Global hotel search platform Trivago
says it is taking a number of steps to preserve cash liquidity and maintain
relationships with advertisers as it navigates the challenges of the COVID-19
outbreak.
In the first quarter of 2020, the
company saw its total revenue drop 33% to €140 million from €209 million in the
same period of 2019.
In the same period net income decreased
by €222.1 million to a loss of €214.3 million compared
to the first quarter of 2019. The company says the decline was due in part to a
goodwill impairment charge of €207.6 million and a sharp decline in referral revenue.
Adjusted
EBITDA decreased by €22 million to a loss of €0.6 million in the first
quarter of 2020 compared to the same period in 2019.
In a letter to shareholders accompanying the financial report, the company says it expects its full year revenue for 2020 to be less than half of its full year 2019 revenue and for there to be a “significant adjusted EBITDA loss.”
But in a call with analysts to discuss
the quarterly results, CEO and managing director Axel Hefer says he is
confident the company has sufficient liquidity to weather this crisis.
“We are using the time of low travel
activity to fundamentally improve our value proposition both to travelers and to
our advertisers, and to leave the crisis stronger than we entered,” he says.
The company says the coronavirus impact it initially felt in its “Rest of World” segment in February
became apparent in its Developed Europe and Americas segments in March.
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“As a result,
traffic to our website dropped significantly. Advertisers significantly reduced
their spend on our platform or deactivated their campaigns, with referral revenue
declining by more than 95% in the last week of March 2020 compared to the same
period in 2019,” the statement says.
To deal with these challenges, the
company says it has reduced advertising spending “to an absolute minimum.”
In the first quarter of 2020, selling
and marketing expenses decreased by 32% year-over-year to €111.4 million, of
which €102.6 million, or 92%, was advertising spend.
“In
Developed Europe, the decline in Advertising Spend was the most pronounced due
to the large-scale performance marketing tests that we conducted in February
2020 prior to the intensification of the COVID-19 outbreak,” the company says.
Trivago has
also reduced hours for employees in its marketing, sales and human resources
teams in its German headquarters. In the future, the company says it will be “making
significant headcount reductions,” which will reduce personnel and related
costs by about €20 million for 2021.
Trivago
also says it is working with advertisers to accommodate their requests to
extend payment dates for outstanding receivables and to pay outstanding
invoices in installments.
To prepare
for what it calls the “new reality in the
online travel industry,” Trivago says it will adapt its product to “inspire
short-term trips that can be planned spontaneously” and support that change
with a focus on brand marketing.
“What we are currently working on and
what we think will increase the engagement and relevance of the website is a
more inspirational product,” Hefer says.
“We are slightly moving up in the travel
funnel that is focused on local travel.”
The company says it will also pull
back on performance marketing campaigns, continue to test new advertising formats
to supplement its traditional auction and create solutions for advertisers to
reduce their risk of paying for bookings that are ultimately cancelled.
As of March
31, Trivago has more than 4.5 million hotels and other types of accommodations
in more than 190 countries, including over 3.3 million units of alternative
accommodation.