Tripadvisor Inc

NASDAQ:TRIP

Earnings Call Transcript 2022-Q1

[Operator]

Good day, everyone. Thank you for standing by, and welcome to the Tripadvisor First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now hand the conference over to your speaker today, Ms. Angela White. Thank you. Ma'am, please go ahead.

[Angela White, Vice President of Investor Relations]

Thank you, Lovely. Good morning, everyone, and welcome to Tripadvisor's first quarter 2022 financial results call. Joining me today are Steve Kaufer, CEO; and Ernst Teunissen, CFO and Chief Executive, Viator, TheFork and Cruise Critic. Last night, after market closed, we distributed and filed our earnings release and made available our shareholder letter on our Investor Relations website.

In the release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. Also, on our IR website, you'll find supplemental financial information, which also includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics.

Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management's views as of today, May 05, 2022. Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements.

With that, I'll turn the call over to Steve.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you, Angela, and good morning, everyone. We just reported a great quarter and a solid start to the year. We are certainly seeing benefits from the recovery and I am pleased with our continued execution. I believe that Tripadvisor is uniquely positioned as the world opens up again, and I am really proud of the role we play in helping travelers. For so many, this brand is about trusted advice, guidance, a community, a spirit of adventure, and with the travel industry in recovery mode, we are really excited about the year ahead.

Another reason for our excitement relates to the other announcement we made last night, Matt Goldberg will join us as CEO starting in July. As you read in last night's release, his experience across multiple industries, travel and digital media and advertising as well as his experience in strategy and operations, make him a really great fit for Tripadvisor. We look forward to introducing him to you on the next call. And in the meantime, I personally look forward to bringing him up to speed on our amazing business and helping him to hit the ground running. On behalf of the entire Tripadvisor family, we welcome Matt to Tripadvisor.

With that, let me turn it over to Ernst before we take your questions.

[Ernst Teunissen]

Thanks, Steve, and thanks to everyone for joining. I wanted to start off today by acknowledging that this will be Steve's last earnings call as our CEO. Most of you know that Steve founded Tripadvisor in 2000 above a pizza shop in Needham, Massachusetts. Fast forward, more than two decades later and Tripadvisor has grown to be an iconic brand and the most trusted travel website in the world, helping hundreds of millions of people plan and book their perfect trip.

Tripadvisor has also proven to be an important economic enabler, helping millions of small businesses thrive in the hospitality industry around the world. Thank you, Steve on behalf of all Tripadvisor employees for your leadership, your integrity, your optimism, your passion, it's been such a pleasure and honor to work with you.

Now to our quarterly financial update. We are very pleased to report our [2022] first quarter results. This is indeed a good start to the 2022 fiscal year. As we exit the quarter, we saw sure signs that we have passed the Omicron headwinds of January. Our revenue was 70% of 2019 levels for the quarter, but we exited March at over 80% of 2019 and we improved further in April.

Our Hotels, Media & Platform business outperformed our internal expectations for the quarter. Our Experiences & Dining business revenue crossed over 115% of 2019 levels in Q1 with booking levels ahead of revenue and exited the quarter and into April at even higher rate. Experiences in particular is growing very rapidly and ahead of schedule. We believe this reflects our strong position in our Experiences & Dining marketplaces.

This quarter gives us confidence in the transition of leisure travel back to full recovery and the benefit we expect to drive from that as Tripadvisor. We are also confident that the value we provide to our customers and partners has us well positioned as we move forward with our 2022 operating plan and our key investment areas, which should propel our future growth.

With that, let's jump into Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Richard Clarke from Bernstein. Your line is now open.

[Richard Clarke, Sanford C. Bernstein & Co., LLC]

Good morning. And just to reiterate Ernst kind words, Steve, we will certainly – certainly missing and having you on the other end of the call and answering our questions and good luck going forward.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Richard Clarke, Sanford C. Bernstein & Co., LLC]

Maybe if I can just start off with the CEO appointment and maybe you can highlight your thoughts of what areas of his past expertise were you feel are going to be most beneficial to Tripadvisor, the company you founded. It seems like he's come from a sort of marketing background, is that kind of the key skill that you were thinking about in looking for the CEO of someone that could sort of pursue those display marketing ambitions. I know back in 2018, you talked about doubling those revenues, is it to sort of follow through on some of those ambitions?

[Stephen Kaufer, President and Chief Executive Officer]

Thanks, Richard for the kind words and the question. Great question. I'm really happy with Matt as our selection. Can't wait for him to start and feel great about handing the reins over to him. What I really love – came to love and appreciated was really a number of things. First, I'd say kind of the breadth of experience, not just at different companies, but in different roles. Like, in one guy, you've got biz dev, you've got strategy, significant M&A, he has been a COO, like operated different parts of the business, EVP of North America at Trade Desk and, of course, being CEO at Lonely Planet. So when you had a lot of different roles, at least in my opinion, you get to see all different aspects of the business up close. It's just the perspective that that provides, I think is really helpful for the top job.

Second, I'd say being CEO, actually, in this case at Lonely Planet, you just have to make a ton of trade-offs while being responsible for the overall growth. So you can imagine we talked to a number of very accomplished individuals that had risen to do very well in their respective departments at some very big companies, but I felt Matt's ability to see the whole picture was actually more valuable than a star player and a player that had either just done sales or just done products. So again, there are lots of different ways to craft what a CEO is going to be great at, but I like the breadth. Tripadvisor is a complex business. And having someone at the helm who has had the experience of running a company before is just great not to have to kind of teach that on the job.

Let's see, third, he's got a real focus on building great teams, the people, the organization, in all his job he has paid a lot of attention to that. And so we were certainly convinced that for a business as complex as Tripadvisor, building the right teams to be able to deliver and getting the teams to work as well together as they can. It kind of – it all makes for that overall success.

And then finally, he knows – at least in my opinion, he knows what it's like to be a change agent and really help transform a business. And I just love that type of background. Tripadvisor isn't a startup anymore, but at the same time, our goal isn't to kind of eke out a 5% or 10% growth each year optimizing different parts of the business. Our opportunity is so much more than that. We have a huge TAM in front of us, huge number of assets. And so Matt's, our belief that as he did at Lonely Planet to be able to take an existing company, reshape it to meet the needs of our future customers, I have a ton of confidence in. And then when you actually go down and look through his resume, you see remarkable accomplishments at each and every job that talked about how he delivered the goods. So in our view, it's not just hand waving talk about things, it's delivering results at very successful companies.

[Richard Clarke, Sanford C. Bernstein & Co., LLC]

Thanks for that, Steve. Lots of great color there. Maybe I can ask just one quick follow-up. One of your peers was quite bullish about the impact of the Digital Markets Act coming in Europe, I was just wondering what your perspectives are and whether you could see Tripadvisor actually benefiting from the changes the regulatory environment that's happening in Europe?

[Stephen Kaufer, President and Chief Executive Officer]

Yes. I see a number of definite potential benefits. We kind of got to see how it all shakes out and when the appeals are done and all the rest of it, and as I stated many times before, it's hard to – we choose not to craft a strategy around that versus take it as a tailwind if it emerges as good for us.

[Richard Clarke, Sanford C. Bernstein & Co., LLC]

Great. Thanks very much.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Naved Khan from Truist Securities. Your line is now open.

[Naved Khan, Truist Securities, Inc.]

Great. Thank you. Two questions, please. One on the HM&P side, and within that, if I look at the different pieces auctions versus display versus Hotel B&B, and it compare the performance versus what the trends are for the OTAs. I think you guys are a little bit lagged in terms of recovery. I think booking actually talk about room nights, getting to positive and like 7%, 10% in April. I wondered what the disconnect might be and if you could go into that. Is it triple length? Or is it business travelers still not coming back? Or is it Asia? Any color there would be helpful.

And then the second question I have is on the E&D side, how much of the acceleration or the really strong growth you're seeing here is driven by conversions versus increased traffic? Any color would be helpful here as well.

[Ernst Teunissen]

Hey, Naved. This is Ernst. I'll kick off and Steve will fill in, I'm sure. On HM&P, so our total HM&P segments recovered 63% in Q1, that was 76% in March, and then it was over 80% in April. If I unpack that, the business that has been recovering somewhat slower than the rest has been our hotel subscription business, our business-to-business to hotels and to chains as well as our display. So it moved a little slower than the average, it's partly because we are rebuilding our salesforce and scale, it's also partly because this sort of up-funnel – relatively up-funnel advertising by hotels has been lagging. But it's been improving very, very solidly. But it's below the pace of the general hotel recovery.

If you look at our auction, our auction obviously suffered in January, but then recovered quickly. Our auction was at 76% of 2019 in March, improved very substantially than in April and was larger. And if you compare that to some of the OTAs, I think one difference is our auction is almost purely hotel-based, where some of the OTAs are reporting numbers, which include alternative lodging, which is not included with us. And we believe alternative lodging is growing faster than recovering faster than hotel. That's one component of it. And of course, we have always skewed to international travel, which we've seen – which may impact that as well. We have seen very robust recovery in the United States. So those are some of the puts and takes. Steve, I don’t know if you want to add anything to that.

[Stephen Kaufer, President and Chief Executive Officer]

That's good. E&D?

[Ernst Teunissen]

E&D. Yes, phenomenal progress in the E&D, both in restaurants and in Experiences, but particularly Experiences. E&D revenue above 130% of 2019 in April, Experiences more than 140% above 2019 in April as our estimated revenue doing phenomenally well was Experiences very U.S.-based in 2021, but we've seen very robust recovery in Europe as well. We called out in the shareholder letter some great factoids in April, actually Europe as a destination was as large as the U.S. as a destination for Experiences, that is awesome, very different from last year. We also saw that U.S. travelers going to Europe and doing Experiences was above 2019 levels as well. So the business is just doing very well. It is partly improvements in conversion that we've made on the site as you were alluding to Naved, but it's also being very successful at attracting more traffic both in paid channels and in free channels. And so most of the indicators in this business are just doing superbly and the management team has done an awesome job in making us grow.

Restaurants was already relatively strong even in 2020 and 2021, but we keep making progress there as well. Very pleased with that as well. And so if you take the two businesses combined, Experiences & Dining, it's really the fast grower in our portfolio at the moment and is exceeding our expectations in this first quarter in April versus what we thought we would do. And we were already quite ambitious with those businesses. So full around, very pleased with that performance.

[Naved Khan, Truist Securities, Inc.]

Thanks. That's very helpful, and wish you all the best Steve.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Jed Kelly with Oppenheimer. Your line is now open.

[Jed Kelly, Oppenheimer & Co., Inc.]

Hey. Great. Thanks for taking my questions. Just unpacking some of the strength you're seeing in Experiences and as we think about you unlocking more value, how would you think about a breakdown between the Experiences coming through the Viator brand and then the Experiences that are being booked on Tripadvisor. And if you were to potentially IPO Viator, would those Experiences booked on brand Tripadvisor, would those actually – that revenue go over to Viator? How should we think about that?

[Stephen Kaufer, President and Chief Executive Officer]

Yes. Excellent question. Our shareholder letter actually has some explanation of what that would look like on a more standalone basis. But let me take you through that. So our Experiences revenue consists of the Viator point-of-sale, the Tripadvisor point-of-sale, and then we have third party integrations. All of that revenue, if you were to separate out Viator would be Viator revenue. For instance, the Tripadvisor point-of-sale, all the revenue there would be Viator revenue, Viator is the merchant of record for Tripadvisor Experiences basically delivers the execution of all of that for Tripadvisor. The Viator point-of-sale is by far the largest point-of-sale, Tripadvisor second, and the third party is sort of third in that. If you were to separate them out, we would recognize all the revenue of the Tripadvisor point-of-sale on Viator as I just said, and we would cross charge an affiliate marketing fee to Viator for that traffic, but the revenue would sit with Viator. So that's where it was.

A part of your question was, “Hey, where are you in your thinking there for Experiences?” We said in previous quarters both for Viator and TheFork were considering ways of structuring is slightly different from today and carving them out more. We said last quarter that we had filed confidentially with the SEC for a sub-IPO for Viator. The work is continuing. And in the first quarter, obviously we've had an IPO market backdrop that is choppy, but we're continuing on our path of looking at all the options, including a sub-IPO for Viator, and we're just very, very pleased with how the business is doing in the meantime.

[Jed Kelly, Oppenheimer & Co., Inc.]

Great. That's helpful. And then just one more. And as we think about your direct marketing spend over the balance of 2022, how should we think about your direct marketing relative to your 2019 levels going forward? Thank you.

[Stephen Kaufer, President and Chief Executive Officer]

Yes. And so that's different for HM&P and E&D. So HM&P, our auction in particular, we have not changed the – our robust levels or return on advertising spend levels compared to 2019. And so there, we have been successful at growing paid marketing largely because our CPCs have been very favorable. And so at higher CPCs and the same return on ad spend, you can buy more traffic. So that's been the impact there, and we've seen a relative shift in 2021 and into this first quarter within our hotel business to more paid as a result of that.

On the E&D side and particularly on Experiences, slightly different. We have actually pushed harder on marketing than we did in 2019, in 2021 and now in the first quarter as well. We are working off of pretty good and consistent multiyear historical data on cohorts on lifetime value of our customers. And so we have – compared to 2019 we're investing at relatively near-term returns, we have pushed that beyond the one-year payback period on the customers, but still profitable over a multiyear period and that has been very, very effective for us in increasing the volume we can get from Experiences.

Combined with that, what we have been able to do is by – with a very, very strong focus on improvements that we have been driving through the pandemic particularly on our Viator point-of-sale, we have increased our conversion rates. We have increased our repeat rates. So the cohorts of customers that we acquired in 2021, even at these elevated marketing expenditures have actually performed better than the cohorts of 2018, 2019 in terms of their repeat profile in the quarters after. And that is very, very encouraging. It means that not only where we write in spending what we were spending on acquiring these cohorts, actually the cohorts have outperformed how we thought they were. So improving conversion, improving repeat and more marketing spend, but also diversifying our market channels beyond Google has been an important focus.

And lastly, the app, so we've spent considerable amount of effort in improving our app on Viator still a way to go, but we've really seen the results in traffic to the app and revenue we generated from the app. So those are some of the core drivers of what's going on in our business.

[Jed Kelly, Oppenheimer & Co., Inc.]

Thank you. Good luck, Steve.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Mario Lu with Barclays. Your line is now open.

[Mario Lu, Barclays Bank PLC]

Great. Thanks for taking the questions. Steve, congrats on finding your successor. Matt seems like a perfect fit. So the first question is on Viator and TheFork. Appreciate the additional P&L detail and a shareholder letter. So it looks like both businesses are operating negatively in terms of profits today. But are there examples where you see pockets of profitability say in more mature markets? Just trying to get a sense of what long-term margins could look like for these businesses. And then separately, Trip Plus, there wasn't really a mention of it this quarter. Just wondering if there is any updates there. Is it no longer a focus for the company to drive future growth? Thanks.

[Ernst Teunissen]

Hey, Mario. I'll take the first question, and Steve will take the second. Yes, we are investing in these businesses. They are, as we say, loss making on a standalone basis if you were to break them out. But we're investing significantly in growth in both those assets, that is people cost, driving the product, in the case of TheFork, driving restaurant acquisition with the salesforce. And importantly, we're investing marketing dollars against an LTV concept. I have been talking about Experiences. If you look at Dining, at our Fork business, you see the same thing. We have significant repeat in that business and therefore value in a customer that we acquire. So as the business is growing, you'll see that we are operating on a marketing basis at a loss for future gains, which is all going back later.

I said in the past that we expect for – this segment for E&D, we expect sort of long-term margins to be mid-to-high percentage of EBITDA margin, mid-to-high-20s percentage EBITDA margin. And that applies to these individual businesses, and so roughly similar measure. The gross margin for instance of TheFork and of Viator are very robust, 90%-ish gross margin, if you take out cost of sales out of Viator for instance.

And so a very robust underlying gross margin profile, currently spending on marketing and people cost to drive the growth, but long-term, tremendous amount of leverage in that business. These businesses take Viator, it's an OTA business with very good take rates, mid-20s type of commissions that we get from operators, which is a very robust commission to work with is favorable compared to the hotel industry for instance, and we think long-term as that business sales, it can have very attractive margins indeed.

[Stephen Kaufer, President and Chief Executive Officer]

Thanks, Ernst. Thanks Mario for the question. And on Trip Plus, it absolutely remains a focus for us. We acknowledge before that we got out ahead of ourselves in terms of talking about it with such excitement before we had actually proven the product market fit. And so we had to pull back, and let's just say that while we continue to test and iterate, you should expect us to be quieter on the topic until we're ready to kind of share the results. There's really no doubt that in my mind that the concept of a travel subscription be it surrounding discounts or extra services, there's a natural fit in the marketplace, the set of travelers that we serve. And there's lots of different ways to go about that product. So to be crystal clear, it is an ongoing effort at Tripadvisor. We have plans, we release new things, we sign new deals. So it is an ongoing effort and we'll share in a more judicious manner going forward.

[Mario Lu, Barclays Bank PLC]

Great. Thank you, both.

[Operator]

Our next question comes from the line of James Lee with Mizuho Securities. Your line is now open.

[James Lee, Mizuho Securities USA LLC]

Great. Thanks for taking my questions. Steve, thank you for answering our question for many quarters. We wish you all the best. Now, I got two questions here. One, maybe a little bit follow-up on Plus to what you talk about last quarter. Are you thinking about maybe making adjustment to your offering in light of the inflationary environment? How that may impact consumer spending? I think you mentioned last quarter, you were trying to resolve the frictions for consumer hesitating for the membership fee. And also you were talking about last quarter, accessing kind of between instant discount versus rebate and just wondering have any update on that.

And my second question is regarding the auctions business, when you're looking at your customer segments specifically, are you seeing OTA customer coming back more aggressive versus hotel direct booking? Or wondering have any color there. And also maybe Ernst you can parse out looking at the revenue recovery for the auction business. Can you kind of break out between volume versus pricing growth? Thanks.

[Stephen Kaufer, President and Chief Executive Officer]

Sure. Thanks, James. I'll touch upon Plus briefly. We continue to iterate on both kind of the pieces of the value proposition that we're offering to travelers as well as different ways that we think we can sell it on the site and to our customers, as well as through distribution channels. So those are all kind of ongoing. We're keeping our options open in terms of discounts or rebates. There's pros and cons to each. We really prefer the discount model, but I'm not saying that the rebates are out of the question. And then on auction, I will turn it over to Ernst.

[Ernst Teunissen]

Yes. We've seen in the recovery, we saw it last year and we seen it in Q1, is that the pricing levels, the auction leads our CPCs effectively, have recovered ahead of volume that has been a very clear trend and continues to be so right now. So if you look at our revenue, healthy CPCs volumes still below 2019 levels. And that’s an indication that actually our auction is functioning very well, that our partners both OTAs and hotels are bidding on our platform. And we have a very healthy auction going on with very good price realization, but volumes still behind in the recovery.

[James Lee, Mizuho Securities USA LLC]

Okay. And Ernst, any distinct difference in terms of growth profile OTA versus hotel direct booking? Any segment that's going faster than the other?

[Ernst Teunissen]

No real trends to call out.

[James Lee, Mizuho Securities USA LLC]

Okay. Great. Thanks.

[Operator]

Our next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is now open.

[Zachary Morrissey, Wolfe Research, LLC]

Thanks. This is Zach on for Deepak. Just quickly on the 2Q guide. Just hoping to get a little more color on the margins. Revenues are approaching back to 2019 levels little below, but margins are kind of expected to be about 10 points below. And you've mentioned before reinvestment, reinvesting a lot of the cost savings back into the business, particularly on the E&D side, but given the strong recovery over the past couple of months, are you seeing incremental opportunities to reinvest? Is this primarily marketing? Or is there any kind of – anything else that we should be aware of? And then second, just on the B2B business, you've given color that the recovery kind of lagged other areas, but are you seeing any kind of green shoots here? And should we expect this to kind of pick up a little bit in the back half or is this kind of more of a steady kind of recovery over the course of the year? Thanks.

[Ernst Teunissen]

Yes. Zach, thanks for that. With regards to Q2 and sort of margin, yes, we've indeed guided for Q2 to an overall consolidated adjusted EBITDA margin of approximately 20% of revenue. We are investing in E&D significantly, that is marketing expenditure and building up some new capabilities in those areas as well, oriented towards growth in 2022, but also importantly growth beyond there. We've said in the past, we've saved during the pandemic about $200 million of fixed cost. We're investing some of that back, but the majority of that is sticking. Some is going back to inflation of cost. Some is going to investment, particularly in E&D, but the majority of it is staying on overall in the business. But we have increased our marketing expenditures, specifically in E&D, and that's led us to give the guidance for both segments for the whole year is to say that we're expecting significantly recovering EBITDA margins, both for HM&P and for E&D versus 2021 in the full-year of 2022. But for both segments, we don't expect to be just quite yet at the EBITDA levels that we were in 2019, but importantly, improving in both segments.

And on the B2B business. So I think there's a couple of factors going on there. So for our Media business, for which we are very ambitious, and some of the questions were asked before about our new CEO and his capabilities. Media is a business that is a historical strong suit for Tripadvisor and has significant potential going forward, but it's been lot slower to recover than other parts of the business during the pandemic and now into the quarter, it's upper funnel marketing and that's been slower to come back. But we expect that to eventually recover and grow as we go back.

On the direct-to-hotels business, the subscription business being found on Tripadvisor, advertising on Tripadvisor for those businesses on the subscription basis, that business has been robust in the – because it's a subscription business robust in the pandemic, but now that the market is coming back strongly in March, April, we see that business improving, but not as much as other parts of the business.

That's two factors. One is we are rebuilding the salesforce really out of the pandemic to be able to sell new subscriptions. That has a bit of a lag time because you bring on new salespeople and they have to be trained up, and then they have to start selling, but that we believe by the end of the year, we'll have the salesforce replenished and firing on all cylinders. And that is a strong business that we have high ambition for going forward as well. Both our hotel B2B business and our Media business, we're double-digit growers from 2018 to 2019, significantly impacted by the pandemic, but strong businesses. And we believe when they're back on the path, they will continue to be growers for us.

[Zachary Morrissey, Wolfe Research, LLC]

Very helpful. Thank you. Best of luck, Stephen.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of John Colantuoni with Jefferies. Your line is now open.

[John Colantuoni, Jefferies LLC]

Hey. Thanks for taking my questions. I wanted to ask about sales and marketing disclosure for the E&D segment. Can you just give a bit more detail on how much of that line is the kind of the costs of boots on the ground versus traffic acquisition costs, given a lot of the business partners probably turned over during the pandemic because of financial strain? And I guess is the step-up in sales and marketing the result of having to get your salesforce going back door-to-door to sign on new customers. And if so, how do you see that dynamic impacting profitability for the segment over the course of the travel recovery? And I'm also just curious if you have any initiatives to kind of build a more robust self-serve offering to accelerate the margin improvement over time.

[Stephen Kaufer, President and Chief Executive Officer]

Yes. Great questions. It's different for TheFork and for Viator. So TheFork, the sales and marketing expenditure leans to sales. Salesforce acquiring new restaurants, signing up new restaurants. The business has lost some restaurants in the pandemic and has to replenish some of it, but it is not a huge factor. We're coming from behind from where we were in 2019 in a number of restaurants, but it's not a dramatic difference. But we have ambitious goals to continue to grow our restaurant base, new countries where we were relatively under indexed, like Germany and UK, where we made an acquisition just before the pandemic, and also in an existing markets getting deeper into tertiary, [indiscernible] cities. And so there's still a growth to be had there. Some recovery from lost restaurants, but not that dramatic.

On Viator, it's different. There the mix is very much skewed to marketing to non-people marketing – external marketing expenditure, both on Google and other online channels. So more variable in nature in that particular part of the business. There we have not seen a major impact of loss of supply in the pandemic. Acquiring more supply is not a huge priority. We have a lot of supply. We spent a lot of that 2017, 2018, 2019 years of building our supply base very aggressively, and we have a supply base second to none. And we're pretty happy with what we have. We're always adding, of course, but it's not a big part of our cost growth. Our cost growth in Viator is very focused on the front end, improving our front end points-of-sales and in marketing.

[John Colantuoni, Jefferies LLC]

Great. And it sounds like Experiences benefited a bit from continued strength in North America as Europe continues to improve. Can you just talk about your supply strength in that region and how you see the European travel recovery impacting that business? Thanks.

[Stephen Kaufer, President and Chief Executive Officer]

Yes. A pre-pandemic actually Europe as a destination for Experiences was larger than the U.S. as a destination. So we historically been very strong. From a point-of-sale perspective, we have been much stronger in the U.S. – English speaking in general, U.S., UK, Australia. But from a destination perspective, Europe has always been very, very strong and very important for us, and that changed in the pandemic. In 2021, U.S. as a destination was really important to us. But as I said in my opening – answer to one of the questions, actually in April, Europe as a destination crossed over again, and was actually at par with or a little larger more recently than the U.S. as a destination for Experiences.

And as I also said, U.S. travelers going to Europe, which was – is an important – was historically an important part of our Experiences business actually is above 2019 as well from a sales perspective in April. So Europe is coming back very strongly and Europe is an important destination market for us. We still have room to grow in Europe as a point-of-sale, and we're making good progress there and have ambitions going forward for 2022 and beyond to make Europe as a point-of-sale even more important to us, but as a destination, that's always been up there.

[John Colantuoni, Jefferies LLC]

Thanks for the details. Appreciate it.

[Operator]

Our next question comes from the line of Lloyd Walmsley with UBS. Your line is now open.

[Lloyd Walmsley, UBS]

Thanks. Wondering if you can just talk a little bit about how Matt is thinking about reviewing the strategy. Anything you can share on how from a process standpoint under new leadership? What that might look like? How the Board's thinking about that? Then a lot of – a lot of different irons in the fire, just wondering if there's anything from a process standpoint you can help us with.

[Stephen Kaufer, President and Chief Executive Officer]

Excellent question. Can't help you too much as he hasn't really started yet. Obviously with our onboarding procedures, we're getting him up to speed on the business. I can share that he is very focused on identifying, clarifying, improving, focusing on that strategic piece. What are the core differentiators for Tripadvisor vis-à-vis our upstream competitors, our downstream clients who are also looking to address the same needs of the same travelers and leveraging the tremendous assets that Tripadvisor has in terms of trust, in terms of guidance, our position in the ecosystem and the ton of first party data that we have being the largest travel site on the Internet, obviously from Trade Desk, Matt comes with a ton of experience, looking at data through that lens. That's really quite a big business.

To the subscription question earlier, I mean, he launched subscriptions as part of Dow Jones and Wall Street Journal. So he's got a relevant experience in a number of the different areas. And of course, it'll be up to him and the amazing leadership team we have here to craft out that kind of that next strategy clarification and the changes that he might want to bring. So great question. I encourage you to give him – more than just the next earnings call to get back to everyone on it.

[Lloyd Walmsley, UBS]

Okay. Thanks, and good luck, Steve.

[Stephen Kaufer, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Vince Ciepiel with Cleveland Research. Your line is now open.

[Vince Ciepiel, Cleveland Research Co., LLC]

Great. Thanks. A question on E&D, the revenue progress there has been really impressive. Sounds like it's tracking ahead of expectations for the year, margin outlook is unchanged. So I guess, when you have more revenue and unchanged margin that kind of also implies that you're adding back some additional fixed costs. I think E&D was probably about half of the $200 million of fixed cost saves that these guys saw through the pandemic. And now it basically looks like you're adding all of those back in 2022. Can you help me understand if that is the case or if I'm missing something there and also help us understand, what types of things you're spending on in 2022 that are different than what you were spending on in that segment in 2019?

[Ernst Teunissen]

Yes, Vince. It's accurate that we are reinvesting some of the overage we see in the quarter and therefore for the rest of the year in E&D back into the business. Marketing oriented growth, when you are acquiring new customers at levels that are immediately loss making, but returning over a longer period means that if you are able to push harder on that, that will come at the expense of EBITDA, so that's part of what we're doing, continuing to push hard on that. We're also investing in some new marketing channels that we've experimented with.

And so on the Experiences side, it's predominantly pushing more on marketing, which should translate into 2022 and 2023. Revenue as well is an improvement in how we position, much less of a focus on pushing even harder in Experiences on our people cost. On the restaurants side, it's really steady as it goes. We’re executing on the plan and we're in line with the plan and not much changes to the plan as that we originally had. On the restaurant side, we are in 2022 compared to 2021 making investments in our people capabilities in particular, both growing our restaurant base, but also improving some new products and services. We're particularly happy in that area with some of the more FinTech oriented products that we have been developing. We've been pushing hard on the growth of TheFork Pay, which is an ability to – through the app pay at a restaurant for consumers and for restaurants to integrate with, with great benefits for us long-term in capturing loyalty and for restaurants as well.

And gift cards is another area that we're growing, the ability to give gift cards to friends and family for restaurants, which TheFork is promoting as well. And numerous others initiatives are the focus there. Dining is a big category in Europe. It's relatively underpenetrated online compared to the United States. TheFork has a truly awesome market position in most of Europe with opportunity to grow its market share in the UK and Germany. And so we're playing to win with that business in the European restaurant landscape.

[Vince Ciepiel, Cleveland Research Co., LLC]

Helpful. And a follow-up there. So it sounds like some additional marketing, I think that you had previously expected variable expenses in the segment as a percentage of the revenue to look pretty similar in 2022 as they did in 2021, but with an additional push in marketing, are you now expecting that to be higher? A. And then B, related to that, when you think about the long-term path for E&D margins, like, I think, I kind of calculate variable as a percentage of revenue is probably running over 50% now of sales. Is there a long-term place where you think that can settle? You talked about gross margins being pretty good there. I mean, is this something that variable could get down to 30%, 35% over time and get closer to kind of where variable is as a percentage of sales that you see in HM&P? Can you help us understand that?

[Ernst Teunissen]

Yes. With the sort of the lifetime dynamics and for repeat performance of cohorts and repeat improvements, we expect not only growth from acquired, we're not expecting and see – we're actually seeing a very strong growth on our free channels. We see strong growth of repeat bookings and revenue in our Experiences business. And that over time that part of repeat bookings will grow as a percentage over time and will provide more leverage on marketing over time. That's a clear impact of an LTV model.

And then secondly, we have a fixed cost base with the substantial scale that we're seeing fixed costs as a percent of revenue is coming down for Viator and that's going to provide leverage going forward. So if you do take those two points together that makes us basically confident that we have, we can show strong mid-20s to plus type of margins in that business.

For TheFork, that is a scale game as well. We're still growing the platform with high growth rates and the underlying cost structure there is favorable as well with scale, will come attractive margins there as well. So we look at both businesses and say, yes, the margins are not there yet at the level of potential. But that is really all you can point really all to the growth strategy that we have in those two businesses, underlying these businesses are both very, very healthy.

[Vince Ciepiel, Cleveland Research Co., LLC]

Thanks. Nice to see the topline progress in E&D, and thanks for the color on the margin path.

[Ernst Teunissen]

Thank you.

[Operator]

There are no further questions at this time. I'll hand back the call over to Mr. Steve Kaufer for closing remarks.

[Stephen Kaufer, President and Chief Executive Officer]

Well, thank you. Let's see, and so these being my final remarks on what is my final earnings call as CEO at Tripadvisor, I want to thank you all and all of our employees past and present for your continued support of this amazing business. Over the past 22 years, we've built a passionate community of travelers that helps hundreds of millions of travelers and diners every month, enabling them to plan and have a better trip. Along the way, we've helped millions of businesses, even the tiniest ones in the remotest corners of the planet to find their audience and growth via the global reach of our platform. The idea of Tripadvisor was a good one clearly, but the real success of Tripadvisor belongs to the thousands of people who invented it, built it, ran it, evolved it, and turned it into the most popular travel site on the Internet. A special thanks to all of you who helped build this company.

At Tripadvisor, we believe in the power of travel to do good. I have a sign in my office. It's a quote by Mark Twain, that reads, travel is fatal to prejudice, bigotry, and narrow-mindedness. I truly believe that travel can be a positive force that brings us closer together and a partial antidote to the many divisive issues in the world today. And for Tripadvisor, this is a special company that will always hold a special place in my heart. There's also a company with a terrific future ahead, as we are only a few chapters in on this remarkable journey. I'm excited to hand the reins over to Matt and the entire Tripadvisor team to invent the next chapter Tripadvisor and help bring the world closer together. Thank you. Thank you all for the privilege of leading this amazing company.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.