TripAdvisor forms joint venture with Trip.com Group, reports decline in Q3 revenue

TripAdvisor is taking a new approach to its China business by entering into a strategic partnership with Trip.com Group (formerly Ctrip.com).

Known as TripAdvisor China, the new joint venture gives Trip.com Group the long-term exclusive brand, content license and all assets of TripAdvisor’s business in China.

As part of the agreement, TripAdvisor content will get distributed across the Trip.com Group portfolio of brands, including Skyscanner.

The deal gives Trip.com Group a nomination right for one TripAdvisor Board seat, pending on regulatory approval.

Trip.com can acquire up to 6.95 million TripAdvisor shares, while TripAdvisor will own 40% of the new venture in China. The share deal will cost Trip.com Group $318 million and can be made over the course of the following 12 months.

TripAdvisor first operated in China in 2009 under the DaoDao brand name. This was later axed and the website switched to "Mau Tu Ying" in 2015.

Jan Sun, CEO of Trip.com Group, says that the new partnership “will undoubtedly further enhance the travel experience for our customers worldwide.”

“As we expand our footprint overseas, it is important that we offer not only seamless access to global travel inventory, but also quality reviews, opinions and pictures generated by other fellow travelers.”

The new venture was announced on Wednesday on the heels of TripAdvisor’s third quarter financial results.

The Massachusetts-based travel and reviews website reported a 7% year-to-year decrease in total revenue for the third quarter to $428 million, missing on analyst expectations by $31.39 million.

Adjusted EBITDA declined 12% to $129 million while GAAP net income dropped 28% to $50 million.

In a call to discuss earnings, CEO Stephen Kaufer says that “Q3 was more difficult than we anticipated, and this has dampened our outlook for the remainder of the year.”

By segment

The Experience and Dining segment reported a 19% increase in revenue to $141 million.

Revenue from the Hotels, Media and Platform segment decreased 12% year-over-over to $197 million.

TripAdvisor-branded hotels revenue fell by 14%, which the company attributes to Google pushing its own hotel products in search results and siphoning quality traffic.

Expedia also reported facing similar SEO headwinds with Google over the past quarter.

Kaufer says that “Google has gotten more aggressive” and TripAdvisor has “predicted this for many years.”

“We know this SEO piece is an on-going trend and we are not predicting this is turning around.”

To combat the declining organic traffic, Kaufer said the company will focus on creating a good experience for shoppers so that they will return to TripAdvisor.

While the company anticipates more SEO challenges in the coming year, it is expecting to grow both media advertising revenue and hotel B2B revenue.

In light of the revenue loss due to SEO, Kaufer says that the company is evaluating the cost structure and “will prudently reduce and allocate expenses in certain parts of our business to preserve strongly profitability while investing in strategic growth areas.”

“We are focused on driving non-auction revenue growth and continue to make excellent early progress on a number of growth initiatives.”