Shares of TripAdvisor (TRIP) are sliding on Monday following a media report saying the company will transition its TripAdvisor Plus subscription program in the U.S. from immediate discounts on hotels to cash-back after check-in. Commenting on the news, BTIG analyst Jake Fuller said the company's apparent pivot "feels like a pretty big concession" and that he now questions whether TripAdvisor can build Plus "without jeopardizing the core advertising business."
CASH-BACK MODEL: Tripadvisor will transition its Tripadvisor Plus subscription program in the U.S. from immediate discounts on hotels when subscribers book an accommodation to cash-back after check-in, Skift's Dennis Schaal reported. The change, which will start in the fourth quarter, comes just three months after the launch of the program.
The issue with the current version of the program, which had hotels providing Tripadvisor with discounted rooms at rates lower than the publicly available ones on their websites, is that Tripadvisor was openly displaying these rates to site visitors to entice them to sign up for Tripadvisor Plus, the author noted.
'PRETTY BIG CONCESSION': Commenting on the report from travel industry publication Skift indicating that TripAdvisor may be rethinking its Plus subscription offering as it has struggled to gain participation from major hotel chains, BTIG analyst Jake Fuller told investors that the company's apparent pivot "feels like a pretty big concession" and he now questions whether TripAdvisor can build Plus "without jeopardizing the core advertising business." Fuller, who also has concerns that Plus will put TripAdvisor in direct competition with Online Travel Agencies, or OTAs, has a Neutral rating on TripAdvisor shares.
PRICE ACTION: In Monday morning trading, shares of TripAdvisor have dropped about 5% to $34.04.
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