Trivago says it’s focusing on improved profitability and has already begun reducing advertising spend as part of its strategy going forward.
Reporting results for the second quarter of 2018, the company says the strategy had meant a “significant decline” in revenue for the period year-on-year.
Total revenue decreased 21% to €235 million in the second quarter compared to the same period in 2017. Meanwhile, total revenue for the six months ending June 30 was down 13% to €494 million compared to the same six-month period in 2017.
In an earnings call, Trivago CEO Rolf Schromgens describes the past year as "quite a test" for the company, adding it believes it will emerge stronger than before.
He went on to say that losses had mounted to a scale not "in line with our culture" and that the decline in commercialization from advertising partners could no longer be seen as temporary.
Later, responding to a question on moves from other players into metasearch such as Booking Holdings acquisition of HotelsCombined, Schromgens says it was a sign of confidence in the metasearch business model.
The metasearch player experienced a net loss of €20.7 million for the quarter compared to the net loss of €3.4 million for the same period in 2017. For the first six months of 2018, net loss was reported at €42.5 million, compared to a net income of €4.3 million for the same period in 2017.
Qualified referrals for the quarter were down 10% to 177 million, with revenue per qualified referral down from €1.5 to €1.3.
Forces working against it
Trivago put the losses down to the same challenges suffered in the first quarter, including the changes in strategies of its main advertisers - Expedia Group and Booking Holdings, as well as, foreign exchange rate fluctuations.
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Adjusted EBITDA for the quarter represented a loss of €17.7 million compared to a positive EBITDA of €3.2 million over the same period in 2017.
Trivago expects EBITDA for full-year 2018 to come in at a loss of between €15 million and negative €30 million.
The company also expects the reduction in advertising spend to have a positive impact on profitability in the second half of the year and says it is already seeing initial signs of improvement.
On the impact of reducing advertising spend on Trivago's brand presence, Schromgens told PhocusWire the company had been "extremely present in all markets in both brand marketing and performance marketing."
"It's not that we don't think we can grow, but we want to reach healthy margins."
On the call, Schromgens also describes the hotel direct strategy as long-term, with the biggest obstacle to getting properties to list directly on the platform being the technical connection that hotels need to invest in.