advance of the peak summer travel season.

Excellent. And as you think about the 160 million shots on goal, can you give us a sense of how much is that of your kind of overall hotel traffic, or hotel ad revenue? Just to give us a sense on that?

I don't know offhand, but you could estimate our auction revenue, guess our CPC, and calculate the total clicks we might generate in a year. Most travelers on our site are looking for what I would call the ordinary trip, which includes staying a couple of nights, half leisure and half business trips, or visiting family. There are many reasons people travel. The TripAdvisor Plus offering can be useful for those short trips if someone wants to upgrade, though it comes with a $99 cost. We're primarily focusing on larger trips and longer stays, which is why we shared the 160 million number to show that we have many travelers already planning trips of that scale. We expect this to bring in incremental revenue, and recurring revenue will be a fantastic part of our overall offering. I hope that clarifies things.

Thank you, Steve.

Your next question comes from Lee Horowitz with Evercore ISI.

Thank you for the question. I have two points to address. First, regarding Plus, I want to emphasize that it is not solely reliant on OTA losses to succeed. By leveraging hotel discounts through hotelier distribution costs, we may find ourselves in more direct competition with OTA suppliers. How do you envision managing this tension with key advertisers on your platform? Secondly, reflecting on Eric's question regarding Experiences and their recovery from COVID, do you foresee that the Experiences industry has been significantly affected? Will you need to increase your spending on sales and marketing to attract more Experience suppliers, especially considering that many may have gone out of business during the crisis? In your experience, what is the average timeframe between investing in sales and marketing and successfully onboarding an Experience supplier to achieve meaningful bookings on the platform? Thank you for your time.

Sure, I'll address the Plus question. Thanks for the thoughtful inquiries. At a high level, it makes sense to consider that if someone books through TripAdvisor, it could be seen as a direct booking for suppliers, which would mean that the OTA misses out on that booking. While this is technically accurate, the scale of these bookings pales in comparison to what our major OTA clients experience, making it hard to see this as significant. Unlike Instant Book, which involved participation from OTAs, TripAdvisor Plus isn't aimed at the majority of our user base, while Instant Book was designed for a broader audience. Instant Book focused on quick, one-night hotel bookings via mobile, which was a more competitive strategy, and it took some time for OTAs to get onboard. However, from our discussions with OTAs regarding this product, they view it differently. This product operates within a specific framework, and discounts tied to paid services are a well-known practice in the travel sector. Although there is a potential for TripAdvisor to capitalize on this, it doesn't pose a significant threat to big online travel agencies' operations. Therefore, we don't anticipate this being an issue. Regarding your question about Experiences, Ernst, would you like to add any comments about the supply side?

Yes, Lee, we don't see this as a significant push into supply that differs from our usual approach as the market recovers. We have ample supply and overlapping supply in numerous markets, with multiple providers offering similar services. Even if some providers exit the market, we believe it won't negatively impact our overall consumer offering. Additionally, there are several historically high-revenue attractions, such as the Vatican, Sagrada Familia in Barcelona, and special tours at the Louvre in Paris, which are likely to return when travel resumes. Therefore, we aren't particularly worried about this. Our focus is more on how to capitalize on marketing to consumers when the market rebounds rather than what we need to do for our supply base.

Helpful. Thank you, both.

And our last question comes from James Lee with Mizuho.

Great. Thanks for taking my questions. Two here. Steve, giving your focus on subscription, maybe can you talk about any changes to your view on the hotel metasearch product over the longer term? Should we think about the overall strategy from a consumer point of view, is more of this segmentation strategy. For example, for high ASP traveler, it goes to subscription and maybe for mass market, do you want to still focus on metasearch? And also secondly, on Trip Plus again, sorry about additional questions here. During your testing here, just curious what your learning is on that specifically? Do you think the demand that you're seeing for people signing up, is that incremental? Or do you think there's some sort of substitution effect coming from other travel subscriptions? Thanks.

Thank you for the question, James. We're currently focusing on marketing Plus as the simplest choice for travelers. For example, if a property offers a $25 discount while the subscription costs $99, we're not pushing TripAdvisor Plus aggressively because the value isn’t compelling enough. However, if a traveler could save $150, it makes more sense for them to consider Plus rather than engaging with our meta auction. We are tailoring our marketing approach based on how much we promote Plus to different audience segments. This strategy may evolve as Plus gains more recognition among travelers who might be looking for better availability on TripAdvisor. For frequent travelers, a $40 savings could be appealing because they plan multiple trips throughout the year. We aim to create messaging that highlights how Plus can save them money over time. For those less focused on price and more interested in a premium experience, we have the opportunity to highlight perks instead of discounts. We believe our meta search will remain relevant for a long time and that Plus enhances it. A typical Plus user might find a great deal for a vacation and appreciate the added benefits. The next time they plan a trip, they may start their search on TripAdvisor, even if the specific hotel they want doesn’t currently offer Plus. This would lead them to click on a meta auction link, which allows us to monetize their search and connect them to their desired hotel, whether it’s through Expedia, Booking.com, or direct suppliers. We don’t see Plus as cannibalizing our business; instead, we view it as a valuable engagement tool as we increase our subscriber base. Additionally, the core TripAdvisor team is focused on fostering more engagement on our platform, turning visitors into members, and encouraging active participation. Some of these engaged members will eventually upgrade to paid Plus memberships. Throughout this process, we aim to provide more reasons for users to return to TripAdvisor. A major part of monetizing that traffic involves our traditional hotel auction, which is performing well. Our clients are paying what we consider fair prices for the traffic we deliver. While there may have been challenges at the top of the funnel, if our efforts to convert visitors into engaged members succeed, we’ll see an increase in traffic to TripAdvisor, which we can support effectively. Regarding your question about testing learnings, we haven't noticed other travel subscription products to benchmark against. Our current tests and product rollouts are attracting individuals who may not have previously considered a travel subscription. We see Plus as a unique subscription option that includes diverse benefits. Consumers aren't necessarily searching for a travel subscription; they're looking for ways to improve their travel experience. By enrolling in our subscription, they can achieve that goal, possibly using the savings from their hotel stay to extend their vacation. We’re glad that they can enjoy the immediate advantages of the subscription.

Great. Thank you.

Thank you.

There are no other questions at this time. I will now turn the call back over to Steve Kaufer.

Well, thank you all. Thank you all very much for joining our call. Time and time again, travelers rebounded, travelers have come back to TripAdvisor. We'll continue executing our strategy and ensure that TripAdvisor plays its rightful role as an influential advisor to travelers into businesses throughout this upcoming recovery. I want to again thank our employees, our TripAdvisor customers worldwide and our shareholders for their support and partnership in 2020 and for the years ahead. So thanks everyone and please stay safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.