Tripadvisor Cracks Down on Costs Despite Slow Travel Rebound

Arhaq

Tripadvisor Inc.’s

online travel-booking business is recovering, but the company doesn’t want to add back some costs it cut during the Covid-19 pandemic.

Chief Financial Officer

Ernst Teunissen

said he is looking to hold the line on costs such as ones related to head count and real estate at the Needham, Mass.-based travel company, which has said it can do more with less by using better technology and by focusing its spending on select initiatives.

Tripadvisor allows users to search and book flights, hotel rooms, rental cars and other travel needs online. It generates revenue in part by selling advertising priced based on user clicks.

Tripadvisor cut its costs and expenses by 32% to $933 million during its 2020 fiscal year ended Dec. 31 from $1.37 billion the previous year. The company declined to provide a cost projection for 2021, but its CFO expects to continue operating a leaner structure.

“We’re going to very much resist just adding back what we had before just because we can,” Mr. Teunissen said. “You could argue that a company should have the discipline to always do that, but a pandemic really sharpens your focus.”

Mr. Teunissen helped lead a pre-pandemic reorganization to improve Tripadvisor’s profitability. The undertaking began in January 2020 and involved cutting and consolidating certain brands, a management shuffle and layoffs.

By last spring, Tripadvisor had laid off about 25% of its workforce, and as of Dec. 31 it was down to 2,596 employees, compared with 4,194 at the end of 2019. Reorganization-related costs totaled $41 million last year.

Ernst Teunissen, chief financial officer of Tripadvisor Inc.



Photo:

TRIPADVISOR

Cost cutting in recent months didn’t prevent losses. Tripadvisor on Feb. 19 reported a $73 million net loss for the quarter ended Dec. 31, compared with net income of $15 million in the prior year period, and revenue fell 65% to $116 million from the prior-year period. The company doesn’t disclose bookings, but revenue fell as much as 86% in the second quarter of last year as the pandemic stalled travel.

Tripadvisor may consider hiring more employees for certain business lines depending on demand in the coming months, and it is evaluating investments it wants to continue, based on returns and alignment with larger initiatives that began before the pandemic, such as expanding subscription services and updating its technology, Mr. Teunissen said.

In some cases, the company stopped investments that it deemed no longer strategically important to its business. Last July, for instance, Tripadvisor sold its SmarterTravel Media portfolio of online brands to digital marketing company Hopjump for an undisclosed price.

Mr. Teunissen said he is looking closely at Tripadvisor’s real estate footprint to determine how much office space the company will need after the pandemic, as it expects to adopt a hybrid model of remote and office work.

Tripadvisor has roughly 30 offices spanning about 600,000 square feet and its lease obligations totaled $168 million as of Dec. 31. The company is considering subletting more of its space and, in some cases, moving to smaller locations, Mr. Teunissen said.

At the same time, Tripadvisor is spending more for certain initiatives, such as its Tripadvisor Plus, a subscription service launched in December that offers hotel discounts and other perks to consumers. The company reallocated funds to invest in the service and expects to expand it if business picks up, Mr. Teunissen said.

The company expects pent-up travel demand to boost earnings this year as more people receive vaccines against Covid-19 and resume traveling.

After the pandemic, Tripadvisor will likely need to invest more in marketing to acquire new customers, said Dan Wasiolek, a senior equity analyst at financial-services firm

Morningstar Inc.

“Marketing costs could offset some of the variable cost savings that they’ve put in place during the pandemic,” he said.

Tripadvisor disagrees with Mr. Wasiolek on costs. A spokesman said the company expects certain marketing expenses to generally align with travel demand.

Write to Mark Maurer at [email protected]

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