TripAdvisor Inc. (TRIP) Q1 2022 Earnings Call Transcript

TripAdvisor Inc.  (NASDAQ: TRIP) Q1 2022 earnings call dated May. 05, 2022

Corporate Participants:

Angela White — Vice President of Investor Relations

Stephen Kaufer — President and Chief Executive Officer

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Analysts:

Richard Clarke — Bernstein — Analyst

Naved Khan — Truist Securities — Analyst

Jed Kelly — Oppenheimer — Analyst

Mario Lu — Barclays — Analyst

James Lee — Mizuho Securities — Analyst

Zachary Morrissey — Wolfe Research — Analyst

John Colantuoni — Jefferies — Analyst

Lloyd Walmsley — UBS — Analyst

Vince Ciepiel — Cleveland Research — Analyst

Presentation:

Operator

Good day, everyone. Thank you for standing by, and welcome to the Tripadvisor First Quarter 2022 Conference Call. [Operator Instructions]

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

Angela White — Vice President of Investor Relations

Thank you, Lovely. Good morning, everyone, and welcome to Tripadvisor’s First Quarter 2022 Financial Results Call. Joining me today are Steve Kaufer, CEO; and Ernst Teunissen, CFO and Chief Executive, Viator, TheFork and Cruise Critic. Last night, after market close, we distributed and filed our earnings release and made available our shareholder letter on our Investor Relations website. In the release, you’ll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. Also on our IR website, you’ll find supplemental financial information, which also includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics.

Before we begin, I’d like to remind you that this call may contain estimates and other forward-looking statements that represent management’s views as of today, May 5, 2022. Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements.

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

Stephen Kaufer — President and Chief Executive Officer

Thank you, Angela, and good morning, everyone. We just reported a great quarter and a solid start to the year. We are certainly seeing benefits from the recovery, and I’m pleased with our continued execution. I believe that Tripadvisor is uniquely positioned as the world opens up again, and I’m really proud of the role we play in helping travelers. For so many, this brand is about trusted advice, guidance, a community, a spirit of adventure. And with the travel industry in recovery mode, we’re really excited about the year ahead. Another reason for our excitement relates to the other announcement we made last night, Matt Goldberg will join us as CEO starting in July.

As you read in last night’s release, his experience across multiple industries, travel and digital media and advertising as well as his experience and strategy and operations make him a really great fit for Tripadvisor. We look forward to introducing him to you on the next call. And in the meantime, I personally look forward to bringing him up to speed on our amazing business and helping him to hit the ground running. On behalf of the entire Tripadvisor family, we welcome Matt to Tripadvisor.

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Thanks, Steve, and thanks to everyone for joining. I wanted to start off today by acknowledging that this will be Steve’s last earnings call as our CEO. Most of you know that Steve founded Tripadvisor in 2000 above a pizza shop in Needham, Massachusetts. Fast forward, more than two decades later, and Tripadvisor has grown to be an iconic brand and the most trusted travel website in the world, helping hundreds of millions of people plan and book their perfect trip. Tripadvisor has also proven to be an important economic enabler, helping millions of small businesses thrive in the hospitality industry around the world. Thank you, Steve. On behalf of all Tripadvisor employees for your leadership, your integrity, your optimism, your passion. It’s been such a pleasure and honor to work with you. Now to our quarterly financial update. We are very pleased to report our 2020 (sic) 2022 first quarter results. This is indeed a good start to the 2022 fiscal year as we exit the quarter.

We saw sure signs that we have passed the Omicron headwinds of January. Our revenue was 70% of 2019 levels for the quarter, but we exited March at over 80% of 2019, and we improved further in April. Our Hotels, Media & Platform business outperformed our internal expectations for the quarter. Our Experiences & Dining business revenue crossed over 115% of 2019 levels in Q1 with booking levels ahead of revenue and exited the quarter and into April at an even higher rate. Experiences, in particular, is growing very rapidly and ahead of schedule. We believe this reflects our strong position in our Experiences & Dining marketplaces. This quarter gives us confidence in the transition of leisure travel back to the full recovery and the benefit we expect to derive from that as Tripadvisor. We are also confident that the value we provide to our customers and partners has us well positioned as we move forward with our 2022 operating plan and our key investment areas, which should propel our future growth.

With that, let’s jump into Q&A.

Questions and Answers:

Operator

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

Richard Clarke — Bernstein — Analyst

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

Stephen Kaufer — President and Chief Executive Officer

Thank you.

Richard Clarke — Bernstein — Analyst

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

Stephen Kaufer — President and Chief Executive Officer

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

So you can imagine, we talked to a number of very accomplished individuals that had risen to do very well in their respective departments at some very big companies, but I felt Matt’s ability to see the whole picture was actually more valuable than a star player and a player that had either just done sales or just done products. So again, there are lots of different ways to craft what CEO is going to be great at, but I like the breadth. Tripadvisor is a complex business and having someone at the helm who has had the experience of running the company before, it’s just great not to have to kind of teach that on the job.

Let’s see, third, he’s got a real focus on building great teams, the people, the organization, in all of his jobs, he’s just paid a lot of attention to that. And so we were certainly convinced that for a business as complex as Tripadvisor, building the right teams to be able to deliver and getting the teams to work as well together as they can. It kind of — it all makes for that overall success. And then finally, he knows, at least in my opinion, he knows what it’s like to be a change agent and really help transform a business. And I just love that type of background. Tripadvisor isn’t a start-up anymore. But at the same time, our goal isn’t to kind of eke out a 5% or 10% growth each year optimizing different parts of the business. Our opportunity is so much more than that. We have a huge TAM in front of us, a huge number of assets.

And so Matt’s, our belief that, as he did at Lonely Planet, be able to take an existing company reshape it to meet the needs of our future customers, I have a ton of confidence in. And then when you actually go down and look through his resume, you see remarkable accomplishments at each and every job that talked about how he delivered the goods. So in our view, it’s not just handwaving talk about things, it’s delivering results at very successful companies.

Richard Clarke — Bernstein — Analyst

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

Stephen Kaufer — President and Chief Executive Officer

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

Richard Clarke — Bernstein — Analyst

Thanks very much.

Operator

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

Naved Khan — Truist Securities — Analyst

Great. Thank you. Two questions, please. One on the HM&P side, and within that, if I look at the different pieces, auctions versus display versus hotel B&B. And you compare the performance versus what the trends are for the OTAs, I think you guys are seeing a little bit lagged in terms of recovery, I think with booking actually talked about room nights getting to a more positive and like 7%, 10% in April. I wonder what the disconnect might be? And if you could go into that, is it trip land or is it business travelers still not coming back or is it Asia? Any color there would be helpful. And then the second question I have is on the E&D side. How much of the acceleration or the really strong growth you’re seeing here is driven by conversions versus increased traffic? Just any color would be helpful here as well.

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

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

Stephen Kaufer — President and Chief Executive Officer

That’s good. E&D?

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

E&D. Yes, phenomenal progress in E&D both in Restaurants and in Experiences, but particularly Experiences. E&D revenue above 130% of 2019 in April. Experiences, more than 140% above 2019 in April as our estimated revenue. Phenomenally — doing phenomenally well. Experience is very U.S.-based in 2021, but we’ve seen very robust recovery in Europe as well. We called out in the shareholder letter some great factoids in April. Actually, Europe as a destination was as large as the U.S. as a destination for Experiences. That is awesome, very different from last year. We also saw that U.S. travelers going to Europe and doing — Experiences was above 2019 levels as well.

So the business is just doing very well. It is partly improvements in conversion that we’ve made on the site, as you were alluding to Naved, but it’s also being very successful at attracting more traffic both in paid channels and in free channels. And so most of the indicators in this business are just doing superbly and the management team has done an awesome job in making us grow. Restaurants was already relatively strong even in 2020 and 2021, but we keep making progress there as well. Very pleased with that as well. And so if you take the two businesses combined, Experiences & Dining, it’s really the fast grower in our portfolio at the moment and is exceeding our expectations in this first quarter in April versus what we thought we would do, and we were already quite ambitious with those businesses. So all around, very pleased with that performance.

Naved Khan — Truist Securities — Analyst

Thanks. That’s very helpful. Best of luck Steve.

Operator

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

Jed Kelly — Oppenheimer — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

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

Jed Kelly — Oppenheimer — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Yes. And so that’s different for HM&P and E&D. So HM&P, for our auction in particular, we have not changed the — our realized levels or return on advertising spend levels compared to 2019. And so there, we have been successful at growing paid marketing largely because our CPCs have been very favorable. And so at higher CPCs and the same return on ads spend, you can buy more traffic. So that’s been the impact there. And we’ve seen a relative shift in 2021 and into this first quarter that within our hotel business to more paid as a result of that. On the E&D side and particularly on Experiences, slightly different, we’ve actually pushed harder on marketing than we did in 2019, in 2021 and now in the first quarter as well. We are working off of pretty good and consistent multiyear historical data on cohorts on lifetime value of our customers. And so we have — compared to 2019, where we were investing at relatively near-term returns, we’ve pushed that beyond the one-year payback period on the customers, but still profitable over a multiyear period. And that has been very, very effective for us in increasing the volume we can get from Experiences.

Combined with that, what we have been able to do is with a very, very strong focus on improvements that we have been driving through the pandemic, particularly on our Viator point of sale, we have increased our conversion rates. We’ve increased our repeat rates. So the cohorts of customers that we acquired in 2021, even at these elevated marketing expenditures, have actually performed better than the cohorts of 2018-2019, in terms of their repeat profile in the quarters after. And that is very, very encouraging. It means that not only where we write in spending, what we were spending on acquiring these cohorts, actually the cohorts have outperformed how we thought they were. So improving conversion, improving repeats and more marketing spend, but also diversifying our market channels beyond Google has been an important focus. And then lastly, the app. So we’ve spent considerable effort in improving our app on Viator, still a way to go, but we’ve really seen the results in traffic to the app and revenue we generate from the app. So those are some of the core drivers of what’s going on in our business.

Jed Kelly — Oppenheimer — Analyst

Thank you. Good luck Steve.

Operator

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

Mario Lu — Barclays — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

I’ve said in the past is that we expect for this segment for E&D, we expect sort of long-term margins to be mid- to high percentage of EBITDA margin — mid to high 20s percentage EBITDA margin. And that applies to these individual businesses in a roughly similar measure. The gross margin, for instance, of TheFork and of Viator are very robust, 90%-ish gross margin if you take out cost of sales out of Viator, for instance. And so a very robust underlying gross margin profile, currently spending on marketing and people costs to drive the growth. But long term, a tremendous amount of leverage in that business. These businesses came Viator, it’s an OTA business with very good take rates, mid-20s type of commissions that we get from operators, which is a very robust commission to work with. It’s favorable compared to the hotel industry, for instance. And we think long term as that business scales, it can have very attractive margins indeed.

Stephen Kaufer — President and Chief Executive Officer

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

Mario Lu — Barclays — Analyst

Thank you.

Operator

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

James Lee — Mizuho Securities — Analyst

Great. Thanks for taking my questions. Steve, thank you for answering our questions for many quarters. We wish you all the best. Now I got two questions here. One, maybe a little bit follow-up on PLUS to what you talk about last quarter. Are you thinking about maybe making adjustment to your offering in light of the inflationary environment, how that may impact consumer spending? I think you mentioned last quarter you were trying to resolve some of the frictions for consumer hesitating for the membership fee. And also, you would talk about last quarter assessing kind of between instant discount versus rebate. And just wondering you have any update on that? And my second question is regarding the auctions business. When you’re looking at your customer segments specifically, are you seeing OTA customers coming back more aggressive versus hotel direct booking? I’m wondering if any color there? And also maybe Ernst can parse out looking at the revenue recovery for the auction business, can you kind of break out between volume versus pricing growth? Thanks.

Stephen Kaufer — President and Chief Executive Officer

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

James Lee — Mizuho Securities — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

No real trends to call out.

James Lee — Mizuho Securities — Analyst

Okay. Great. Thanks.

Operator

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

Zachary Morrissey — Wolfe Research — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Yes. Zach, thanks for that. With regards to Q2 and sort of margin, yes, we’ve indeed guided for Q2 to an overall consolidated adjusted EBITDA margin of approximately 20% of revenue. We are investing in E&D significantly. That is marketing expenditure and building up some new capabilities in those areas as well oriented towards growth in 2022, but also importantly, growth beyond there. We’ve said in the past, we saved in — during the pandemic, about $200 million of fixed cost. We’re investing some of that back, but the majority of that is sticking. Some is going back to inflation of cost. Some is going to investment, particularly in E&D, but the majority of it is staying on overall in the business. But we have increased our marketing expenditures, specifically in E&D.

And that’s led us to give the guidance for the — for both segments for the whole year is to say that we’re expecting significantly recovering EBITDA margins, both for HM&P and for E&D versus 2021 in the full year of 2022. But for both segments, we don’t expect to be just quite yet at the EBITDA levels that we were in 2019, but importantly, improving in both segments. And on the B2B business. So I think there’s a couple of factors going on there. So for our media business, for which we’re very ambitious and some of the questions were asked before about our new CEO and his capabilities, media is a business that is a historical strong suit for Tripadvisor and has significant potential going forward.

But it’s been much slower to recover than other parts of the business during the pandemic and now into the quarter, it’s upper funnel marketing, and that’s been slower to come back. But we expect that to eventually recover and grow as we go back. On the direct-to-hotels business, the subscription business being found on Tripadvisor, advertising on Tripadvisor for those businesses on a subscription basis, that business has been robust in the — because it’s a subscription business, robust in the pandemic, but now that the market is coming back strongly in March-April, we see that business improving but not as much as other parts of the business.

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

Zachary Morrissey — Wolfe Research — Analyst

Very helpful. Thank you. That’s all.

Operator

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

John Colantuoni — Jefferies — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

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

John Colantuoni — Jefferies — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

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

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

John Colantuoni — Jefferies — Analyst

Thanks for the details. Appreciate it.

Operator

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

Lloyd Walmsley — UBS — Analyst

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

Stephen Kaufer — President and Chief Executive Officer

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

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

Lloyd Walmsley — UBS — Analyst

Okay. Thanks. And good luck Steve.

Stephen Kaufer — President and Chief Executive Officer

Thank you.

Operator

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

Vince Ciepiel — Cleveland Research — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Yes, Vince, it’s accurate that we are reinvesting some of the overages we’ve seen in the quarter and therefore, for the rest of the year in E&D back into the business, marketing-oriented. The growth when you are acquiring new customers at levels that are immediately loss-making, but returning over a longer period means that if you are able to push harder on that, that will come at the expense of EBITDA. So that’s part of what we’re doing, continuing to push hard on that. We’re also investing in some new marketing channels that we’ve experimented with and so on the Experiences side, it’s predominantly pushing more on marketing, which should translate into 2022 and 2023 revenue as well as an improvement in how we position, much less of a focus pushing even harder in Experiences on our people cost. On the restaurant side, it’s really steady as it goes. We’re executing on the plan, and we’re in line with the plan and not much changes to the plan as that we originally had.

On the restaurant side, we are in 2022 compared to 2021, making investments in our people capabilities, in particular, both growing our restaurant base, but also improving some new products and services. We’re particularly happy in that area with some of the more fintech-oriented products that we have been developing. We’ve been pushing hard on the growth of Fork Pay, which is an ability to through the app pay at a restaurant for consumers and for restaurants to integrate with, with great benefits for us long term in capturing loyalty and for restaurants as well. And gift cards is another area that we’re growing the ability to give gift cards to friends and family for restaurants, which TheFork is promoting as well. That and numerous other initiatives are the focus there. Dining is a big category in Europe. It’s relatively underpenetrated online compared to the United States. TheFork has a truly awesome market position in most of Europe with opportunity to grow its market share in the U.K. and Germany. And so we’re playing to win with that business in the European restaurant landscape.

Vince Ciepiel — Cleveland Research — Analyst

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

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Yes. With the sort of the lifetime dynamics and sort of repeat performance of cohorts and repeat improvements, we expect not only growth from acquired, we’re not expecting — we’re actually seeing a very strong growth on our free channels. We see strong growth of repeat bookings and revenue in our Experiences business. And that — over time, that part of repeat bookings will grow as a percentage over time, and will provide more leverage on marketing over time. That’s sort of a clear impact of an LTV model. And then secondly, we have a fixed cost base, but with the substantial scale that we’re seeing fixed cost as a percent of revenue is coming down for Viator.

And that’s going to provide leverage going forward. So if you take those two points together, that makes us basically confident that we have — that we can show strong mid-20s plus type of margins in that business. For TheFork, that is a scale game as well. We’re still growing the platform with high growth rates and the underlying cost structure there is favorable as well. With scale, will come attractive margins there as well. So we look at both businesses and say, yes, though margins are not there yet at the level of potential, but that is really all — you can point really all to the growth strategy that we have in those two businesses. Underlying these businesses are both very, very healthy.

Vince Ciepiel — Cleveland Research — Analyst

Nice to see the top line progress in E&D and thanks for the color on the margin path.

Ernst Teunissen — Chief Financial Officer and Chief Executive, Viator, TheFork and Cruise Critic

Thank you.

Operator

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

Stephen Kaufer — President and Chief Executive Officer

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

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

Operator

[Operator Closing Remarks]