TRIPADVISOR, INC. The information included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
our unaudited condensed consolidated financial statements and the accompanying
notes included in this Quarterly Report on Form 10-Q, and the consolidated
financial statements and accompanying notes, as well as Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in our
Annual Report on Form 10-K for the year ended
This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements reflect the views of our management regarding current
expectations and projections about future events and are based on currently
available information. Actual results could differ materially from those
contained in these forward-looking statements for a variety of reasons,
including, but not limited to, those discussed in our Annual Report on Form 10-K
for the year ended
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this report. Other unknown or unpredictable factors also could have a material
adverse effect on our business, financial condition and results of operations.
Accordingly, readers should not place undue reliance on these forward-looking
statements. The use of words such as "anticipates," "estimates," "expects,"
"intends," "plans" and "believes," among others, generally identify
forward-looking statements; however, these words are not the exclusive means of
identifying such statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. These forward-looking statements
are inherently subject to uncertainties, risks and changes in circumstances that
are difficult to predict. We are not under any obligation to, and do not intend
to, publicly update or review any of these forward-looking statements, whether
as a result of new information, future events or otherwise, even if experience
or future events make it clear that any expected results expressed or implied by
those forward-looking statements will not be realized. Please carefully review
and consider the various disclosures made in this report and in our other
reports filed with the
Overview
Tripadvisor operates the world's largest travel guidance platform, connecting a global audience of prospective travelers with travel partners through rich content, price comparison tools, and online reservation and related services for destinations, accommodations, travel activities and experiences, and restaurants. Our mission is to help people around the world plan, book and experience the perfect trip.
In 2000, under our flagship brand Tripadvisor, we launched www.Tripadvisor.com
in the
Executive Financial Summary
Tripadvisor is the world's largest travel guidance platform, as measured by unique users de-duplicated monthly, according to SimilarWeb. As a result, Tripadvisor represents an attractive platform for travel partners - including hotel chains, independent hoteliers, OTAs, destination marketing organizations, experience operators, restaurants, and other travel-related and non-travel related product and service providers - who seek to market and sell their products and services to a global audience. Tripadvisor's platform and product offerings enable consumers to discover, research and price shop a variety of travel products, including hotels, flights, cruises, cars, vacation rentals, tours, travel activities and other experiences, and restaurants; and book a number of these travel experiences either directly on our platform, or on our travel partners' websites or mobile apps.
Our Long-Term Growth Strategy
The global travel market (which excludes dining) is expected to reach
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offering products that delight travelers by reducing friction throughout the travel planning and trip-taking journey;
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driving consumer loyalty to our platform through user experience and by offering products and services that increase engagement with our platform and result in membership growth, new and repeat bookings, mobile app engagement and repeat usage;
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driving traveler and diner engagement, bookings, and loyalty on our branded platforms by offering industry-leading choices for online bookable experiences and restaurants in top destinations worldwide;
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deepening travel partner engagement on our platform by expanding the number of products and services we offer; and
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leveraging our platform's brand and scale and our unique attributes to expand and grow our offerings such as hotel and restaurant B2B solutions, direct-to-consumer products and services where consumers pay us on a per trip planned or an annual subscription basis and click-based and display-based media advertising.
We expect to enable our growth through investment in:
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organic investment in marketing and technology (e.g., machine learning) to further improve the experiences we can deliver to consumers and travel partners on our platform; and
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inorganically by opportunistically pursuing strategic acquisitions.
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--------------------------------------------------------------------------------Business Trends
The online travel industry in which we operate is large and also highly dynamic and competitive. Our overall strategy is to deliver more value to consumers and travel partners in order to generate more monetization on our platform. While we operate with a long-term growth focus, our specific growth objectives and resource allocation strategies can differ in both duration and magnitude within our segments. We describe below these dynamics, as well as the current trends affecting our overall business and reportable segments, key drivers of our financial results, and uncertainties that may impact our ability to execute on our objectives and strategies.
COVID-19
The COVID-19 pandemic has caused a significant negative impact on the travel,
leisure, hospitality, and restaurant industries (collectively, the "travel
industry"), and consequently has adversely and materially affected our business,
results of operations, liquidity and financial condition since early 2020,
continuing, albeit, at a lessening degree and unevenly at times, throughout 2021
and through the three months ended
Traffic trends on our platform, a leading indicator of consumer travel demand
have improved substantially since the trough of significant declines seen in the
second half of
Our consolidated revenue for the three months ended
The ultimate duration of the negative impact of COVID-19 on our results of operations, liquidity and financial condition remains uncertain and is dependent upon factors beyond our control, such as the continued transmission rate of COVID-19, including new variants and/or additional resurgences of existing variants, if any, the extent and effectiveness of containment actions that are taken, vaccine efficacy, and the ultimate long-term impact of these and other factors on consumer demand for travel and usage patterns on our platform. Although uncertainty remains, we generally saw continuous, albeit uneven, improvement in the travel market in 2021 and during the first quarter of 2022 and expect that the market will continue to improve as 2022 progresses, driven by continued vaccination programs, the gradual lifting of government restrictions, and what we believe to be continued significant pent-up consumer demand for travel industry related services.
Hotels, Media & Platform Segment
Our Hotels, Media & Platform segment is comprised of Tripadvisor-branded hotels revenue and Tripadvisor-branded Display and Platform Revenue.
Tripadvisor-branded hotels revenue primarily consists of hotel auction revenue and, to a lesser extent, hotel B2B revenue, which primarily includes subscription-based advertising services that we offer to travel partners and click-based revenue generated from hotel sponsored placement advertising that enables hotels to enhance their visibility on Tripadvisor hotel pages. Tripadvisor-branded Display and Platform Revenue primarily includes impression-based advertising revenue.
Our overall strategic objective in our Hotels, Media & Platform segment is to drive revenue and profits while delivering compelling services to consumers and driving a holistic user experience, increased customer engagement and monetization, as well as offering travel partners a diverse set of advertising opportunities on the Tripadvisor platform.
For consumers, we test and implement product enhancements that deliver a more engaging and comprehensive hotel shopping experience. This includes providing rich, immersive content - reviews, photos, videos and ratings, among other contributions, increasing the number of travel partners and properties as well as the available hotel supply on our platform. We believe providing consumers tools to discover, research, price shop and book a comprehensive selection of accommodations helps increase brand
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--------------------------------------------------------------------------------awareness and brand loyalty and, over time, can result in deeper consumer engagement, more qualified leads delivered to travel partners and greater monetization on our platform.
We seek to monetize our influence through hotel-related product improvements, supply and marketing efforts and customer advertising opportunities. Historically, we have generated a significant amount of hotel shoppers from search engines, such as Google. A hotel shopper is a visitor to our platform that views either a listing of hotels in a city or a specific hotel page. Our key ongoing objective related to traffic acquisition is to attract or acquire hotel shoppers at or above our desired marketing return on investment targets. Over the long-term, we are focused on driving a greater percentage of our traffic from direct traffic sources rather than search engines, which comes with little to no traffic acquisition costs.
As noted in the "COVID-19" discussion above, easing of travel restrictions
across the world, rising vaccination rates, and an increase in consumer travel
demand drove improved financial results during the first quarter of 2022, as
Hotel, Media & Platform revenue increased by 82% during the three months ended
While slower to recover than Tripadvisor-branded hotels revenue, our display and
platform revenue increased by 71% during the three months ended
Over the long-term, we believe that improving our offerings to deepen consumer engagement on our platform will enable us to more effectively monetize our influence. For example, in Tripadvisor-branded display and platform revenue, we enable travel partners to amplify their brand, generate brand impressions, and potentially drive qualified leads and bookings for their businesses. We continue to work on initiatives to better leverage our audience, content, data, travel influence and platform breadth to open up new media advertising opportunities through a more modern, high-powered advertising suite spanning native, video and programmatic solutions. Our platform is open to advertising from travel endemic and non-travel endemic partners, including industries such as entertainment, spirits, and finance. On the consumer side, we are focused on making Tripadvisor membership more valuable for consumers. As an example, during 2021, we launched Tripadvisor Plus, an annual subscription-based membership that offers financial incentives, benefits and perks to members who book hotels and experiences on our platform.
These efforts demonstrate our continued focus on increasing the quality of customer engagement on our platform, including driving membership growth, increasing personalization, and innovating our mobile app experience. We believe delivering - and improving upon - a great experience for users will encourage more users to use our services more frequently, increase member growth and member engagement, and drive loyalty to our brand and services. In turn, we believe this makes our platform more attractive for travel partners, and can result in increased monetization over time for us and our travel partners.
Experiences & Dining Segment
Our Experiences & Dining offerings contribute to the comprehensive user experience we deliver, which we believe helps to increase awareness of, loyalty to, and engagement with our products, drive more bookings to Experiences & Dining travel partners
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--------------------------------------------------------------------------------and generate greater revenue and increased profitability on our platform. Given the significant market opportunities in these large categories, we expect to continue to invest aggressively in building these offerings to drive consumer engagement, bookings and revenue growth for the long-term. Since the first quarter of 2020, this segment has been negatively and materially impacted at varying levels by a significant reduction in consumer demand due to the COVID-19 pandemic, which has reduced consumer willingness to research, purchase, and consume travel activities. This negative impact has also been driven by a wide variety of government-instituted actions and restrictions around the globe aimed at limiting the spread of the virus, all of which have impacted consumer access to experience offerings and restaurants. For example, during the first quarter of 2021, restaurants in most of the European countries in which our Dining business operates were ordered to remain closed.
However, during most of 2021, our Experiences & Dining segment's financial
results improved significantly and this trend continued in the first quarter of
2022, as revenue in this segment increased by 229% during the three months ended
During the three months ended
We continue to explore new initiatives to delight and engage consumers. For
example, we improved our site navigation, recommendations, sort orders, quality
of our experience products, and offered new consumer payment options and
customer support improvements, as new customer acquisition remains top priority
during the growing travel recovery. In addition, we remain focused on enhancing
and promoting our mobile app experience, further improving the traveler
experience. For operators, we continued to scale a new advertising program,
Other
Other is a combination of our Rentals, Flights & Car, and Cruise offerings and
is not considered a reportable segment. Similar to our other business units,
financial results in Other also improved during the three months ended
Employees
As of
Seasonality
Consumers' travel expenditures have historically followed a seasonal pattern. Correspondingly, travel partners' advertising investments, and therefore our revenue and operating profits, have also historically followed a seasonal pattern. Our financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters,
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--------------------------------------------------------------------------------which represent seasonal low points. During the first half of the year, experience and rentals bookings typically exceed the amount of completed experiences and rental stays, resulting in higher cash flow related to working capital, while during the second half of the year, particularly in the third quarter, this pattern reverses and cash flows from these transactions are typically negative.
Other factors may also impact typical seasonal fluctuations, which include
further significant shifts in our business mix or adverse economic conditions
that could result in future seasonal patterns that are different from historical
trends. For example, although consumer travel demand generally remained
materially lower than historic levels due to the impact of COVID-19 on our
business, these trends improved during 2021, resulting in increased revenues,
and working capital and operating cash flow more akin to typical historical
seasonality trends, which has continued during the three months ended
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that we believe are important in the preparation of our consolidated financial statements because they require that management use judgment and estimates in applying those policies. We prepare our consolidated financial statements and accompanying notes in accordance with GAAP. Preparation of the consolidated financial statements and accompanying notes requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements as well as revenue and expenses during the periods reported. Management bases its estimates on historical experience, when applicable and other assumptions that it believes are reasonable under the circumstances. Actual results may differ from estimates under different assumptions or conditions.
There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We consider an accounting estimate to be critical if:
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It requires us to make an assumption because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and/or • Changes in the estimate or different estimates that we could have selected may have had a material impact on our financial condition or results of operations.
There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in our Annual Report on Form 10-K for the fiscal year ended
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