4 ms·

TripAdvisor could challenge the big two providers of online travel services

13 points by e15ctr0n 12y ago

coldcode 12y ago
A total crock. Having worked for an OTA I can guarantee you that the last thing TA will do is try to build an entire backend to book the hotels themselves. In hotels you only make good margin on huge volume since they more you bring customers the better numbers you can demand. It's not just the processing, it's the relationships with thousands and thousands of hotel chains and individual hotels. It's customer service and dealing with all of those hassles. It's competing in all the different types of hotel booking submarkets (tonight, opaque, long term, vacation, packaging etc). Getting a small percentage of so many sales with almost no expense is way easier than getting more margin but having huge outlay and competing with the big guys (namely Expedia mostly in the US and Priceline mostly everywhere else in the world outside of China). They would be insane to switch their business model. Orbitz is too dinky to compete effectively and Travelocity gave up and is essentially Expedia now. Tripadvisor is in a great place where they bring traffic to everyone but compete with no one. Once they lose that they will lose period. I highly doubt E and P miss their percentage at all.
- gdilla 12y ago
  why not just acquire themselves there? They are loaded.
- e15ctr0n 12y ago
  > TripAdvisor's boss, Stephen Kaufer, denies he wants to take on the big two. "We are a media site," he says. "I want Expedia and Priceline to thrive because they are my clients." Looks like the boss agrees with you. > But soon, holidaymakers will be able to book their entire trips without leaving the TripAdvisor app. Rivals beware. The Economist is known for making bold predictions. What do you think this one is based on?
  - foobarian 12y ago
    They could be reading too much into it. The on-site booking still talks to OTA's back-end API. It's probably most useful to small OTAs who don't want to bother/don't have resources to build their own top-tier UI. But a site like Expedia will probably have their own, nice, well converting UI.
- walterbell 12y ago
  Does TA get paid as an affiliate for completed transactions, or are they paid for traffic (CPC)?
  - coldcode 12y ago
    Both. Even the OTA's themselves do this from competitors. You'd be surprised how much they make although it's just a sidelight for them.
    - walterbell 12y ago
      Is there room for enterprising HN readers to siphon some of this business via niche travel sites? Volume must be large if OTAs are sending traffic to competitors, a bit like traffic peering between ISPs.
e15ctr0n 12y ago
This is the Harvard Business School case study mentioned in the article: http://hbr.org/product/TripAdvisor/an/511004-PDF-ENG http://hbr.org/product/TripAdvisor/an/511004-PDF-ENG Another fascinating article on how TripAdvisor took $4 million of invested capital to build a company now worth almost $14 billion: http://www.businessinsider.com/scaling-is-hard-case-study-tripadvisor-2012-8 http://www.businessinsider.com/scaling-is-hard-case-study-tr...
sanj 12y ago
I work at TripAdvisor and am quite enjoying myself. I'm happy to answer questions to the extent of my ability.
- e15ctr0n 12y ago
  The article implies that TripAdvisor is gearing up to take on Expedia and Priceline as OTAs and that "the two ways of doing business are converging." What is your take on this?
  - sanj 12y ago
    We built instant booking to make booking easier for our visitors. If you look at the phone booking experience on most sites, it is miserable. We've got some phone expertise, and wanted to parlay that into a much better experience. Instant booking is a way for us to exploit that expertise to make a better experience for users, even as they book with one of our partners.
    - e15ctr0n 12y ago
      So TripAdvisor will continue to book with partners and not become an OTA itself?
      - sanj 12y ago
        As coldcode pointed out, "being an OTA" is a lot of work. I'm not involved in that side of the business, but I'd take our public statements at face value.
- OrwellianChild 12y ago
  Can you break down the commission structure that differentiates TripAdvisor from someone like Yelp? Stop me where I go off the rails: - TA collects reviews, good or bad, for free from users. - Then they set up commissioned links to someone like Expedia for the hotel. - Expedia pays them a commission for closing the sale. - Expedia then passes the reservation on to the hotel. - The hotel gets the booking, and pays Expedia for the lead. As long as there is enough money in the system to support two layers of outsourcing on BizDev, this sounds like a fairly stable relationship... ...If TA starts booking directly, however, it can do any of several things: - Charge lower rates than Expedia - Make more margin on the same booking - Provide bundling or other discounting not available from the existing Expedia arrangement - Start selling "preferred listings" which always float to the top of search results It strikes me that the only reason this relationship exists is that Expedia doesn't have a good review front-end... Because the spun it off as TA. Is there any back-end connection/relationship/ownership across Expedia and TA that would facilitate these two not eventually competing as described above? EDIT: Formatting.

13 points by e15ctr0n 12y ago

A total crock. Having worked for an OTA I can guarantee you that the last thing TA will do is try to build an entire backend to book the hotels themselves. In hotels you only make good margin on huge volume since they more you bring customers the better numbers you can demand. It's not just the processing, it's the relationships with thousands and thousands of hotel chains and individual hotels. It's customer service and dealing with all of those hassles. It's competing in all the different types of hotel booking submarkets (tonight, opaque, long term, vacation, packaging etc). Getting a small percentage of so many sales with almost no expense is way easier than getting more margin but having huge outlay and competing with the big guys (namely Expedia mostly in the US and Priceline mostly everywhere else in the world outside of China). They would be insane to switch their business model. Orbitz is too dinky to compete effectively and Travelocity gave up and is essentially Expedia now. Tripadvisor is in a great place where they bring traffic to everyone but compete with no one. Once they lose that they will lose period. I highly doubt E and P miss their percentage at all.

gdilla 12y ago
why not just acquire themselves there? They are loaded.
e15ctr0n 12y ago
> TripAdvisor's boss, Stephen Kaufer, denies he wants to take on the big two. "We are a media site," he says. "I want Expedia and Priceline to thrive because they are my clients." Looks like the boss agrees with you. > But soon, holidaymakers will be able to book their entire trips without leaving the TripAdvisor app. Rivals beware. The Economist is known for making bold predictions. What do you think this one is based on?
- foobarian 12y ago
  They could be reading too much into it. The on-site booking still talks to OTA's back-end API. It's probably most useful to small OTAs who don't want to bother/don't have resources to build their own top-tier UI. But a site like Expedia will probably have their own, nice, well converting UI.
walterbell 12y ago
Does TA get paid as an affiliate for completed transactions, or are they paid for traffic (CPC)?
- coldcode 12y ago
  Both. Even the OTA's themselves do this from competitors. You'd be surprised how much they make although it's just a sidelight for them.
  - walterbell 12y ago
    Is there room for enterprising HN readers to siphon some of this business via niche travel sites? Volume must be large if OTAs are sending traffic to competitors, a bit like traffic peering between ISPs.

e15ctr0n 12y ago

This is the Harvard Business School case study mentioned in the article: http://hbr.org/product/TripAdvisor/an/511004-PDF-ENG http://hbr.org/product/TripAdvisor/an/511004-PDF-ENG Another fascinating article on how TripAdvisor took $4 million of invested capital to build a company now worth almost $14 billion: http://www.businessinsider.com/scaling-is-hard-case-study-tripadvisor-2012-8 http://www.businessinsider.com/scaling-is-hard-case-study-tr...

sanj 12y ago

I work at TripAdvisor and am quite enjoying myself. I'm happy to answer questions to the extent of my ability.

e15ctr0n 12y ago
The article implies that TripAdvisor is gearing up to take on Expedia and Priceline as OTAs and that "the two ways of doing business are converging." What is your take on this?
- sanj 12y ago
  We built instant booking to make booking easier for our visitors. If you look at the phone booking experience on most sites, it is miserable. We've got some phone expertise, and wanted to parlay that into a much better experience. Instant booking is a way for us to exploit that expertise to make a better experience for users, even as they book with one of our partners.
  - e15ctr0n 12y ago
    So TripAdvisor will continue to book with partners and not become an OTA itself?
    - sanj 12y ago
      As coldcode pointed out, "being an OTA" is a lot of work. I'm not involved in that side of the business, but I'd take our public statements at face value.
OrwellianChild 12y ago
Can you break down the commission structure that differentiates TripAdvisor from someone like Yelp? Stop me where I go off the rails: - TA collects reviews, good or bad, for free from users. - Then they set up commissioned links to someone like Expedia for the hotel. - Expedia pays them a commission for closing the sale. - Expedia then passes the reservation on to the hotel. - The hotel gets the booking, and pays Expedia for the lead. As long as there is enough money in the system to support two layers of outsourcing on BizDev, this sounds like a fairly stable relationship... ...If TA starts booking directly, however, it can do any of several things: - Charge lower rates than Expedia - Make more margin on the same booking - Provide bundling or other discounting not available from the existing Expedia arrangement - Start selling "preferred listings" which always float to the top of search results It strikes me that the only reason this relationship exists is that Expedia doesn't have a good review front-end... Because the spun it off as TA. Is there any back-end connection/relationship/ownership across Expedia and TA that would facilitate these two not eventually competing as described above? EDIT: Formatting.