Tripadvisor Inc

NASDAQ:TRIP

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Tripadvisor Third Quarter 2024 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Angela White, Vice President of Investor Relations. Angela, please go ahead.

[Angela White, executive]

Felicia, thank you, and good afternoon, everyone, and welcome to Tripadvisor's Third Quarter 2024 Financial Results Call. Joining me today are Matt Goldberg, President and CEO; and Mike Noonan, CFO. Earlier this afternoon, after market closed, we filed and made available our earnings release. In that release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call.

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, November 6, 2024. 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 Matt.

[Matthew Goldberg, executive]

Thanks, Angela, and good afternoon, everyone. Our financial performance this quarter reflects the strong execution and operational focus of our teams across Tripadvisor Group. As we continue on our multiyear journey to transition from optimizing legacy offerings to scaling strategically focused growth drivers, we have the benefit of a diverse portfolio that we're managing for growth and profitability.

For the third quarter, on a consolidated basis, we delivered $532 million in revenue, flat to last year and in line with our expectations, given the anticipated headwinds in our legacy Hotel Meta offering, offset by healthy growth at Viator and TheFork.

Our adjusted EBITDA came in at $122 million, with all 3 of our segments delivering profitability, which gives us confidence in how our teams have delivered and to reaffirm our full year estimates. Mike will provide more details in his section. I'd like to take this opportunity to reflect on the meaningful progress we've made and the opportunities ahead. I'll also cover how this comes together as we think about 2025, starting with the experiences category.

Our ambition is to extend our leadership position in this large and expanding market with our scaled global platform and attractive financial profile. This is one of the most exciting opportunities in travel given the secular tailwinds, low online penetration and the growing recognition of experiences as the most meaningful and important part of travel. This positions experiences to grow faster than the travel industry as a whole over the foreseeable future. We still have much work to do.

But with our unique assets, some of the most trusted brands in travel, sizable, high-intent audiences, the deepest source of supply online, extensive third-party distribution and the review platform of choice for operators, we're confident in our leadership position. In the Viator segment, we've been balancing growth and investment to drive scale and contribute an increasingly larger share of revenue and profit to the group. As a reminder, this includes contributions from the Viator and Tripadvisor B2C points of sale as well as our B2B offerings for operators and third-party distributors.

In Q3, revenue was $270 million, growing 10% year-over-year and gross booking value, or GBV, grew 9% to approximately $1.1 billion. Adjusted EBITDA was $30 million or 11% of revenue. We believe we're still in the early innings in the experiences category, with meaningful distinct advantages to serve travelers. The Tripadvisor brand is one of the most trusted brands in travel and its largest and fastest-growing audience comes to the site to discover and book experiences. Its broad reach and position in guidance and planning helps capture upper funnel travelers at the start of their planning journey.

The Viator brand is well positioned to capture high intent travelers further down the funnel as the leading experiences marketplace with the most scaled source of supply and a strong foothold with U.S. travelers. While each of these brands serves different audiences with unique products and distinct marketing strategies, the scale we've reached allows us to unlock new opportunities across product, supply, data and geographic expansion that leverage our combined assets and capabilities.

We've made good progress with our priority investments at Viator this year. Year-to-date, we've seen higher-than-average growth in bookings from direct and other low-cost channels, which reflects our increasing scale and our progress in building awareness beyond search. We continue to improve the products across the board, such as landing pages tailored to traffic sources that have improved the user experience and yielded conversion wins.

Our effort to drive more bookings to the app is working. App bookings in Q3 grew faster than any other surface, and the mix of app bookings has almost doubled since 2022. We're seeing strong and stable repeat booking growth, which combined with large cohorts of new customers that we expect to mature into repeat travelers, gives us confidence in our durable foundation for future growth.

We're also increasingly leveraging generative AI to improve our product and customer experience. Not only are we using the technology to better assist customer service agents in serving travelers but we're also leveraging GenAI to provide better product recommendations that drive higher conversion and generate communications for agent follow-up.

Shifting to Brand Tripadvisor, where our teams continue to work to transform the business and shift from our historical reliance on the profitable but pressured legacy Hotel Meta offering. This transition is reflected in Brand Tripadvisor's Q3 financial performance, with revenue of $255 million, a year-over-year decline of 12%, which was within our expectations, and adjusted EBITDA of $87 million or 34% of revenue, which came in above expectations due to the timing of certain investments. Mike will discuss this further shortly.

Our strategy is to address these well-known headwinds by innovating around travel planning and guidance, still one of the most labor-intensive and time-consuming parts of travel. We believe we're uniquely positioned to solve this pain point for travelers with our trusted brand, high-quality content and extensive data. And our indicators of traveler engagement with the new products we rolled out this year only strengthened our conviction.

Our monthly active users, or MAUs, have stabilized and returned to growth year-to-date. And importantly, our engagement trends in monthly active members and app users have continued to improve quarter-by-quarter. We see the benefits of this growth among our most engaged users in our channel mix, where our direct channel has added more MAUs than any other year-to-date, achieving more than 30% growth versus 2023.

As I've noted in prior quarters, we continue to see our strongest performance against these metrics in the U.S. market, where we typically launch new products first, and we increasingly see fast follow markets outside the U.S. following a similar trajectory. Of course, this progress in our engagement strategy must translate to financial impact at scale. This means continuing to grow these audiences, innovating in our product and particularly in our hotels and experiences marketplaces and actively managing the structural headwinds in Hotel Meta.

We continue to shift our focus and resources to the areas where we are differentiated and have the highest conviction about future growth. Our execution will center on a few key pillars. First, we're focused on growing our mobile app through a host of UX changes that have already resulted in higher engagement and repeat rates, evolving our trip planning feature and optimizing conversion in our hotels and experiences booking capabilities. As we continue to scale in-app hotel booking in the U.S., we're seeing higher click-through rates, 4x better monetization per booker and significantly higher experiences revenue and review and photo submissions versus in-app meta.

Second, we're focused on accelerating experiences growth by more effectively serving the diverse global demand we see in Brand Tripadvisor's funnel. This includes improving discovery, cross-selling on hotel detail pages and expanding supply partnerships in new categories and geographies. We're also leading with experiences when we launch new guidance features like our chat-based AI assistant on destination pages, which is designed to help travelers navigate the best of our billion-plus reviews, forum posts and other guidance content to find the most relevant things to do.

Finally, we're focused on rolling out new membership enhancing features, including rewards, promotions and an achievements program that are driving higher conversion and meaningful uplift in member contributions. This also includes member-only capabilities like AI-powered trip planning and in-app hotel booking as well as leveraging our proprietary data to deliver more personalized cross-category recommendations to each member.

Now turning to the dining category, where we see ample opportunity for growth as evidenced in our Q3 results at TheFork, the segment's best financial performance on record. Revenue accelerated sequentially to $49 million or 17% year-over-year growth. Adjusted EBITDA in the quarter was $5 million or 10% of revenue, a significant improvement from last year. This is a strong trajectory, and we're well positioned to sustain the momentum.

We have a defensible position as the largest dining reservations platform in Europe, serving both diners and operators. Our unit economics continue to improve through a combination of marketing efficiency and sales productivity that are driving healthy growth in new and repeat diners as well as our restaurant base, providing a strong foundation for the future. Continuous product improvements at TheFork have positioned us well on both the B2C and B2B fronts, each of which are delivering strong growth.

For diners, our user experience largely on app is increasingly personalized with more relevant content in AI-powered review summaries, tailored onboarding flows and special offers, which are driving better conversion rates. We've also strengthened our B2B offering to provide more value for our restaurant operators, which is driving an uplift in ERB usage and accelerated growth. Our upgrades include AI-driven predictive analytics, better service and table views, mobile optimization and enhanced revenue management insights.

Following our recently announced Vodafone partnership to introduce new diners to TheFork, we continue to gain traction with strategic partners as a trusted dining brand with a strong consumer value proposition. We recently entered into a relationship with Mastercard, and we'll work together to provide premium restaurant experiences across Europe and preferred treatment for Mastercard cardholders utilizing TheFork pay.

While this won't begin to scale fully until next year, this is a testament to our brand value and reliability in our payments technology. To further enhance this collaboration, Mastercard will also become the title sponsor of our annual event, TheFork Awards. Throughout 2024, we've delivered tangible evidence of the progress we're making across multiple categories in each of our segments, which we believe will set us up to deliver our desired financial profile going forward.

This is a critical input for us as we solidify plans for 2025. While it's premature to provide specifics, I do want to take the opportunity to share some thoughts on our emerging priorities for the coming year. First, we will utilize all of our group assets and capabilities to extend our leadership in experiences, leveraging our marketing scale, brand value across geographies and B2B relationships with distributors and operators. Even with all the talk of normalized growth rates in travel, we believe this category will continue to outperform the industry with solid double-digit growth, contributing a higher mix of our overall revenue and profit and enhancing our group financial profile.

Second, we expect Tripadvisor to be increasingly focused on a streamlined set of priorities, including further differentiating our brand and content around planning and guidance, driving booking growth in our experiences and hotels categories, especially in-app, and enhancing our membership offering to reward engagement and drive monetization. We believe these priorities are most critical to translate our strategy into a sustainable, long-term financial profile.

Third, we'll begin to build on the strong foundation at TheFork, growing both diners and restaurants, continuing to improve our products and driving diverse revenue growth across B2C and B2B as we maintain this year's momentum, delivering growth and profitability. And finally, we'll ensure that our operating model supports our growth agenda across the group by balancing investment and profitability, including managing operating costs as we continue on our transformation journey.

As always, we're monitoring what's happening on a macro level, although its future impact is difficult to predict. We continue to see healthy search data and strong consumer intent to travel and book experiences with overall stability in booking windows and average length of stay. We've observed some bifurcation of intent between higher and lower income travelers. But regardless of the fluctuations we may see periodically, I remain confident in the durability of growth in leisure travel.

This is a sector that has continued to adapt, change and grow over the long term. Across Tripadvisor Group, we are well positioned for enhanced growth as we continue to build trust with travelers innovate our offerings and as the experiences category continues to emerge as an increasingly central and durable part of the travel budget. With that, I'll turn the call over to Mike.

[Mike Noonan, executive]

Thanks, Matt, and good afternoon. I'll start with a review of the quarter, and then we'll provide our outlook for the remainder of the year. As a reminder, all growth rates are relative to the comparable period in 2023, unless noted otherwise. Third quarter revenue was $532 million, reflecting flat growth and in line with our expectations. Adjusted EBITDA was $122 million or 23% of revenue and meaningfully higher than expected due to Brand Tripadvisor contribution, which I will cover in a moment.

Turning to segment performance for the third quarter. Brand Tripadvisor delivered revenue of $255 million, a decline of 12%. Performance was in line with expectations, which anticipated a sequential step down. In branded hotels, revenue declined 17% to $151 million, driven primarily by Hotel Meta. As anticipated, we witnessed a softer pricing environment in Hotel Meta, particularly in the U.S., which stepped back meaningfully from prior quarters, but we believe is reflective of the overall normalization of travel trends.

For the quarter, overall volume trends remained under pressure year-over-year and continued to be our largest headwind, but we're better than we witnessed in Q2. Revenue declines in Hotel Meta peaked in July and then saw consistent improvement throughout the quarter. Media and advertising revenue grew 5% to $40 million. Growth in our off-platform sales and creative offerings from our Wanderlab Studio and programmatic advertising offset declines in direct advertising revenue.

Experiences and dining revenue was $51 million, a decline of 7%, driven by the ongoing transition to self-serve sales model and our restaurant B2B offering and a sequential deceleration in experiences revenue. In experiences, performance this quarter was driven primarily by Brand Tripadvisor segment-specific marketing strategy to emphasize profitability.

Finally, other revenue declined 19% to $13 million, in line with expectations. We continue to deemphasize our flights, car rental and vacation rentals offerings to focus on initiatives more aligned to our stated strategy. Adjusted EBITDA at Brand Tripadvisor was $87 million or 34% of revenue. Year-over-year deleverage of approximately 400 basis points was related primarily to higher headcount costs as a percent of revenue, despite lower headcount dollars year-over-year due to lower Hotel Meta revenue.

Relative to our outlook in August, we came in higher than expectations due to operational outperformance, normal quarterly true-ups of certain expenses and the decision to delay certain growth investments until 2025. While the delayed growth investment was a benefit to Q3 adjusted EBITDA, postponing it also reduces our expected Q4 revenue and adjusted EBITDA versus the outlook we provided in August.

Turning to Viator. Q3 revenue grew 10% to $270 million and gross booking value, or GBV, grew 9% to approximately $1.1 billion. Viator point-of-sale growth for GBV outpaced total GBV growth, while Brand Tripadvisor point-of-sale grew below total GBV growth. Viator segment growth is a function of different growth and profit priorities between the different points of sale, which is reflected in the relative growth rates.

As Matt mentioned, we believe our unique assets, Brand Tripadvisor's broad reach in large upper funnel, combined with Viator's ability to capture high intent travelers as an OTA, provide us a distinct advantage as we look to capitalize on this large market opportunity. Viator adjusted EBITDA was $30 million or 11% of revenue. Year-over-year margin leverage of over 400 basis points was driven by higher contribution profit and lower fixed and discretionary expenses as a percent of revenue, which include brand marketing and people costs.

While we continue to see healthy growth in our paid marketing channels, our direct channels beyond search are growing faster. We continue to drive strong growth in repeat bookings, and this growth has been consistent quarter-over-quarter. Importantly, repeat bookings come with lower marketing costs than new bookings. At TheFork, revenue was $49 million or 17% growth and 15% in constant currency terms. Growth was driven by a combination of both bookings volume and pricing, despite headwinds from Olympics and Euro Cup as well as strong growth in our B2B revenue.

Sequential acceleration was also due to a benefit from the Vodafone partnership we noted last quarter and higher B2C revenue due to some incremental marketing spend in the quarter. Our B2B business, while a smaller contributor to overall revenue at TheFork, is growing faster than our reservation revenue as we capitalize on our product investments to drive an enhanced value proposition to restaurant operators.

Importantly, the team continues to drive greater efficiencies, particularly through reduced restaurant acquisition costs. Adjusted EBITDA at TheFork was $5 million or 10% of revenue, an improvement of 12 percentage points year-over-year and represents the highest margin the business has ever achieved. This leverage is primarily due to lower fixed and discretionary costs, which include people and brand marketing costs.

Now turning to consolidated expenses for the quarter. Cost of revenue was 9% of revenue, an increase of 100 basis points, primarily due to higher Viator transaction costs as a percent of consolidated revenue and higher cloud and media production costs at Brand Tripadvisor. Sales and marketing was 51% of revenue and was flat as a percent of revenue year-over-year. Deleverage from Viator and TheFork sales and marketing costs as a percent of consolidated revenue is mostly offset by leverage from Brand Tripadvisor.

Technology and content costs were 14% of revenue, approximately 100 basis points higher, primarily due to higher cost of Brand Tripadvisor and Viator in support of product development to advance their respective strategies. G&A expense as a percent of revenue was 10%, flat year-over-year as a percent of revenue. The Q3 year-over-year increase in share-based compensation of $7 million was primarily due to differences in vesting schedules for our employee equity grants, resulting in additional expense recognized in Q3 2024 versus Q3 2023.

SBC expense was impacted primarily due to a onetime acceleration of the vesting period of our 2020 company-wide equity grants to 2 years from 4 years as disclosed during 2020, resulting in lower than usual run rate for Q3 2023. Now to cash and liquidity. Operating cash flow was negative $44 million and free cash flow was negative $64 million, reflecting our typical seasonality. Other drivers of the year-over-year decline were changes in other working capital, including seasonally lower deferred merchant payables and last year's refund of approximately $49 million related to the 2009, 2011 IRS transfer pricing settlement.

We continue to expect net cash inflows of $50 million to $60 million in the next 12 months related to the 2014 through '16 IRS transfer pricing settlement. The total net outflow of the 2014 through '16 IRS transfer pricing settlement is expected to be approximately $100 million to $110 million in 2024 versus the net cash outflow from that 2009 through 2011 IRS transfer pricing settlement of approximately $60 million last fiscal year.

We ended the quarter with nearly $1.1 billion of cash and cash equivalents, an increase of $45 million from December 31, 2023. During the quarter, we had no share repurchase activity. Although we have not terminated the program, we have been in the past and may continue to be limited in our ability to purchase shares in the public market due to ongoing consideration of a variety of potential strategic alternatives. We will continue to look for opportunities to repurchase shares, taking into account our capital needs, market conditions and other relevant factors.

Turning now to recent trends and our outlook for Q4. In October, we saw positive trends in Viator with meaningful acceleration from where we exited the third quarter. At Brand Tripadvisor, our October performance was in line with our third quarter growth rate, with Hotel Meta performing largely consistent with where we exited the quarter, which was an improvement from early Q3 trends.

Given what we've seen quarter-to-date, our full year 2024 revenue and adjusted EBITDA on a consolidated basis are in line with our previous outlook in August. We expect high single-digit revenue declines at Brand Tripadvisor, while Viator and TheFork will deliver revenue growth higher than expected in our last update. For consolidated adjusted EBITDA, we expect 100 basis points of deleverage year-over-year.

As a result, we expect a sequential acceleration of consolidated revenue growth in Q4 to low to mid-single digits year-over-year. At Brand Tripadvisor, revenue declines are expected to be flat sequentially while we expect Viator to accelerate sequentially to mid-teens growth and TheFork to accelerate sequentially to mid-20s growth.

For consolidated adjusted EBITDA margin in Q4, we continue to expect deleverage year-over-year. We expect Brand Tripadvisor margins to be approximately 20%, which is primarily due to lower revenue in branded hotels, combined with the lapping of last year's cost actions that drove lower people costs and other discretionary costs. For Viator, we expect margins in the high single digits. And for TheFork, we expect margins roughly flat with Q4 of last year as we are making some incremental growth investments that will largely benefit us next year.

With that, I'd like to turn the call back over to the operator to begin Q&A.

[Operator]

[Operator Instructions] The first question comes from the line of Ben Miller of Goldman Sachs.

[Benjamin Miller, analyst]

Just on Brand Trip margins, can you expand on some of the drivers of the margin performance in Q3 and the qualitative puts and takes as we look out into next year, understanding, it sounds like some of the investments were pushed out a bit?

[Mike Noonan, executive]

Yes, Ben, it's Mike. Yes, so for Q3, there were a couple of puts and takes in there that we want to call out and be transparent on. I think when we saw the outperformance, it's really was driven by three things, all of relatively equal weighting. One, we certainly did see some outperformance across the assets at Brand Tripadvisor. But two, we saw some -- and two, we saw some normal kind of quarterly accruals that we adjusted that we see in the normal course of business. And three, we did have some market investments that we did build into our forecast that we ultimately ended on not executing on.

And really that's a result of us being very thorough in our testing and making sure that we continue to have very high conviction in the dollars we roll out. These marketing investments were really in social mid-funnel that we are still very excited about, but we're going to make sure we get it right before we roll these out and would move into -- really into 2025. And again, as I pointed out, it did have a knock-on effect as we think about Q4 as well.

Too early to think about the impact to margin for 2025. That's the work we're doing right now. But again, we want to make sure we're transparent with the Q3 movements.

[Benjamin Miller, analyst]

Great. And then just as a follow-up. I was curious if you could expand on some of the early learnings from launching the bookable hotel inventory in the app. And just any color you can share on what adoptions look like or penetration of the member base that's actually engaged and made a booking?

[Matthew Goldberg, executive]

Yes. Thank you, Ben. It's Matt. We're excited about what we're doing in the app, and we think that we're taking a differential approach to this. And as we engage with the ecosystem, we're getting good feedback. And so while it's really early, we're seeing some promising signs as we roll out. Members have demonstrated that they really have a preference for hotel booking over the Meta product. And we see that in meaningfully higher click-through rates when they're presented with a booking option and that results in higher revenue per booker, which is multiples higher than a Meta shopper.

We're also seeing a strong propensity to repeat. And the conversion rates are 5x higher than new users. And so when somebody books, they actually want to book again. And these shoppers are also engaging with other categories as well. So hotel bookers drive material incremental experiences revenue and they also engage more. They create more trips, they leave more reviews. And so our testing is showing that we can meaningfully drive higher levels of conversion, which has already grown since we launched it. And as we scale, we're not only holding that conversion, we have identified opportunities to even drive that conversion higher. So early, but feeling good about it so far.

[Operator]

The next question comes from the line of Richard Clarke of Bernstein.

[Richard Clarke, analyst]

I guess if I look at your slide deck you've put out with the release there, on Slide 15, it looks like you're expecting online experiences as a market to grow by about a 17% CAGR, but Viator's bookings just growing at about half that at the moment. So just wondering how you're balancing sort of growth versus profitability in that business? And what you expect you can kind of catch up to that what you're putting out as the market level of growth for online experiences?

[Mike Noonan, executive]

Yes. Richard, it's Mike. I'll answer it and Matt can chime in. So listen, I think we all agree that the experiences as a category is growing and expected to grow faster than overall travel for the foreseeable future for some of the obvious reasons around online -- offline to online penetration and moving more online. And so we're very -- and then just general awareness of the category. So we are excited about the kind of long-term growth nature of the category.

I'd say a couple of things around experiences for us were large and really as it comes through at Viator, one, when you think about our growth rate this year, I would say, our growth rate, we're pleased with, and a lot of it is very expected as we've come through a period, particularly last year, where we lapped some meaningful price increases throughout the system. Again, we knew that this year was in line with how we were expecting to grow.

And then secondly, which we've talked before, our second revenue in Viator is a mix between a lot of different market strategies, particularly at one of our largest channels being Tripadvisor. And as they really manage for management profitability, they are growing at lower rates than what Viator is.

So that's a bit of the history. I think as we look forward, a couple of things. We are pretty pleased about the reacceleration we're seeing in Q4. Some of that clearly is an easier comp on some of the Mid-East activities last year, but we're also seeing good demand. And so we're heartened by that. We feel very strong around our ability to capture share next year with ongoing development, both at TA and the optimization work we're doing on that brand as well as the opportunities we have to lap this year and move into the work we're doing across the product at Viator as well, which is funnel optimization, supply extension, et cetera. So we feel very strongly our ability to capture and play in a meaningful role and grow in line with these -- with the industry.

[Matthew Goldberg, executive]

Yes. And the only thing I would add is I think industry growth rates right now, last report I saw was in the 10% range. And so if you look at that, online is going to grow faster than off-line and OTAs are going to go faster than online as a whole. And we think we're really well positioned with the assets that we brought, as I discussed in my prepared remarks. So we feel really good about the growth trajectory for Viator.

[Mike Noonan, executive]

And the last thing I would say from a technical perspective, Richard, is that I think that growth rate includes APAC, which is obviously growing at a faster rate than our target markets.

[Richard Clarke, analyst]

Understood. And maybe just as a follow-up. You mentioned that there were some restrictions maybe being placed on your ability to buy back shares at the moment. Just any extra color on what that might entail? And any time frame on when that might be resolved?

[Matthew Goldberg, executive]

Yes, Richard, let me try to respond to that one to the best of my ability. Obviously, given our limited participation, we just want to be clear that there are a variety of reasons at any given time why we might be limited in our ability. And one of these reasons is the ongoing consideration of a variety of potential strategic alternatives. But we really can't get into any of the details more than what we've said. We will always look for opportunities to repurchase shares, taking into account our capital needs, market conditions and other factors. And I'm sure you can understand, it's very challenging for us to comment any further than this. I hope that's helpful to you.

[Operator]

The next question comes from the line of Naved Khan of B. Riley Securities.

[Naved Khan, analyst]

So Matt, on your commentary about 2025 and sort of high-level outlook for experiences to grow like solidly double digits. If I have to kind of think about balancing growth and profitability and your ability to kind of continue to show margin improvement, what's the right way to think about that for -- specifically for Viator? And then in terms of things you're doing in the Tripadvisor app, maybe just talk about rewards, how are you thinking about that? Is it pretty limited testing you're doing? Or what are you seeing so far with respect to that?

[Matthew Goldberg, executive]

Yes. So let me kick off and then Mike can add on 2025. What I was talking about and what I said was we believe that the category is going to have solid double-digit growth. We also believe that our participation in the category can contribute a higher mix of our overall revenue and profit and really enhance our group financial profile. And we are very excited about the progress that we are making. We're also identifying opportunities that we think we can really attack this category in a different way across areas of product and leveraging our data and thinking about conversion and supply acquisition and international growth.

And these are all things where we have multiple assets and capabilities, not the least of which is the Tripadvisor demand in lots of territories where, frankly, in the past, we haven't had the ability to expose the demand to the supply that they might want in those territories. So we're really excited about adding supply geographically and categorically to drive that. Mike, do you want to add anything on Viator before I move on to Tripadvisor?

[Mike Noonan, executive]

No, I think you covered it well. And again, these are all the investment and growth choices we're working through now, Naved. But again, I emphasize that Matt said around a belief in the category and our assets there.

[Matthew Goldberg, executive]

Yes. So I think you asked about what we're doing with the Tripadvisor app. And we're really excited about how the app is progressing. And I think I've said this a couple of times in the past. But when I pick up the app, which I do just about every day, it continues to evolve, and it looks very different than it did just a year ago. We are continuing to scale in-app booking for hotels for members. We think that the use case of doing it in context with trip planning is proving to drive engagement and monetization.

We're doing a lot to leverage AI there. And of course, all of that drives us into the ability to drive bookings of both experiences and hotels. Now the rewards piece is a really important piece. And it's a component of what we've said for a long time, which is a free membership is going to be an important part of our engagement strategy. So we've launched the first elements. It enables travelers to earn rewards. And that's different than trying to do something that starts with discounting.

And that's, I think, one of the reasons that the ecosystem has responded really well is because we're allowing travelers to earn cash back when they make hotel bookings. We have the ability to do that across categories. We're also testing first time booker offers to incentivize trial. And of course, we're seeing higher levels of conversion and with the associated repeat. So we feel like that is a really exciting part of what we are delivering, and we're going to continue to test and learn as we scale this out. And this is something we feel really excited about. So watch the app space from here.

[Operator]

The next question comes from the line of Ron Josey of Citi.

[Unknown Analyst]

This is Robert on for Ron. First one is on Viator. I know you guys called out strong growth in repeat bookings in the quarter. Can you maybe just elaborate on Viator's direct traffic trends? And then perhaps talk to how you expect Viator's advertising spend to evolve heading into next year?

[Mike Noonan, executive]

Yes. It's Mike. I'll address this. So listen, I think our repeat growth rate has been fairly consistent for several quarters now, which we're very excited about. And it goes back to what we've been talking about for some time, which is the flywheel of new user acquisition and then working really hard to give those users a great experience and get them to come back to us. And generally, when they do that over time, it becomes cheaper and cheaper.

I would say when we think about our -- I think your question was more around direct cost, I think we have been doing that at very consistent ROASes, which we're excited about, and it proves that we're able to continue to, again, perpetuate that flywheel. So again, an important part of what we're doing. We realize that user acquisition or new users and repeat users they come to us through many different channels, and we have to be where they are and where they're seeking. And again, we will look to acquire the highest as we possibly can. On your second question, repeat that again for me, please?

[Unknown Analyst]

The second question was just how you expect advertising spend to evolve Viator into 4Q and then into '25 as well?

[Mike Noonan, executive]

I got it. Thanks. Yes, so '25, we're in the plans of thinking through strategies and looking at as it goes back to Naved's question, growth and profitability and what those look like. And we have a lot of choices to do that. I think we've been driving very -- I think, we believe, very good strong growth this year through our diverse marketing strategies. I think traffic acquisition will continue to be an important part of how we will acquire new and repeat users.

I think we're going to be continuing to do more and experiment with more outside of traditional SEM, like mid-funnel and social, connected TV, et cetera, and that will continue, we think, be a bigger part of our spend going forward. So I think -- I guess, we have very good teams. We've got to go where the intent is, and we'll continue to find those pockets of tent in the lowest cost we possibly can and feel good about the teams doing it.

[Matthew Goldberg, executive]

I mean the only color I want to add is that this is all about this flywheel, right? It's going and finding the right customers who are going to be high intent, get them onto our product, particularly the app where we're putting focus. And I referenced because you asked about direct, I referenced that we're making real progress there in the fastest-growing surface for bookings, and it's almost doubled since 2022.

And that's because the product is doing the work. So we got to lean into getting the product to do the work. And then, of course, we need to think about how we enhance supply so that flywheel gets rolling. And we feel really good about the progress we're making and our ability to continue to lean into that in a way that will drive the continued accelerated growth that we're starting to see here in the first part of this quarter.

[Operator]

The next question comes from Trevor Young of Barclays.

[Trevor Young, analyst]

Great. First, just tying in to some of the earlier questions around U.S. experiences in particular. It seems like a large competitor is aiming to scale meaningfully here in the U.S. in that category. How is that impacting trends at Viator? Or are you seeing any impact from that at all?

And then second one, just to your comments on international and building inventory there as one lever to flex on the go forward. How should we think about potential order of magnitude of investments to help scale in certain international markets and how that's going to impact margin trajectory in Viator next year and beyond?

[Matthew Goldberg, executive]

Thanks, Trevor. We've seen competitors getting more vocal about their intentions to aim to take share in our home market. And that's no secret. And we've seen the investment that comes along with it. To an extent, it helps the category as a whole because as travelers become more aware of the experiences category. We think that that's a good thing in general because we're going to participate in that growth. But we really think it's important to address our opportunity with discipline and get the right balance of how we think about market share growth and profitability.

I think the market is certainly large enough to support multiple players. It's not a zero-sum game. We feel really good about our progress. And I think it really helps because we have not only that strong foothold but the largest operator base and really highly-rated products, which we think position us well. And of course, we're taking advantage of the scale demand that the Brand Tripadvisor brings, and we can continue to test and learn how to grow the relationship between these 2 brands.

And I'll kick off on the geographic expansion point. We do think there are opportunities to leverage both brands to think about adjacent international markets. We can go and look beyond the U.S. consumer. We already have meaningful pockets of demand and frankly, Tripadvisor, the majority of its traffic is ex U.S. And there are pockets of demand there that we are not meeting today. The Tripadvisor brand is relevant. We know that Viator brings some of that supply. We think we can partner and acquire other elements of supply.

And I think it's a little early to talk about levels of investment for '25 because we're doing the work now. I think you will see that be a growth lever and one that we will go after in a thoughtful and disciplined way, but we're excited because we can see real growth opportunity.

[Mike Noonan, executive]

The only thing I'd add to that, you asked specifically about international inventory. I would say a couple of things. One, we do have a large inventory of experience OTAs out there. EMEA is our largest area of supply makes sense as our North American bookers spend most time in Europe. U.S. a second, and then we have other inventory really throughout the world that we're proud of.

I think -- as Matt said, we're going to let the data of our users tell us where to build and focus on -- where we focus our supply, and that could be a lot of different things. Our users could tell us that building supply out in certain regions, maybe not inside the biggest cities is very interesting. As Matt said, we have a very interesting opportunity. I think when you think about EMEA since we already have a very large supply base there, do we think more deeply around acquiring EMEA bookers in the region? I think that's something very interesting.

And so we are very focused across investments and experiences around supply. Letting data tell us where to go and where to build out for the supply, building out in the app and the product experience, and thirdly, smart acquisition, which we do think we can get efficiencies on as we move into next year.

[Operator]

The next question comes from the line of Jed Kelly of Oppenheimer.

[Jed Kelly, analyst]

Great. Just going back to some of the things you're seeing in Brand Tripadvisor, can you help us parse out what's being driven by normalization? And then, I mean, are you seeing anything from the SEO headwinds that some people have caught some other companies have called out in Google? And then on experiences, just if I kind of try to understand your comments, are you planning on higher investment to reaccelerate growth into '25 for Viator?

[Mike Noonan, executive]

Yes, I'll start. So on Brand TA, there's really -- and I mean, I'm assuming you're talking about Hotel Meta and if you want to expand on the experiences piece, please just let me know. But on Hotel Meta, there's really not -- there's no incremental we're calling out this call. I think it's well understood around headwinds, both in the paid and free side with the travel serve.

I think we have been saying for some time, managing this asset for profitability, which we continue to do. But we also continue to find areas to innovate and create a better product for our operators as well. But I don't think that, that we foresee that necessarily changing, but it's all about how we manage this appropriately and think about scaling the growth investments that Matt alluded to earlier.

On experiences, I think if your question is around very large investments, I just alluded to earlier, I think we have continued -- have had good and sizable investment in the category at Viator. We continue to believe we have a lot of opportunity, particularly in supply and the app. We continue to accelerate the flywheel of smart acquisition into supply, give them a great experience and haven't come back. I think that a lot of the investment is going to depend on locations and targets and where we want to geographically expand, if any.

And these are the things we're wrestling with or going through in our planning process. I would just say there's a lot of great opportunity we see in front of us, and we have to be disciplined in how we approach it.

[Matthew Goldberg, executive]

Yes, the only thing, Jed, that I would add, it's Matt, is when we think about how we manage through some of those known traffic issues, our history is to be one of the best in the world at optimizing SEO. And I think that we've got a fantastic team, and they do a great job. So that's going to continue. We're going to continue to optimize that. But let's face it's exactly why we put the strategy in place. So we can address those known issues and really engage people and get them coming and repeating and using our app. So that feels really good.

On experiences, we see multiple growth paths ahead. There are source market opportunities beyond our foothold in the U.S. There are supply categories where we are underpenetrated. There are geographic opportunities through partnership. And of course, there's also B2B opportunities, additional services for operators and partners. So we see a lot of opportunity there, and we're doing our planning now. But I got to tell you, there is a lot of excitement and enthusiasm about how we're positioned and what 2025 will bring.

[Operator]

The next question comes from the line of James Lee of Mizuho.

[James Lee, analyst]

One is on overall kind of broader travel trends in general. You guys noted stable booking windows and length of stay. I was wondering any differences by geo, maybe in the U.S., Europe and APAC? Are you seeing any change in terms of consumer behavior in terms of trading down? And my second question is more on, Matt, I think you recently commented on the SCIT conference that Tripadvisor is shifting from arbitrage economics to engagement economics. Can you maybe a little bit elaborate on that progress and investment you need to make to transition your business?

[Matthew Goldberg, executive]

Thanks, James. All right. You've given me real work to respond to these very detailed and excellent questions. On the macro, overall leisure demand is clearly stable, and travel intent remains healthy. Our survey suggest almost 3/4 of travelers intend to travel this winter. And we are seeing and have expected travel to normalize, but booking windows are holding mostly flat. There's some nuance by region. There's some nuance by domestic and international. So we see domestic booking windows have ticked up marginally. International booking windows have contracted very slightly. But we think these things are very slight, likely a function of normalization.

Experiences booking windows are flat. Length of stay has increased year-on-year, but it has moderated from earlier in the year, but there's marginal growth overall. It's -- we don't see clear trends of trading down. There could be some bifurcation, as I mentioned in my prepared remarks, in travel intent between high-income travelers and middle or low-income travelers. There may be some slowdown in family travel, but look, hotel class star is stable.

And frankly, while price per night growth has trended lower, the declines are moderating in recent months. So I think the macro signals, it's just hard to predict. We've got normalizing inflation, maybe recession risk is declining and traveler concern in some of these areas seem to be subsiding as well. So I think that's the picture. It feels stable and healthy.

In terms of our shift from arbitrage economics to engagement economics, thank you for asking, we are making progress on Brand Tripadvisor strategy. It's important to remember we're in the middle of a multiyear strategy. And we started off clearly by getting ourselves in a position to deliver and test and learn. We then moved into delivering our product improvements and scaling those improvements, and we are driving engagement. And of course, that is what we are looking to scale to financial impact.

Now parts of the strategy are delivering that financial impact. I think the experiences category has been a good proof point. And other parts of the strategy are contributing, but just not at the scale where they move the needle and they're early in rollout or they're indirectly contributing by delivering growth and engagement. But we feel really good that we have stabilized and returned to growth, our monthly active users. We like the quarter-to-quarter improvements we're seeing in monthly active members and app users.

And as I said, we can see that strategy progress in North America, where we've been rolling out our product work and it's fast following in non-U.S. as we roll out further. So it feels like we're in progress. And of course, we are all impatient to translate that into financial performance at scale.

[Operator]

The next question comes from the line of Kevin Kopelman of TD Cowen.

[Kevin Kopelman, analyst]

Could you give us your early thoughts on 2025 for Brand Tripadvisor and how you're thinking about managing the growth versus margins in that segment?

[Mike Noonan, executive]

Kevin, it's Mike. I'll provide a few things. Yes, so when we think about -- I'll take a step back, when we think about growth in 2025, we're obviously still early, working through our plans. And we very much think about our consolidated as -- our consolidated results as a portfolio, and we see really nice growth prospects for both Viator and TheFork we've talked about.

For TA, this is a continuation of our strategy, which we are getting through the midpoint of right now. And this year was a very big and important year for a lot of product development. And we did a lot of great work developing our planning tool, revamping our app. All of these things we're very excited about. And so when we think about next year, I think there's two basic things we look at.

One, we have to acknowledge we would expect there to be continued structural headwinds in our core meta business, or we certainly would say would expect volatility there. And then it really turns to how we think about our strategic investments. meaning, the app booking capabilities and experiences on Tripadvisor. And as Matt just said, we have tremendous excitement around what we can drive in these investment areas.

And so as such, it's really balancing level of investment and expected growth. We really want to be able to scale the right way with high conviction. It's the reason why we pushed some of the Q3 investment into 2025 because we continue to really iterate and want to get that right, which we are. And so I think as we think about, certainly, ambition is to return to growth as quickly as possible. It's really around investment levels around that. When you think about some investments that are more LTV-based leaning into faster growth is more investment and more upfront expense.

And so I think these are the things we are putting together as we speak to think about that very important balance between growth and profitability. But we do believe in what we've done this year, the foundation we've laid, the experimentation work we've done gives us a very good base to think about how we get back to growth in the next few years. I don't know, Matt, do you have anything to add to that?

[Matthew Goldberg, executive]

No, I think that's good.

[Kevin Kopelman, analyst]

And maybe just a quick follow-up. Yes, is there anything to call out on the comps with regards to some of the changes that have taken place at Google that may have affected TA in the coming quarters?

[Matthew Goldberg, executive]

Yes. I think, Kevin, Google continue to do what Google does. I don't think we really -- we're not calling out anything new or incremental this quarter. They've continued to do a bunch of algos and updates through the year. Our teams are really good at source into those, particularly on the SEO side. And as a brand, TA is a brand that has some of the deepest and most connected content out there. We continue to do really good work around that. But Google continues to put paid ads in the serve. That's a headwind to SEO, and it's an opportunity on the paid side.

On the paid side, we continue to think about relevancy, how we acquire high-intent traffic at TA, but with the right cost, right? We've been very disciplined in how we think about our ROIs and that spend. We'll continue to do so as we manage that asset that way, particularly as we want to set ourselves up for thinking about scaling the growth assets that I just mentioned.

[Operator]

This concludes the question-and-answer session. I would now like to turn it back over to Matt Goldberg, CEO, for closing remarks.

[Matthew Goldberg, executive]

Thanks again, everyone, for joining us today. We look forward to closing the year strong and finalizing our plans for next year. Until then, travel safe.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.