Yet Another Value Podcast - Adam Lindsay takes a TRIP through the LTRPA bull thesis

Episode Date: July 14, 2021

Adam Lindsay, founder and managing partner of Powell Anderson Capital Partners, discusses his bull thesis for Tripadvior (TRIP) and Liberty Tripadvisor (LTRPA). The bull thesis is nuanced, but much of it centers on TRIP's nascent Tripadvisor Plus business, which Adam thinks TRIP is uniquely suited to successfully launch and could drastically change their financials.Adam's email: [e-mail]0:00 Intro1:30 TRIP Overview6:30 Why is Tripadvisor Plus not Instant Booking 2.0?13:00 How Plus could be a win/win/win22:30 Why can't OTA competitors copy Plus if it works?25:25 TRIP's crown jewel: experiences33:00 Evaluating TRIP's management38:00 Strained analogy comparing Twitter to TRIP40:30 TRIP valuation43:45 TRIP's cost structure going forward50:05 Comparing Liberty Tripadvisor to Tripadvisor55:00 Do TRIP and LTRPA get a "Maffei discount"?

all right hello and welcome to the yet another value podcast i'm your host andrew walker and with me today i'm excited to have adam lindsay adam is the founder and managing partner of pal anderson capital partners adam how's it going great andrew uh thanks thanks for having me excited to be here hey thanks for coming on i'm excited to have you on as well and let me transition with that to start this podcast the way i do every podcast that's by pitching you my guest you and i first started swapping notes i think on the Warner Discovery deal when that got announced, which a super interesting deal. I thought we were sharing some pretty good notes there. So I was really excited to have you on.

And then you got pitched to me by one of the people's favorite podcast guests, Randy Barron, who pitched Amherst a few weeks ago. So the combination of a smart guy swapping thoughts with on Discovery plus Randy's endorsement, that just had to have you on. So really excited to have you on. And that out the way, let's just transition right over to what we want to talk about. This is in the John Malone universe, which longtime listeners and readers will know, I love. Your idea is kind of buying Liberty TripAdvisor, but it's really centered on

TripAdvisor, the company, and then Liberty TripAdvisor gives you some up the side. So we'll focus TripAdvisor, and then we'll maybe transition to Liberty Trip Advisor at the end. So I'll toss it over to you. Why is now the time to buy Trip Advisor? Great. Well, thanks, Andrew. I appreciate it. Thanks. You know, fan of the podcast. I feel like there's been a lot of useful things I've learned from the podcast and the blog. So hopefully this is a chance to give back maybe just a little bit. Hey, I appreciate that. And I do. And I appreciate you mentioning Randy, too, because he helped encourage me to take the jump

and go on the record here, at least a little bit. Full disclosure, none of this is investment advice, right? Absolutely, people should do their own work here. You know, personally, I have, you know, via my partnership, a decent slug of my net worth is invested in Liberty TripAdvisor, so I have a view. But always looking for disproving evidence. So I welcome the conversation. And if, you know, I'd love the feedback.

If people listening have a materially different view, I'd welcome it and I'd like to hear it. So on the TripAdvisor, like you said, you know, people kind of have a sense of what that is, five-ish billion dollar enterprise value advertising company in the travel space. Liberty TripAdvisor, separately publicly traded company has about a, you know, 20% economic interest, 60% of the vote of TripAdvisor. So it's got kind of a billion-ish dollar. of TripAdvisor stock, and then, you know, $700 million of complicated Liberty-style debt. And, you know, so, you know, there's a nav there of $400 million, $400 million, almost,

trades for less than $300 million. So there's a discount there. The other thing to note, Liberty Tribut Advisor is controlled by Greg Maffa, not John Malone. And, you know, it's unclear to me, Malone may be long gone here, right? Like, so, you know, this, and let's, that gets into. So when you think about the thesis, I'd say there's kind of four points. Number one is, you know, we're here on the yet another value blog. So we're supposed to be looking for, you know, things that are unloved and, and, you know, these guys are that, right?

Like, Tribadvisor has been a real stinker as a public stock since, you know, for seven, eight years, almost since it spun out. Liberty Tribadvisor has been an unmitigated disaster down like 90% from when it spun out of ventures. is a real case study and the dangers of margin. And so that's number one. Number two, you know, then there may be reasons for that, but at least we do, we know we're not hunting in something that's terribly popular. Number two is online travel is a great sandbox to play in. And you only have to look at, say, you know,

the last 15, 20 years at booking.com to really is a case study to understand that. trip advisor has always had continues to have a unique position in that ecosystem that they've sort of never been able to monetize but it's still a good sandbox to play in number three is the fundamentals of trip advisor that where they get their revenue and who their customers are what they pay to google where their cash flows come from it's really changed over the last two three years and it looks you know it's it's meaningfully different from where it was three five years ago. So if you haven't taken a look in a while, you know, you could debate whether or not it matters that it's changed, right? But it does look different. And then and then the fourth,

and this is the reason why we're here today, kind of to the point you brought up, is COVID really has created this opportunity for them to reset the business model and push on this TripAdvisor Plus. And really, I think they're re-architecting the entire business model towards TripAdvisor Plus and a direct-to-consumer offering. And, you know, the reason, to your point, like, why isn't this just instant book 2.0 is what's different here than all the other efforts to improve the monetization is there's real industrial logic to this subscription product. there's a real value proposition for the consumer because essentially the consumer gets hotel rooms at wholesale cost.

There's proposition for TripAdvisor because they get the 99 bucks a year subscription fee. And then even for the hotels, it's good because it's a cheaper source of distribution for them than say the OTAs or some of their other channels and they get all the consumer data. So there's a real argument to be made that this is logical. and then Tribut Advisor, because of its spot in the ecosystem, is uniquely positioned to profit. And so then if that's true, right, the big dream here is pretty easy to see, right? They've got 400 million uniques. You convert 2, 3% of those, you know, that's 10 million subscribers at 100 bucks a year

in sort of a Costco-type model where we pass you goods at wholesale prices. is we, you know, our earnings are basically the subscription and, you know, that's a billion dollars right there on a company that's, you know, had a hard time doing three, four hundred million bucks in EBITDA. So that's kind of the, so it's easy to see the big dream and, you know, three, five years out. So that's kind of the headline. I'd welcome, you know, let's dig in. No. That was great. I'm going to have to really earn my, my hosting money here because you just went through like 95% of the questions I had there. But I think I can earn my hosting money here. That's okay. Let's start. So the big initiative, I think the big thing that gets you

excited, that gets me excited, to be honest, is the TripAdvisor Plus program. And the first thing, and you address this a little bit, so we don't have to have too hard in, but every person who asked questions on this, including when you first talked to me about this, my first question, every analyst asked this question, every person who heard about the podcast asked this question is, why is this not instant booking 2.0? Because three, four, five years ago, people got very excited about instant booking 2.0, and it was a flat out, I don't want to say disaster, but pretty much a disaster, I'd say. So maybe you could start by giving an overview of what instant booking was, a little bit more on the TripAdvisor Plus model and why, and I think they've laid it out nicely.

I think you started to lay it out nicely there, why the TripAdvisor Plus model makes more sense than instant booking. One thing I want to step back that I think is important table stakes in all discussions about online travel is to realize, you know, and what makes online travel a special, niche to operate in is these are fixed cost businesses. You got to buy planes, you got to buy hotels, you got to buy ATVs and ziplines, like whatever it is. It's a fixed cost business, and there's no long-term constraint on supply. There's always another hotel down the beach in Cancun. There's always, you know, a block away from the plaza. There's a mid-block hotel that goes up. So you have this

super fragmented supplier base that is in a fixed-cost position. So they're very well. willing, you know, if you, Andrew could like sell hotel reservations on yet another value blog, right? These hotels would pay you a 20% per night commission, right, to put ahead in a bed. And that's a really big nut. If you think about, you know, room nights, 100, 200, 300, 300 bucks, 20% a night. It's a really big nut. So that is just the important thing, the background to understand about kind of all of online travel. So Instant Book, you know, was a strategic mistake. And I think the most important thing to realize is at the time, Expedia and booking were 50% of TripAdvisor's revenue. And then TripAdvisor basically said, we're going to try and go over

the top of you and take those customers for ourselves. And then to the customers, they said, hey, this will be great. You won't have to click off our website. And we'll take the credit card and we'll store your information forever. And isn't that awesome? And the customer said, No, that's not awesome. Like, I don't want to transact on TripAdvisor. Like, TripAdvisor's a magazine. Like, there's no real benefit for me to transact on TripAdvisor. And there's no, the price is the same, right?

The price is the same. Can I just hammer that point home just a little bit more? So TripAdvisor, the way they generally make, most of their money comes from, you said Expedius 50%. What happens is, was, was, was. You look up a, I want a hotel in New Orleans. And they present a list of hotels on TripAdvisor. and what would actually happen is you would click it and you would go off-site and book it on Expedia.

Right. You end up on Expedia. Expedia would pay them for the click or whoever would pay them for the clip. And in instant booking, you just wouldn't go off-site. They kind of cut out the, they're the middleman. They kind of cut out the end person and became the end person. But I just want to make sure we drive that home exactly what it's. Right. And then, but they still needed trip, TripAdvisor still needed the hotel, the OTAs, Expedia and booking for supply. And so then they had to architect the product in such a way that, you know, they were happy to provide it. And it just, it didn't, it didn't provide any benefit for the consumer.

And the other piece of, and that's really important to understand here is there's these two principles in, in online, really in most commerce, but in hotels and online travel is called resale price maintenance and rate parity. And what this means is a hotel can determine and has the right. to dictate the pricing that gets advertised publicly out there. So the dirty little secret on all the OTAs and the hotels or whatever is nobody gets a deal, right? Like if you, and you could do this test yourself. If you, you know, try and get the exact room with the exact amenities in the exact times, at the exact same hotel and you do on the hotel's website and on booking, you're never going

to see that different of a price. You're very rarely. And if you do, like, and you click all the way through somebody you don't end up getting it, right? That's this, this, it's kind of like MSR. RP. And so, and that's what's out in the public universe. And that was what, you know, and so Instant Book had to operate like that. So they'd show people, you know, three different prices. And they were all the same. You could book it on Instant Book or you go over to booking or you

go over it. And so there was just no consumer benefit. Tribut advisor plus, because you pay the 99 bucks up front, you're behind, you know, what the, you know, a paywall or a hard. And, and this is what what really caught my eye is, you know, about five, seven years ago in Europe, there became real antitrust issues. And it was a real concern for booking because there were a number of small companies that were sort of offering these wholesale rates out there. And, and they were saying it was anti-competitive that the hotels told them they couldn't do it. And in the U.S., it's kind of established that you can do this behind a paywall or on your own website, you know, if you're, you know, in your own members program, but in Europe it was less established. And the way they wrote out the

law is it, or the regulations, is it has to be behind one of these affinity groups or one of these affinity paywalls. And so what's different here is the consumer, you know, TripAdvisor is going out. There's a whole network of wholesale suppliers, these bed banks. Tribut advisors tapped into that. They buy those hotel rooms at wholesale prices, you know, 10, 15, 20 percent discounts. And they're passing it along but they can advertise those to you once you've paid the 99 bucks and once you're behind the login you know and so until that happens they just say hey you're looking at this hotel you know most people save 350 bucks if they book this hotel you should pay 100 bucks come behind our paywall and see and so for us and it's not going to be for every consumer right and particularly

initially but for a certain kind of savvy consumer who wants to you know who's you know travels a decent amount and they sort of understand that they never get a deal anywhere. It's going to be very attractive. I agree. And I just want to make sure we're getting this right because TripAdvisor says we want this to be a win, win, win, right? And it's a win for TripAdvisor if you sign up for TripAdvisor Pro because they get that sweet, sweet Costco membership revenue, right? $100 per year. Yes. Win for the consumer because I think TripAdvisor said, hey, we target consumers who are about to go on a $750 trip. You get 15% off $750 that more than covers the price of $1,000. That more than covers the price

of your first year of membership on that trip. And the question to me, and they explained it, but I'd like you to explain it a little further, is how does the hotel win, right? Obviously, they're getting people, but they're giving trip advisor a discount on this rate versus exped, and everything. So why is this a win for the hotel?

Right. Well, and so the other part is it's a win, win, win, but it's not a win, win, win, right? So in theory, hopefully they're going to take some of the, you know, stuffing out of, you know, Google, and then maybe to a lesser extent, the OTAs, but I think that's kind of a longer tail situation. The reason it makes sense for the hotels, right?

If I'm a hotel today, you know, I have various forms of distribution depending on the kind of hotel I am, right? So obviously, as much as I can get to my own website, that's awesome, right? This is why Marriott buys Starwood, you know, for all those Starwood points members. And they want to, you know, you know, for those consumers that are loyal, they want as many of those as possible. Then, you know, there's the other big bucket is going to be basically the OTAs, particularly for leisure travel, expedient booking.

and then kind of a long tail of smaller guys, you know, that that's another channel of distribution. There's there, you know, there's a couple others. The other, you know, sizable one, and it depends on the hotel. It might be 15 to 25 percent is wholesale, where they go to these bed banks and those guys commit the capital and they put it and then, you know, it gets sold in an opaque market, like the old price line, name your own price or different things like that. So, and as a hotel, I don't want just one source of distribution, right? because maybe we have a bad season.

If I'd sold some rooms up front, I'd be better off. And every hotel is going to come to their own determination on that. But for that big slug of their business that is Expedia and booking, right, Expedia and booking own the customer. They don't tell you, right, they don't, you know, they get a name. That hotel gets, like, you should, you know, next time you go and your book, ask them to show you the screen. And, you know, they get your name and they know you came from Expedia.

They don't even know if you came from Hotwire or Hotwire or Hotels.com or whatever. they just, that's all they know. And then they'll try really hard to market you, get you to sign up for their, but they don't even know who you are. And they paid, you know, book, you know, Expedia, you know, 18% or 20% whatever the commission was. TripAdvisor goes to them, you know, in the, in the big dream where TripAdvisor develops direct relationships with the hotels, tributvite goes to them and says, hey, don't pay, you know, don't pay 20% and get zero information. Pay us 15% and we'll give you all the information. We'll give you their. email, their address, give them a great experience, try and get them to sign up to your loyalty point, like try and, you know, turn them into a lifetime customer, right? And so for the hotel, to the extent there's enough volume to make it worth their time, you know, it's, it's not worse than, than the, you know, it's better than the OTAs. So that, that's the value proposition for them. And I get, that brings us nicely into my, into the next question. And I think people have been asking, people have been asking this, hey, the OTA shut down, basically shut

down Instant Booky in the last time because they hated it. And the big question here is, yes, this is going to start small, but aren't the OTAs going to stop giving you traffic once they look at this and say, they say, hey, you're getting cheaper prices. You're going to wreck your end running around us. We can't give you things. We can't give you any more of our supply because you're going to cannibalize our business at some point. Right. Well, so and this is what gets so interesting, right? Because first of all, when Insta book happened, like I said, Expedia and and booking were 45, 50% of revenue. So what we haven't talked about yet is TripAdvisor bought this business called Vietor,

which is a travel, like an experiences business, right? So you have heads and beds, you got, you know, butts in airline seats. And now you've got like butts in ATVs and in zip lines, right? And TripAdvisor is, I think, the largest in the Western world on this. They're really an OTA for these experiences, so tours, you know, all that kind of stuff, super fragmented, fixed costs. There's a lot of nice attributes about that business. It was growing, you know, pre-COVID is growing well north of 20%. The commission rates, you know, a guy who owns 10 ATVs industry or bikes or whatever and is trying to like, you know, sell those online.

He has a lot less leverage than a hotel chain. So the commission rates should actually be, you know, kind of similar at least to the long tail of hotels. So that's a pretty good business to be. And that's, that experiences in dining is now 30% of tributt of revenue. Right. The, um, and then, you know, partially because of COVID, expedient booking have dropped all the way down to 20% of revenue in 2020, right? So from 50 to 20. So 50 they could dictate 20, you know, nothing's work. Maybe true advisor can just tell them to pound sand, right? Like, so it's a different, it's a totally different negotiating position. That's, that's number one. the second is, you know, it's the, with Instant Book, they didn't, you know, they kind of

threatened to not come on, they threatened to not come on parts of it. They eventually sort of got there. They got to a place where TripAdvisor would display, so you knew you were booking on priceline.com or whatever. And, you know, it effectively made the product not very, you know, monetization friendly for TripAdvisor, and it was sort of not any worse for the OTAs. But in, you know, so in this case, you know, that's, that's just not what's on offer here, right? Like TripAdvisor is giving them something totally different. So I guess to reset, you know, on your question, you know, why won't the OTAs just, you know, pull away? Well, first, they're a much lower percentage of revenue now, so they have much less power.

The other thing, and this may be more important, where are they going to go, right? So like the bane, and this is the other key point of online travel, Google and the Google tax, that's the bane of everybody in the travel ecosystem, right? And so, you know, booking is the best in the world at arbitraging click to a head in a bed, like a Google click to a head in a bed. They're the best in the world. If you go look, they give you pretty good information. They pay, you know, 30% of their kind of net revenues go straight to direct

advertising, which is mostly Google, right? So, and they're the best of the world. For Expedia, it's more like 50%, right? And for, you know, you know, a European OTA or, you know, air, it might be 60 or 70%, right. So, so if I'm, if I'm booking and I'm slowly like, you know, getting boiled like a frog by Google, do I really, even if I only get 10% of my traffic from Trip advisor, do I really want to kill them off, right? Do I, you know, I always, you know, to some extent, you know, they want some, you know, they're going to go, you know, until the ROIs, if the ROIs were to get, you know, meaningfully worse. Here's the other reason why I think that's not, or it doesn't concern me too much. If you think about it, so booking and, you know, I would love it if it

cannibalized. If they said, you know, if TripAdvisor got so many subscribers that they, that booking and Expedia, you know, pulled off the platform, that would be awesome, right? Because today, day, you know, and I don't have perfect numbers, but you can think about it from a high level, you know, best case, you know, somebody say like a good customer 10 times a year, if you look at the averages, booking gives, you know, is a pretty clean, you know, that, those average hotel room nights are 100, 130 bucks. Booking, you know, makes $20-ish or something like that on their commission. And, you know, that Google tax is six bucks, right? So, so, and, you know, TripAdvisor maybe isn't even that six, right? Maybe they're much less of that.

And so, so, you know, if a good customer is 10 nights a year, you know, for booking that customer's worth 200 or, you know, maybe they're staying in a nice hotel, so they're 300 bucks a year. But for TripAdvisor, that customer is, you know, I think it's probably worth, you know, 30, 50 bucks max, right? So cannibalization to me is great because if I'm TripAdvisor, I'm taking a customer that was worth 30 bucks a year to me. And I'm turning them into a customer that's worth 100 bucks a year to me. And booking, you know, they're kind of in a tough. I mean, it's so small that it's not going to matter, right? And they can, they're just going to, you know, they're smart capital allocators and they're just going to like run this thing, you know,

for another decade or two and, you know, run it for cash and do smart things with that cash like they did before when they stopped, you know, they saw that the name your own price business only had a limited, you know, market. And then they made the greatest acquisition ever when they bought, you know, booking and the other business and put them together, right? So they will do fine. And I think the reality is, is it takes so little to move the needle for tripping. advisor in the grand scheme of things you know you know we haven't heard anything yet you know i had the same reaction when they first came out i thought holy cow they're going you know you this is going to be war right like trip advisor or booking and expedia are just going to come out and so far it's been

crickets they haven't said a thing right and so we'll see we'll see but i mean that could still happen but so far um it hasn't let me ask you a question on the different side of the race right so let's say expedia and booking don't respond by taking supply off of TripAdvisor. But I think the next most natural question would be, well, booking Expedia have more relationship, already have the direct relationships with the hotels. They already have customer credit card information, all that type of stuff, great data. So I think the next question would be, well, if this starts getting some traction for Trip

advisor, why wouldn't Expedia in booking, or if you wanted to go real crazy, Google, roll out a membership like this when they see the value, they see the value prop, they see all the consumer sign up for it. they could roll out a membership like this and kind of told TripAdvisor before they really got the fly wheel gone. Sure. So Google is the easy one to get rid of. You know, Google, and I think they understand this, they are in the advertising business, right? Even in online travel, you know, that's been a bugaboo forever is that Google is just going to come

and take it all. And it's like, no, like that, you know, what booking does, those direct connections, those hotels, that takes a long time. There's a lot of, there's a totally different skill set in being a transactions business versus being in an advertising business, right? And I think Google understands that. I don't think they're going to offer a subscription. I mean, maybe Amazon would, but wouldn't they just buy TripAdvisor, right?

I don't know. So I think that makes me less concerned. It's a valid point. Like, you know, shouldn't Expedia and booking just do this, but they can't. To that point I said earlier, if you think about what is a good customer worth to booking on an annual basis. And I don't know if it's, you know, $200. 300 bucks, 500 bucks, whatever it is, that customer, you know, unless the universe, you know,

unless there's only like a million customers at TripAdvisor that actually matter and they're all the most valuable customers in the universe, right? Like, there's no way TripAdvisor makes more money on a customer than booking does, right? Like, best case, they make a third, right? So booking can't do it, right? Because they take a customer that was worth 300, 300 bucks a year. And they say, well, we'll take you for a hundred bucks here. I mean, that would destroy. I mean, you know, there's, you know, I've talked to people to say, like, I would love that if booking would do that, you know, but I mean, I think, I think it's a long shot, right?

Because they're there in the innovator's dilemma there. I was going to say, so if I could summarize what you're saying, they're in the innovator's dilemma, they're almost too profitable to roll out the subscription product that would be highly valuable, but would cannibalize so much of their core business. Because really what this is, the subscription product is a wholesale distribution channel, right? and and that's just they're not in the wholesale distribution business right there in the retail business let's talk about we've talked about some of the risks and i've got a couple more we'll come back to but let's talk about some of the upsides let's have a little bit more fun and the two upsides i want

to talk about which kind of do connect but you mentioned a little bit earlier you know when we talk trip advisor you think trips and a lot of times you you think hotels flights that type of stuff but i think the real jewel for trip advisor is the experience side of the business right i want to talk about that and then i also want to talk about the flywheel that they could go and once they get the subscriptions going. So why don't we start with the experiences and we can flip over to the flywheel if we don't address during the experiences? Yeah, I mean, so, and again, to some extent, you know, I always look at this.

Myel boss used to talk about risk reward, you know, probabilities, right? And when I think about my downside risks here, one of the things I really like is that experience this business. I mean, anybody who digs under the covers, you're like, holy cow, these are going to, you know, TripAdvisor, you know, if hotels is a global duopoly in OTAs, you know, it appears, at least in the Western world, experiences, booking these experiences is, you know, going to be a duopoly or maybe maybe it'll be three players, right? There's, there's, there's, I think it's called get your guide, and there's a thing called KLOK and mostly Asia focused. Like those, and so that's a great

place to be. We already know if you can be in an OTA in a super diversified market, like, that's a great business. And so you could, you know, there's a big dream right there with that, that business. I mean, I think in 19, it had $450 million of revenue. It was growing north of 20%. So you say, line of sight, a couple of years, you know, where could that be, you know, $5,600 million. You know, if we were willing to believe that it should have good OTA economics, you know, EBITDA margins there would be 25%. I don't know, they could be very high. You know, you fund with multiples and you come with a real healthy valuation there.

The private companies are unicorns in the private market. So, you know, right, you know, it's hard to do with some of the parts for Tribut Advisor because you really can't, you know, because that review and that that that that kind of travel attention acquisition model is. is, you know, doesn't travel if you separate the parts, but if you just for the intellectual exercise did it, you know, I don't think it's too hard to say that business today would be worth, I don't know, two or three billion dollars, right? You know, in a non-downside scenario. I hear you. And I'll just add a little bit, and this will help transition us to flywheel, but the thing I love it, so anyone who's read the blog, I don't think I've talked about this

much on the podcast, but I love escape rooms. And a couple of years ago, I got kind of bullish on Yelp. And one of the things that would always love escape rooms. Every podcast guest gets an escape crate present. So you'll be getting that in a couple of days. Oh, wow. Yeah. But I hate to spoil the surprise there. But I love escape rooms. And a couple years ago, I was getting pretty bullish on Yelp. And one of the things I was thinking was whenever I would go to a escape room, none of them would ask for a Yelp review. All of them would ask for a TripAdvisor review. And that's because Yelp had an ingrained. You do it for local stuff. But trip advisor, everyone, they knew their core business was people who were traveling. and everyone knew trip advisors how they do it. When I went to Asia for my honeymoon,

every place would ask for trip advisor reviews. It's just such a great network where people who are traveling go to trip advisor to look up local experiences. So local experiences want to get trip advisor reviews. And there is a very natural, it's difficult, but there is a very natural if trip advisor can go to those local places, get them to get direct bookings on trip advisor. I mean, that is an incredibly potentially powerful and valuable thing with a massive moat because you have to go literally local company by local company. And as you said, it's a local escape room that owns one escape room. It's not Marriott.

So they don't exactly have a lot of pricing power to push back on your commissions. Right. No, that's exactly right. And then, and you know, to your point about the flywheel, I think a big component, and I mentioned this a little, is, you know, the importance of the Google tax here, right? So the thing I didn't mention or that we didn't get to yet is TripAdvisor. If you look, when they were doing the instant book, they were paying 40, 45% of revenue straight to Google, right? Because they were, and they were terrible at it, right?

Like, they're, you know, booking could take that click and convert it so much more efficiently into a head into bed than TripAdvisor could. And so, and, you know, they tried it for a couple of years and it didn't work. And they quit. And they stopped doing it. And they said, Mia Copa. They said, we did the wrong thing. And they said, we're going to run this thing for cash, right? And you can see it in like the numbers in 18 and 19 and they and then and then in 20 and it's just

gone down, down, down, down, down. Whereas last year it was like 20-ish percent of revenue went to Google, right? They just said, look, we're going to run this thing for cash. And because they're TripAdvisor, because people just, you know, end up there, right? If Google isn't totally evil, right? And I'm searching around the internet. I'm eventually going to end up, you know, I'm planning my travel. I'm eventually going to end up on TripAdvisor.

So what that, you know, and that's, again, versus, you know, that Google tax is like 30% for booking, 50% for Expedia. And so TripAdvisor has this low-cost position in acquiring travel intention, right? And so then, and then to me, that's like the biggest piece of the flywheel. You're just getting them into the ecosystem, right? Then, you know, do they do an experience? Do they do a hotel? Do they become a TripAdvisor Plus member? and then and then and then and then and then that tribute advisor plus like we we see you know the benefits you know

if it's Netflix or if it's Amazon you know every business now that you know nobody launches a business with a third party right you launch on Shopify right like everybody's trying to go direct and then there's certain flywheel if you can like continue to add value so I think an important part of that besides just adding you know more experiences more hotel rooms is that that you know, that acquisition, you know, ability should give them. And that's the piece that makes TriVisor uniquely able to do this. Now, it's not a guarantee, right, that it's going to work. And, you know, maybe people just don't want to book anything on TripAdvisor, right? They just want to, like, go there to read reviews. But, you know, there's a lot of indications that it is

getting traction. Yeah. And if I could add on to that, I think TripAdvisor Plus, adds another components that fly will because if somebody goes there once and they save, you know, as we said, they try to save you more than the annual subscription price on your first booking. But then the next time you go, you're going to go book through them because it's going to be cheaper to book on TripAdvisor than to go anywhere else because they're giving you that discount. So they should get people kind of ingrained where when we travel, we go to TripAdvisor. We book our hotels there because we'll save money. We book our experiences because we're already on there and we'll probably save money because TripAdvisor can pass through some of that

commission cost to us. So I think you just get a great flywheel going where once you get someone in, all of a sudden they're redirecting more and more of their spent to you. TripAdvisor doesn't have to reacquire them through Google marketing every time. So I just think there's a really powerful potential flywheel there. I mean, and that's the big dream, right? This becomes the Costco of like online travel. Like people just, you know, they view themselves as Costco members, right? People start to view themselves as TripAdvisor members. And yeah, they don't get all the selection, right? You don't get everything in the universe, but you get some great stuff. And, you know, you sort of upscale your experience relative to what you would have otherwise. Yeah. Let's turn to another risk. So I actually

think this is the biggest risk. And it very much relates to the instant booking risk we talked about earlier. But Steve, it's Koffer. Steve Koffer is the CEO, co-founder, co-founded it around 2000, 2001, co-founder, Trip Advisor. And I do think there's a question, look, Instant Book wasn't great. This Stocks been flat for 10 years. I love the vision they're rolling out for TripAdvisor Plus, but it's the same team that launched, again, launched Instant Book. The company has been pretty bungled. I think they've frequently been on the list of worst performing companies.

So when you look at the management team's history, how do you kind of get comfortable with them doing another launch that's got tons of upside, but it's going to take a lot of work. So, and I think, you know, I would say a lot of investors have probably lost patience, right, with him as a CEO. And on the point, on the rest of the team, I'd have to go back and look, but CFO is definitely different. Like, a lot of the management teams refreshed, but besides coffer. So, I think, you know, you got to go, my take is, you know, he's an engineer, right?

Like, it was a strategic mistake that they, you know, to try and really compete directly against the OTAs when the, the OTAs were 50% of revenue. At the same, you know, because I think that the, the knock on this idea is always like, well, these guys can't execute, so why are they going to execute any differently this time? I think, you know, if they change the CEO, the stock would probably go up tomorrow, right? However, I think that might be misplaced. Like, my take is a little bit different. You know, if you step back, you got to ask yourself, like, why is this guy still coming to work, right?

So 20 years ago, right? 18 years ago, you know, I don't know how much of the business he owned, but IAC at the time paid a couple hundred million dollars for TripAdvisor. He was a founder, so presumably he could have done whatever he wanted, right? And yet he continued to work for Barry Diller forever. And now he's been working for Greg Maffay forever. And, you know, he's not, presumably he doesn't do that because he needs the paycheck, right? Like he's, you know, if the question is, does this guy love the money or does this guy love the business, I think he actually really loves the business. So that's like, You know, and he might be able to, he might love the business, but be terrible at running it.

Like, I don't know. You know, that, that's, you know, that's a valid concern. But I think the other thing is like, you know, they, you know, that, I mean, look, that was a mistake. Like, you know, the, the instant book and they blew a ton of money on Google clicks that weren't that valuable, right? I think that was the biggest issue. But they, you know, they stopped and they changed and they pivoted to something else. And there's no question that they've been dealt a tough hand, right? you look, you mentioned Yelp, you know, you look at sort of the other, you know, group bar and the other kinds of businesses that sort of compete against, you know, Google effectively for customer, you know, that last click attribution, you know, it's tough. And so, you know,

that's not his fault, right? And, and the, and, and while, you know, it's, it's a common critique to say they can't execute, I would actually say, well, if you, if you step back and you look at the product, right? And as an engineer, I actually would say it's gotten materially better, right? When, you know, my old work, we own this at the spin when it spun out from Expedia, like eight, nine years ago. And, you know, it was pop-ups, right? We were in desktop land then. And it was like pop-pop-up, pop, and it's this terrible experience.

And then they transitioned it to, you know, an in-line meta-search on desktop and then an in-line meta-search on mobile. And then the instant book on mobile, which is arguably from the consumer, you know, maybe it's easier. if you're a dedicated consumer. And so, you know, they did a very good job rolling out those products that are arguably better products than the one, you know, I think almost unequivocally better products than the ones before. They just couldn't monetize, right? So, you know, so I, to me, I feel like, I mean, it can't get much worse, right?

And so I, and I think this, because of, you know, the, like I said, the industrial logic here, I think there's a real opportunity. And, you know, so hopefully we're in the, you know, we're entering a business where, you know, anybody can run it. This might be a strained analogy. So if it is, you just, you just tell me I'm wrong and we go for it. But, you know, for years, TripAdvisor has been saying, I think it's, hey, our reviews are the start of, I think it's $100 billion of travel spend every year. It's some, it's no, 2.4.4, like, a billion. No, it's a lot.

It's got to be harder than to win for, but it's a lot. They say, hey, we do, you know, we're the start of 10, 100 times the spend for actually the revenue that we get, right? So their argument for years has been, if we can just find some way to capture a little bit more of that value we're creating, we're going to go to the moon. And it kind of reminds me a little bit of Twitter, where Twitter for years the argument has been, they found this product that's creating so much. much value for everyone else around them. And they just haven't been able to find the way to really tap into that. I mean, Twitter literally had the power to end the presidency of, to end a presidency. And they're, you know, they can barely make any money. And in a similar way, Jack Dorsey, founder, he's been there for a long time, kind of controversial, but he's still

running it. I don't think it's because he needs the money. It's the same way to see. So I see some parallels, obviously very different, but I see a lot of parallels there. Well, you know, the other parallel, I mean, there's two things, you know, the analogy breaks down a little in that, The problem with travel is always you take one or two or three trips a year, whereas I'm on Twitter every day. So that's an issue. But it's an issue for everybody in the industry. So what can you do? But the other part of the analogy, actually, as you're saying that, makes sense to something we haven't talked about is like Greg O'Hara and Sataris at Liberty TripAdvisor.

And if people haven't done work, it's willing to do the dive and figure out who is this guy who's now vice chairman of Liberty TripAdvisor. These are the guys that bailed out the liberal. folks last year when they had a margin call and, you know, they've already like tripled their money, right, on the, on the preferred that they did. And then, you know, I mean, he's like a travel industry wizard, right? And, and, you know, his big deal kind of, kind of the claim to fame is he, after he, he had a number of jobs at Sabre and other places then was like, you know, JP Morgan's private equity and running kind of like all their travel investment. And then he quit there and did this giant club deal where they took down 50% him and then like Carlisle and the, I think it was Cutter, Qatar, Dubai, somebody, you know, and they took down 50% of American Express global business travel, right?

So that's now, you know, like a 50% JV between this private equity consortium led by Greg O'Hara and American Express. And just in the same way at Twitter, you've now got, you know, Elliott and Silverly. like, you know, really, you know, presumably it's not bad to have them there. And I think it, I think it is a similar situation. Perfect. And we're going to talk a little bit more Liberty TripAdvisor in a second. But let's just, let's stick with TripAdvisor and just talk valuation here, right? So as we're doing, as we're taping this, the stock is trading a little under 40. I call it 37, whatever. I've got it trading at maybe 12 times EV to 2019 adjusted EBDA. A lot of stock comp is in that adjusted EBITDA number.

So there is a lot of debate on how you look at that. But I guess the question is just when I'm looking at that 12 times 2019 EBDA, yeah, we probably have a little mini cycle coming. But it doesn't seem crazy cheap on the headline numbers, but doesn't include the TripAdvisor Plus number. So I'll kind of flip all that over to you. How are you looking at the valuation here? Yeah. So I mean, mostly like what is my downside, right?

And so if I strip out, you know, and think about, you know, what is that value of that experience is business, right? Because I don't really care that that thing doesn't generate much in the way of cash flow or EBITDA right now, right? Because it's growing and I think there's a bright future there. And there's real cost to grow in it, right? Because again, they have to go literally business by business and say plug into our program that it takes real cost on a real sales force.

Right. So, so, you know, and we can have debate about what that's worth, but it's worth something. Then you say, you know, and I think, you know, you've talked about the stock company. You also got to look at, you know, they expense, like a lot of guys, Expedia in particular, they expense a lot of, uh, they amortize a lot of their like software expenses too. So, so Eva Da is a very slippery slope. I prefer to look at the cash flows of this business, right? And it was, you know, after they kind of, you know, repented of their sins.

with regards to Instant Book, and they said, we're going to stop, you know, pizzen away money on Google, right? This thing started to generate $350 million of free cash flow a year and like real free cash flow, right? And, you know, when I think about like, well, what happens if Instant Book doesn't work, right? That's what I'm left with, right? I'm left for this nice asset and sort of, and I think kind of the same business where

they're going to run it for cash, they're going to buy back stock. they're going to, you know, maybe paid, you know, they paid a big dividend a while ago. And so, you know, on a free cash flow basis, it's probably traded like, I don't know, seven percent free cash flow yield. If you were to back out the experience this business, because it presumably doesn't generate hardly any cash, right? You just said, what is this kind of legacy, very mediocre advertising, you know, kind of just free cash flow machine?

Like, what does that thing yield? And, you know, it would be, you know, double. did it, right? It would be double digits, right? If you were willing to play those games. So that's kind of how I, I think about it. On the valuation side, you know, with the upside, like, yeah, you probably should think about like, what's the right EBITDA multiple on a, you know, a billion dollar EBITDA subscription kind of a business. We know, what would that, you know, what would that, what would the market garner that, right? And I mean, it's, it could get silly. And then, I mean, you know, and then maybe this is the time to transition to Liberty Tribalise. We're going to be a tributt buzzer one second. I want to agree with you on one point and ask you one more question. I mean, I'm with you. That's one of the things that attracts me. I was running the math.

I was like, well, if they, you know, hundreds of millions of unique users, if they could just get $2 million, $100 per year, you start putting a subscription multiple on that. It gets pretty crazy, pretty quickly. And that's before you talk about all the flywheel effects. Last question on tributt buzzer, and then we'll switch over to Liberty Show. One of the things they've been talking about is they say, hey, we took out more than $200 million in fixed costs from 2019 to 2012.

And this is just something I've struggled with every company that's gotten hit by COVID and this kind of reopening play. You know, 2019 adjusted EBITDA, so this was after stop comp, or before stock comp was $438 million. And they're saying, hey, we took out over $200 million and fixed cost expenses. And I look at this and I'm like, I don't think this was, you know, it was a $1.5 billion business in 2019. I don't think they were running around with tons of fat. And I keep looking at it being like, they say they're going to be able to keep almost all of that fixed costs kind of out when they rebound. but where what was that fixed cost like two I think number go ahead I think you're conflating two things right because I think I'd have to go back and look that 200 million includes that some of the ad

spend right which they just went away I don't think so because I think it was the jp morgan conference where they said we took out 200 million in fixed costs and we reduced our variable cost by 200 million because they stopped that ad spend but I couldn't be wrong no I take it back you're probably right I think the um you know I don't doubt there's costs coming back what I think is really interesting, right? Like the head count number, this is real, right? Head counts down 34% year over year, right? So we know they took out a huge slug of head count. And my view is it's because, you know, if you look back into when they hired the people who are running these subscription businesses, it's very unclear to me if this was a COVID decision or they were actually

working on this pre-COVID and then it kind of happened. And COVID was sort of this excuse to like, you know what, let's re-architect the business, right? We can totally change our employee base and and let's point it in this other direction, right? And because, you know, the people who were selling clicks to the OTAs may, you know, it's probably a different skill set, right? Who's selling, you know, trying to build on inventory with the hotels or whatever. So I think, I think you're right. I think there, you know, some of these fixed costs have to come back.

But, you know, we're starting from, you know, a leaner, cleaner place with a, you know, than, you know, than we would have been otherwise. And so I don't know if that answers your question or that's, kind of my take on it. No, it's great. I don't think there's an answer. It's something I wanted to ask you, and it's a question I've been having with every COVID reopening play. You know, you see a restaurant and they say, hey, when we come back or EBITO margins are going to be 10% higher than they were pre-COVID, and you're like, what restaurants? Maybe, right? Maybe for a while. How are you guys going to, you have to pay someone. You know, before we move, there's one other point that just hasn't come up that

I wanted to highlight for people is there's a company in Europe, an online, it's a, It's publicly traded, online travel agency, primarily air focused called eDreams Odigio, right? And they operate in a bunch of, they operate in a bunch of different European markets. And, you know, they kind of had the same problem, right? You know, if I go back to my hierarchy of like good businesses, like hotels has been the best, you know, air has really sucked, right? Like, particularly in the U.S. where you have five carriers and, you know, everybody books direct. Like, there's just no commission in it. In Europe, it's a little different because you have all.

all these different countries. Everybody's got kind of a local carrier. So there's like a business there. And that's what E Dreams is really focused on because booking sort of clean their clock on hotels. But people would go in the markets, they operate. They had a decent business in air. But they could never really monetize it, right? Like, like, because it was, you know, it's just a teeny tiny air commission, not a big chunky hotel commission. And, and then they were paying, you know, like 60% of their revenue in the Google tax. Right. So it was just a, and they, they about two, three years ago, landed on this idea of a we'll just get this wholesale hotel inventory which is pretty easy to get you know you two could go out there and acquire it and we'll push it through this subscription model and you should go on their website and like study you know they're they're selling that like this thing they just hit over a million subscribers um to their um you know they've been out for three year two years two years two three years to three years to three years uh but they hit a million subscribers they say those people book you know two times three times more they're their they're um you know their lifetime value. is up multiples on those customers that pay for that, that annual subscription. And, and, you know,

the thing to to realize here is that company had like 10 to 20 million monthly Uniques, right? And so they're like, you know, 5% of TripAdvisor's opportunity, right? And, and that doesn't mean that TripAdvisor, you know, is going to go straight to, you know, 20 million uniques, right? Or 20 million subscribers. But what, what it does is it, it does validate the subscription. model, at least to some extent, right? That there's a certain population, at least in Europe, who are interested in this kind of a product, which I find, you know, I think is very helpful. And I don't think eDreams has the experience offering that advisor does.

And if you, everybody gets really focused on the hotels because that's where the big money saver is, right? You know, five-day hotels say probably $750,000, so it can save a lot of money. But I do think experiences actually where the real value could be. added where they could really offer hey you go try to book this escape room anywhere it's $30 you do it through us it's 25 just because we're passing a lot of that they'll give you if you're some behind plus they'll give you know which is trip advisor eating into their margin but they can't you know yeah but you know if the if the escape room pays them a 30% booking fee so $9 on a $30 room trip advisor could pass

you seven keep two and they've got the subscription and they're encouraging you to book through them a lot it just really works out well. I mean, I don't want to, like, I really, you know, I appreciate the bullish sentiment. The risk is, again, this idea of resale price maintenance and rate parity, somebody's got to police it, right? And like, you know, historically the OTAs, like, police it for the small hotels. So you would probably see that. But if I own one escape room, right, like, I might be offering that discount a lot of places. Right. But yes.

A hundred percent true. But at some point, it's going to get difficult because. if you're that person like yeah if somebody calls you directly or books directly with you you could probably give them a wink wink deal but you can't advertise it everywhere because then you're just undercutting it trip advisor is going to go and say hey you have to match us you've got to pay us anyway unrelated i just thought that was interesting got about 10 minutes left let's turn over we've talked about trip advisor but i think the way both you and i think is a little more interesting to play is liberty trip advisor and that story has gotten a little more complicated to value

because they got bailed out in the margin loan last year so let's let's talk about why Liberty TripAdvisor is a better way to play it, how you value it because I think the financials are a little complicated at this point, all that type of stuff. Yeah, I mean, you know, whether or not it's a better way to play it, it just depends on your risk profile, right? And, you know, because, you know, there's, you know, a higher risk and a much higher reward. It's just a levered bet on TripAdvisor, right? They own, you know, again, it's sort of, they have a billion dollars in TripAdvisor stock, 1.1 maybe, and the control. You could argue whether or not that's worth anything.

And then they've got this complicated pile of debt. And so it basically means in a big dream scenario, right, where tribut advisor is up, you know, multiples from here. This is up many, many multiples from here, right? So that's the reason to do it, you know, if you believe that. But, you know, it goes both ways. Tribut advisor, you know, crater is 30%. This will be down 50%.

So, you know, at a high level, that's what it is. I mean, I think where, you know, they got caught with their pants down last year, right? Like, it was a margin loan. They got a margin call. And, you know, Sataris came in as the white night and they've been paid handsomely for that. But like, what a great partner. Like, you couldn't, it's not like they just got the schlocky, you know, kind of first dollars. They could get their hands on like, this is a great partner to have, you know.

So, you know, fortunately, we weren't invested in Liberty Tribalvisor at the time. But like when they came on, it's, it's, you know, it's, you know, excited to be partnered with them along with the Liberty guys. Would I be crazy to say that it is not a coincidence that instant or sorry, that TripAdvisor Plus, the subscription product came out after Satari's kind of got involved. I don't know. I asked the company that question. Like I don't know.

Nobody will really cop to it. Like I said before you, you can see like some of the folks running when they were hired. Like, I mean, you think the Liberty guys have been talking about subscription business forever, right? Like, why can't you turn this? Like so I don't know the answer to that. But, I mean, clearly, when you think about, you know, what is that American Express global business travel business? Like, what's one of the things they offer is, I think, I mean, I'm not an expert of that business, but they negotiate corporate rates, right, with hotels. And then they pass them through in this closed system.

So, I mean, you can see why it's attractive for Sataris and why they, you know, they've taken, they've basically taken their bait back, you know, kind of with the refinancing that happened a month or two ago. not the refinancing, but we're Liberty TripAdvisor, but they bought back 40% of the preferred. But then, you know, the rest is going to ride. Like they don't, you know what I mean? They have the right to sell it, but they no longer have the right to put it. So, you know, it appears. And if you listen to kind of how Sataris operates, you know,

it looks like they're in here for a while, which I think is positive. Yeah. I agree with everything you're saying. So, you know, I think, so we've talked about Sartari's impact. We've talked about Trip Advisors, sorry, Liberty TripAdvisor's leverage, but let's just break it out for people, you know, as we talk again, trip advisors trading around 40, a little bit below 40, Liberty TripAdvisors trading around 360, 370. So, you know, in a bull case, let's say TripAdvisor knocks it out of the park with TripAdvisor

plus. I mean, I think the stock could, it could run to crazy multiple. Give me a number, and I'll tell you what I think it would be worth. Let's say, let's say TripAdvisor's shares go to a hundred. What is Liberty TripAdvisor worth? So, and you have to, if you're building your models, you got to remember it. So there's the Satari's preferred participates at 80% of the upside over 17 bucks. So you got to build that in.

And then they sold, there's a, there's a variable prepaid forward that will tax some of the upside. And then there's also, they sold the same. exchangeable that is a draw after about 70 bucks, that starts to be a tax on the upside. So if you build all those things in, you know, I could be wrong. But, you know, I think I'm right here. You know, at that point, you know, the nav would be like 21 bucks a share, 22 bucks a share for Liberty TripAdvisor. And then whether or not it trades at a discount or not, you know, you'd have to back that off. But so the rough math here is if TripAdvisor is a three is a three X, which it could be more than that if the subscription product really got rolling. But if it's a 3x. Well, and we're talking over,

this isn't going to happen overnight, right? Like this would be three and five years. But if TripAdvisor is a 3x over, let's call it the next three years or something, right? Then Liberty Trip Advisor, NAV could go to $21. It's a $3.60. So this could be a four or five X. It win TripAdvisor. Probably think about it as sort of double whatever TripAdvisor roughly. Cool. Cool. Well, we are approaching to our mark. Oh, I did have one last question. And I actually do think it's an important one. I do think there is an argument that both TripAdvisor and Liberty TripAdvisor right now have what I'm going to call a Maffa discount, right? Because Mofay, there is no doubt about it. We've talked about how Liberty TripAdvisor had to get bailed out down 90 percent, right? Kind of twice, right? Because first

they had to get a little bit of bail out when they forced TripAdvisor to pay a dividend in, I think it was late 2018 or maybe 2019. Then they had to get bailed up again when the crisis happened. And you know what? The crisis is very unique, but obviously they mismanaged the capital structure. They had to get bailed out, as you said, down 90%. So there's that. They mismanaged the Formula One capital structure and Formula One in Liberty Series had to do all of these weird things to kind of bail out the Formula One and especially the live nation stake. So I think there could be an argument that there is a Maffa discount applied to this because what has he done? What has he kind of done for you lately? Over the past five years, they made a great investment in charter. But what can you really point to Maffa doing? So I think

there's a discount there. And I just wanted you to riff on that for a second. I don't disagree. I mean, if you look at where, you know, this thing used to trade, you know, if you track the discount to NAV, it was basically it traded a nap, sometimes at a premium, right? There were times I traded, well, 1.2 times NAV or 1.1 times NAV. Which makes sense, because levered upside, plus they have the super voting controlling chair. So it kind of would make sense to trade at a premium. Well, you know, if, you know, but it's really only worth a premium probably if somebody wants to buy it. Right. So, you know, I don't really disagree. I mean, I think, you know, I don't think we should shed tears for people who lost money investing with the Liberty guys. You know, and, you know, you pick up both ends of the stick, right? Like, you know, it's complex and you know, they put a lot of leverage on it. And they have a portfolio and, you know, the portfolio is done pretty well. But this is, you know, not their most finest moment. that's for sure. That's perfect. That's perfect. We've talked out a lot. It's been about an hour. I just want to make sure, is there anything else? Liberty TripAdvisor, TripAdvisor, anything you think we should have covered that you kind of wish we had talked about? Nope. I think we got the high points. All right. Well, then, look, Adam, this is a great idea. I'm really interested in it.

I thought you did a great job laying out the TripAdvisor Plus thing. You know, this has multi-bagger potential, and Liberty TripAdvisor would then have multi-multivagger potential. So super interesting idea. I appreciate you coming on. We might have to do another one in Discovery again because I know we've got a mutual interest there and there's a couple other ones, but appreciate you coming on and we'll have to chat again soon.

All right, thanks. Appreciate it.