Tripadvisor stock is down as it revamps hotel subscription service

Richard Clarke, a Bernstein analyst, called the change “a major and unexpected turning point at Trip Plus.” He maintained an outperformance rating, but lowered his target stock price to $ 52 from $ 58.

Tripadvisor Plus, a subscription service costing $ 99 per year, now gives users the ability to book hotel rooms in the United States at lower than published rates. Tripadvisor reports on its website that users save an average of $ 350 on their first trip.

Some investors have been excited about the potential of Tripadvisor Plus as a potentially lucrative subscription service that could boost Tripadvisor stocks, which have been lagging behind in the travel industry. The Bulls were hoping that Tripadvisor could ultimately enroll millions of subscribers and generate significant ongoing subscription revenue.

Barron wrote favorably in July on Tripadvisor, and the subscription service was part of the bull’s business.

Tripadvisor was able to list a few smaller hotel chains for the service, but it encountered opposition from large hoteliers who feared the discounted rates violate “rate parity,” in which hotels offer similar rates on various platforms, including online travel sites.

Reserve assets

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Expedia Group

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Tripadvisor hoped to overcome this concern by arguing that only subscribers could access the discounted rates. And rather than paying commissions to Tripadvisor, hotels would pay nothing to Tripadvisor and offer the discount directly to subscribers. Large hotels, however, were not happy that Tripadvisor was posting the discounted rates on its site to entice users to sign up for the subscription service, Skift reported.

“This new idea is conceptually sound but will enter a crowded market where competitors don’t normally charge $ 99 for the privilege of extracting rewards,” Bernstein’s Clarke wrote. “The larger concern may well be execution and management communication with management changing the model less than 3 months after launch and previously stating that the involvement of the brand hotel was not essential for the product works. “

Under the new program to be rolled out later this year, hotels will be able to offer their lowest public rate to Tripadvisor Plus subscribers and then pay a commission to Tripadvisor. After registration, Tripadvisor will pay a reward into what it calls the Subscriber Vacation Fund, funded by Tripadvisor, which can be paid in cash or applied to future travel.

“The frequent consumer can easily find a cash back / reward offer at Hopper, Revolut or Hotels.com without having to pay $ 99. Tripadvisor will need to prove that its offering is more generous or push full service elements (experiences, car rental, etc.) onto the subscription product. Clarke wrote.

In an email to Barron, a Tripadvisor spokesperson said the new terms should benefit Tripadvisor Plus users by providing greater availability of rooms and satisfactory hotels on the rate parity issue.

“And more hotel offering will equate, in our view, to more subscribers accessing the value of the program for years to come,” the company said.

“We are very excited about this enhancement to Tripadvisor Plus and how it will maximize the revenue potential of our partners (helping them establish a long-term connection with a very valuable traveler audience) as well as the Overall traveler experience using Tripadvisor Additionally, delivering great value and benefits to our subscribers, ”Tripadvisor said.

Write to Andrew Bary at [email protected]