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Photograph by Andrew Harrer/Bloomberg

After getting pushback from big hotel chains,


is revamping its Tripadvisor Plus service just months after its launch and plans to offer cash rebates to subscribers after check-in rather than upfront discounted rates on hotel rooms.

The shift may make the service less desirable to travelers, and Tripadvisor shares (ticker: TRIP) were off 5.3%, at $33.90 Monday. The change was originally reported early Monday by Skift, an industry publication.

 Richard Clarke, a Bernstein analyst, called the shift “a major and unexpected U-turn at Trip Plus.” He retained an Outperform rating, but cut his price target on the stock to $52 from $58.

 Tripadvisor Plus, a subscription service costing $99 a year, now gives users the ability to book hotel rooms in the U.S. at below published rates. Tripadvisor says on its website that users save an average of $350 on their first trip.

 Some investors have been excited about the potential for Tripadvisor Plus as a potentially lucrative subscription service that could energize Tripadvisor shares, which have been a laggard in the travel sector. Bulls have hoped that Tripadvisor could ultimately sign up millions of subscribers and generate significant ongoing subscription revenues.

 Barron’s wrote favorably in July on Tripadvisor, and the subscription service was part of the bull case.

 Tripadvisor was able to sign up some smaller hotel chains for the service, but it ran into opposition from major hoteliers who were concerned that the discounted rates would violate “rate parity,” in which hotels offer similar rates on various platforms including online travel sites

Booking Holdings

(BKNG) and

Expedia Group


 Tripadvisor hoped to overcome that concern by arguing that only subscribers could access the discounted rates. And rather than paying commissions to Tripadvisor, the hotels would pay nothing to Tripadvisor and offer the discount directly to subscribers. Big hotels, however, weren’t happy that Tripadvisor was showing the discounted rates on its site to entice users to sign up for the subscription service, Skift reported.

“This new idea is conceptually sound but will enter a crowded marketplace where competitors do not standardly charge $99 for the privilege of extracting rewards, ” Bernstein’s Clarke wrote. “The wider concern might well be execution and management communication with management changing the model less than 3 months after launch and previously stating that branded hotel participation was not essential for the product to work.”

 Under the new program that will roll out later this year, hotels will be able to offer their lowest publicly accessible retail rate to Tripadvisor Plus subscribers and then pay a commission to Tripadvisor. After check-in, Tripadvisor will put a reward into what it calls the subscriber’s Vacation Fund, funded by Tripadvisor, that can be paid in cash or applied to a future trip.

 “The diligent consumer can easily find a cash back/reward offer at Hopper, Revolut or Hotels.com without having to pay $99. Tripadvisor will need to prove their offer is more generous or push the full service (experiences, car hire etc.) elements on the subscription product.” Clarke wrote.

In an email to Barron’s, a Tripadvisor spokesman said the new terms should benefit Tripadvisor Plus users by offering greater availability of rooms and satisfying hotels on the rate parity issue.

“And more hotel supply will equate, we believe, to more subscribers accessing the value of the program for years to come,” the company said.

 “We’re very excited about this enhancement to Tripadvisor Plus, and how it will maximize both our partners’ revenue potential (helping them build a long-term connection with a highly valuable traveler audience) as well as the travelers’ overall experience using Tripadvisor Plus—delivering great value and perks to our subscribers,” Tripadvisor said.

Write to Andrew Bary at andrew.bary@barrons.com

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