Tripadvisor forced by hotel chains to reverse cash back subscriptions

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Skift take

We have said throughout that membership of large hotel chains will go a long way in determining the trajectory of Tripadvisor Plus. Now it looks like big hotel brands can participate, but the subscription program is reduced and much less convincing.

Dennis schaal

In an astonishing reversal, just three months after the official launch of the Tripadvisor More Subscription program in the United States, Tripadvisor has caved in to hotel chain concerns and will move the offer from immediate hotel discounts when subscribers book accommodation to cash back after check-in.

The change, which begins to take shape in the fourth trimester, appears to be taking its breath away. Consumers got an average savings of $ 350 on initial hotel reservations, according to the company, after signing up for the program for an annual subscription of $ 99.

The problem with the current version of the program, in which hotels provided Tripadvisor with discounted rooms at lower rates than those publicly available on their websites, and did not pay commissions on bookings, is that Tripadvisor openly posted these. rates to site visitors to attract invite them to register with Tripadvisor Plus.

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In an interview on Saturday, Sean Graber, CEO of Tripadvisor Plus, said potential subscribers want to see what they sign up for in advance.

However, despite the fact that Tripadvisor has attracted tens of thousands of hotels to participate in Tripadvisor Plus at the property and aggregator level, such as global distribution systems, the major hotel chains have balked at Tripadvisor thus openly posting discounted rates lower than their published retail prices. rates. Under “price parity” rules, hotels do not reduce the retail rates they offer to the general public through online travel agencies and on their websites to visitors who are not members of their loyalty programs. .

One of the reasons Tripadvisor is changing its business model is that the company calculated that it wouldn’t get enough hotel deals without the involvement of a large hotel chain to attract enough subscribers.

Room rates widely available elsewhere

With the model starting to be tested and deployed in its early stages in Q4, hotels pay Tripadvisor a negotiated commission and provide the company with their publicly available rates. Tripadvisor, in turn, will use these commissions to provide Bookers Plus cash back, or Tripadvisor funds, to their Tripadvisor accounts to use once they check-in at the hotel.

In theory, travelers could use these funds to spend at the hotel, purchase a tour, book another trip on Tripadvisor at any hotel, or receive the reward in the form of cash back.

For a while during the transition, Tripadvisor will be offering both initial discounts for some bookings and cashbacks for others, but the immediate discounts will be phased out.

Will the thrill be gone?

However, will Tripadvisor Plus have the same appeal when transitioning from the current instant gratification model – when booking a hotel for a week at a rate several hundred dollars lower than the rate on the website? from the hotel – having to wait for the trip to take place and get cash back at check-in?

There are plenty of cash back programs offered by credit card companies and online travel agencies, including HotelTonight and Booking.com, so the new Tripadvisor Plus would have a lot of competition. On the other hand, the substantial initial discounts in the initial version of the program were very attractive and the cash back may not be as large for a variety of reasons.

Another factor in the program’s eventual success or failure is the amount of Tripadvisor funds that the company would allocate to subscribers after booking may be less than the current immediate discount plan. Tripadvisor cash back will be heavily tied to the amount of hotel commission, and several of the major hotel chains regularly pay online travel agencies commissions below 10%, although they may also offer certain benefits to Tripadvisor bookers.

Challenging the idea that consumers might find cash backs less attractive than the initial discounts, Graber said in testing that the concept of the Tripadvisor funds ‘piggy bank’ resonated with consumers.

Tripadvisor had high hopes for Tripadvisor Plus

Subscription programs, including those offered by Inspirato for luxury accommodation and eDreams Odigeo for flights and hotels in Europe, appeared to be gaining traction across the travel industry.

As recently as last month, Tripadvisor co-founder and CEO Steve Kaufer told financial analysts that the company’s consumer base is so large – 100 million travelers browse the site each month “in time. normal ”- that Plus in the long run could register tens of millions of members.

“So it’s a small fraction of those travelers who sign up for our subscription product every month because they know they’re going to save money on those hundreds of thousands of hotels, those hundreds of thousands. attractions, ”Kaufer said Aug. 6 during the second quarter of Tripadvisor. call for earnings. “We end up adding millions of subscribers over the next few years with that same longer term opportunity in the tens of millions.”

But some will wonder if the revamped Tripadvisor Plus will have any legs, or if it will add to a long list of Tripadvisor tests and failures, including in vacation rentals, Tripadvisor instant booking, and a high-profile social feed.

“This change would be a big departure for Tripadvisor, which had previously pushed Tripadvisor Plus as offering ‘no evidence’ to customers and enticing them with best-in-class rates,” said Bernstein analyst Richard Clarke. “The new model makes sense and could offer good deals to customers, but will be in a competitive space with Booking.com, Hopper and Revolut also offering cash / credit back on bookings with a $ 99 fee as well. It could ultimately be a test if Tripadvisor Plus can be a full-service travel subscription offering, not just a discount club. “

Tripadvisor spokesperson Brian Hoyt argued that the Tripadvisor Funds program, which would include a form of ‘wallet’, would be compelling for hotels in that it goes beyond the usual transactional relationships between hotels. and online travel agencies. Under Tripadvisor Plus, consumers book hotels on Tripadvisor, but hotels process the reservation behind the scenes and get guest data.

Tripadvisor executives also claimed that the new Tripadvisor Plus offers a branding opportunity for hotels in that there could be joint communication from Tripadvisor and the hotel with bookings about the discount. in property money during their stays. In this way, the hotels could have an additional opportunity after booking to generate income.

Consumers who signed up for Tripadvisor Plus as part of the initial vision – initial discounts on bookings – will have the option to collect payment for their subscription although Tripadvisor did not immediately provide details of how this is done. will work.

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