TripAdvisor Inc. said it’s pulling back from a major strategic effort to get travelers to book hotels directly on its website after the initiative cut into revenue growth and sent the stock to its lowest price since 2012.
A massive online repository of hotel and restaurant reviews, TripAdvisor is “increasingly agnostic” about how its customers book their accommodations — whether through the site directly or via links to hotel booking sites — Adam Medros, senior vice president of product at TripAdvisor, said in an interview. The company has changed its website to make its “Instant Book” feature less prominent.
Investors cheered the move, and TripAdvisor shares jumped as much as 8.6 percent to $50.95 Wednesday for their biggest intraday gain in more than a year, even as the company reported earnings that missed analyst estimates. The stock closed at $47.99, up barely 2 percent.
For years, TripAdvisor made money by charging a referral fee for sending its users to sites like Expedia Inc. At the end of 2014, though, it started trying to get those customers to book directly on its site, aiming to capture higher-margin booking fees. The effort continued while revenue fell, and some investors abandoned the stock. In the last few weeks, the company did an about-face, changing its website to more prominently show deals from other websites if the prices were better.
“With Instant Book now heavily rolled back on both desktop and mobile, we no longer view IB as a meaningful headwind,” Cowen & Co. analyst Kevin Kopelman said in a note to clients.
Medros insisted Instant Book is still a key part of TripAdvisor’s strategy.
“If Instant Book wasn’t working, we would just kill it, but we’re not killing it,” he said. “We are trying to change the perception of TripAdvisor to not just be a review site.”
TripAdvisor, like other e-commerce companies, constantly tests different versions of its apps and website to find the best way to make money. Slowing down on Instant Book just means the company is listening to its users, chief executive Stephen Kaufer said on a conference call Wednesday.
“We believe Instant Book plays a role in that, but not as big a role as we anticipated a couple years ago,” he said. “And that’s OK for us.”
A new TV advertising campaign is set to launch this quarter with the aim of convincing travelers to see TripAdvisor as more than just a place to look up reviews, but the best place to find low-priced hotels as well, Kaufer said.
Still, questions remain for TripAdvisor. One of the driving reasons behind Instant Book was the fact that pop-up ads and links to other websites don’t work as well on mobile phones as they do on desktop computers. As travelers increasingly use mobile phones to book hotels and flights, the referral model comes under pressure. Visitors to TripAdvisor’s mobile site or app become paying customers at about a third the rate that they do on desktop, Kaufer said on a conference call Wednesday.
Alphabet Inc.’s Google is also pressing into TripAdvisor’s territory, both in referral fees for hotel booking and in the core business of reviews. The internet giant unveiled a new app last year that helps travelers plan and navigate their trips, a space TripAdvisor says is core to its strategy as well.
TripAdvisor reported revenue of $372 million in the first quarter, less than the average analyst estimate of $376.2 million. Earnings excluding some costs were 24 cents a share, also missing the average projection of 26 cents.