With speculation of a sale in the air, Tripadvisor reports record revenue driven – again – by Viator

Two days after announcing it
has created a special committee and retained a mergers and acquisition advisory
firm, Tripadvisor reported an all-time high for revenue in 2023 led by a
49% growth in revenue for its Viator segment.

Tripadvisor CEO Matt Goldberg began Thursday’s call with analysts
to discuss the company’s fourth quarter and full year 2023 earnings by saying
he would not take any questions or provide further updates on the question of a
sale until the time when the company has “something definitive to share.”

Revenue for Tripadvisor for the year was $1.78 billion, up
20% compared with 2022, and $390 million in Q4, up 10% compared with the same
period last year. The company’s adjusted
EBITDA was $334 million for 2023 – up 13% year over year – and $84 million in
the fourth quarter, up 95% quarter over quarter.

“In addition to growing our revenue more than 10% higher
than our previous peak, we have diversified our portfolio, with experiences now
delivering more than 40% of our revenue, as we continue to drive our
transformation at Tripadvisor, market leadership at Viator and profitable
growth at TheFork,” Goldberg said in the company’s earnings statement. 

And on the call he added, “Last year we made meaningful progress
executing against our strategic priorities. We reinforced our market leadership
position at Viator while sharpening our focus on smart user acquisition. Viator
also finished the year at break-even profitability – achieving the full-year milestone
a year earlier than anticipated. At Brand Tripadvisor, we invested in our
strategy and delivered promising early proof points while maintaining financial
discipline.”

Acceleration for Brand Tripadvisor

Brand Tripadvisor, formerly known as Tripadvisor Core, was
nearly up 7% in revenue for the year – from $966 million to $1 billion – and nearly
flat for the quarter – up $1 million to $218 million.

Goldberg told analysts “2024 will be a year of acceleration
for Brand Tripadvisor.”

A key part of that relates to the Tripadvisor app and how it
will use generative artificial intelligence. Last year, the company
re-launched its Trip tool for itinerary planning and integrated OpenAI’s generative
AI technology. Goldberg shared early data regarding customer usage in
November and now says the proof of the tool’s value is continuing to improve.

“First, the average revenue for a Trip user shortly after
the launch was three times higher than average member. That has now increased
to closer to five times – and the average member already monetizes at
approximately ten times the rate of the average non-member,” he said.

“Second we saw a 100% increase in the number of daily users
who generated and saved an itinerary specifically with AI in the back half of
the year, with limited marketing efforts. And the majority are now engaging
with this tool in our app.  Finally we
continue to see growth in the return rate of Trip users – whose repeat rates
are meaningfully higher than users who don’t use the tool.”

Goldberg also mentioned the company is seeing “early but
strong positive indicators” about the generative AI-powered hotel review
summaries launched last fall and now implemented for more than 30 thousand
hotels, which he described as an example of “how we are uniquely positioned to
use technology to draw differentiated insights from our proprietary database of
quality content and behavioral data.”

And using AI is a key part of the priorities Goldberg identified
to help grow Brand Tripadvisor:

• using data and AI for better personalization: “This starts
  with recognizing them [members] for their contributions to our community and
  extends to broader benefits and rewards we can offer to our free membership
  program. It also includes new ways to engage with our product including in AI-driven
  conversational search experiences and iterative trip planning capabilities that
  better integrate commerce opportunities by helping travelers find the right
  hotels, experience or restaurants to round out their itineraries.”
• shifting marketing to an engagement-led strategy: “Historically
  we’ve optimized everything from our paid search spend to our CRM to drive immediate
  click and display revenue. …  We now have
  the opportunity to target higher-value audiences more directly and drive more users
  to sign up and sign in as members to download our app and to begin planning a
  trip – because we know each of these behaviors is orders of magnitude more valuable
  to us than same session clicks.”
• improving the experience in the Tripadvisor app: “Our aim to
  deliver an essential app for travelers that convinces more of audience to
  download and use the app as the best end to end trip companion powered by AI.”

Viator

When asked by an analyst how Monday’s news about the
potential sale will affect “planning for the potential spinoff of Viator,”
Goldberg reminded listeners that since
he joined the company in July 2022, that topic has not been a priority.

“I think you can see that our focus on the traveler, the experience
they have with us and the way our product delivers over and over for them and
has really shown itself to prove out in the results that we’ve seen to date. And
that remains true. We are totally focused on the business,” he said.

“The announcement this week doesn’t change that. I’m focused
on moving things forward and focused on our strategies, which I think are clear
and really delivering and I know that our teams are doing the same.

Viator’s revenue for the year was $737 million – up 49%
compared with 2022 and up as a percentage of Tripadvisor’s total revenue from 33% in 2022 to more
than 40% last year. In Q4, Viator’s revenue was $161 million – a 27% increase compared with Q4 2022.

Viator’s gross bookings value came in at $720 million for
the fourth quarter and adjusted EBITDA was $15 million, compared with a loss in
Q4 2022 of $3 million. 

“We exited the year with solid financial results, delivering
fourth quarter revenue of $390 million, reflecting year-over year growth of
10%,” said chief financial officer Mike Noonan. “Adjusted EBITDA of $84 million, or 22% of revenue, came in better than
expected due to favorable channel mix and disciplined marketing spend. In 2024, we will continue to prioritize our
segment strategies, which focus on long-term growth and profitability.”

For Brand Tripadvisor, the segment’s revenue from “experiences and dining” led the
way with annual revenue of $176 million, up 31% for the year, and quarterly
revenue of $38 million, up 12% compared with Q4 2022.

Branded hotels revenue was nearly flat for the year, up just
1% to $659 million, while in the quarter revenue from branded hotels dropped 4%
compared with Q4 the year prior.

“During the fourth quarter, the decline in branded hotels
revenue was primarily a result of our European hotel meta offering,” the company’s statement said. “Within
branded hotels, during the full year 2023, growth in the hotel B2B offering was
mostly offset by declines in the hotel meta offering. Hotel meta performance,
during the full year 2023, was impacted primarily by declines in Europe, which
more than offset growth in Rest of World.”

Brand Tripadvisor’s media and advertising revenue for the
fourth quarter was $35 million, reflecting year-over-year growth of 6%, and
media and advertising revenue for the full year was $145 million, reflecting year-over-year
growth of 12%.

Tripadvisor’s selling and marketing costs in 2023 were $940
million, an increase of 20% year over year but still 53% of consolidated
revenue. For the fourth quarter, selling and marketing costs were $179 million,
a decrease of 8% compared with Q4 2022.