Trivago reports solid
financials for the quarter ending Sept. 30, 2022, including its highest quarterly adjusted EBITDA
in the company’s history.
Adjusted EBITDA for Q3 2022 more than doubled year-on-year to €33.5
million, and Trivago expects full-year 2022 adjusted EBITDA to far exceed
2019. The Germany-based metasearch brand attributes its adjusted EBITDA growth to cost
discipline, increased marketing efficiency and recovering travel demand.
The company’s total Q3 revenue increased 33% year on year to
€184 million; however, it experienced a net loss of €67.1 million.
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“Travelers were willing to spend even though prices have
risen sharply this year,” Trivago CEO Axel Hefer said in a call with investors.
“In this inflationary environment, we’ve seen strong demand for our services,
helping users save money.”
Founded in 2005, the metasearch brand predicts that labor shortages
and inflation will continue to drive up travel prices.
Said Hefer: “We expect consumers to adjust their behavior in
the next 12 months – going for shorter trips, cheaper destinations and comparing
their accommodations more.
In Q3, Trivago saw a slight contraction in consumer stay and
consumers choosing lower rates, especially in developed Europe.
“Nevertheless we expect the overall travel spending to grow
in absolute terms and higher prices to compensate for softer travel demand,”
Hefer explained.
Counting on Asia comeback
Trivago CFO Matthias Tillmann said in the investor call that coming
out of the pandemic, the metasearch brand is a much more profitable business,
and it plans to grow “at sustainable rates from current levels.”
Trivago’s “rest-of-world” segment continues to lag in the
recovery “mainly due to slower recovery in some Asian markets compared to our Western
market and the disruptions in Eastern Europe,” Tillmann said.
India, Japan and Australia are the three biggest “rest of
world” markets for Trivago, Tillmann tells PhocusWire in an interview. He expects Asia – and
Japan in particular – to experience a travel resurgence in 2023.
In Q3 2022, the company increased selling and marketing expenses
23% year-on-year to €128.8 million – 95% of which was advertising.
Trivago’s Q3 2022 advertising spending increased across all
segments compared to the same quarter in 2021 because of summer 2022 advertising campaigns. The company ramped up Q3 advertising spending by 7% in
developed Europe, 38% in the Americas and 81% in its “rest of world” segment as
those markets reopen.
The company took a cautious approach to brand marketing in Europe over the summer, and in hindsight could have spent more, Tillmann says.
TV remains a strong part of Trivago’s ad budget, and the company is beginning to test ads on streaming services.
Communicating core value
Trivago’s return on advertising spend (ROAS) rose to 147.6%
in the third quarter – up from 138.7 last year.
“This summer was the first time where we started to invest, and given that we hadn’t really spent that much the last two
years, there was a bit more uncertainty around how effective that would be,”
says Tillman.
“But it turned out to be very effective, and I think one of
the key reasons was that we really focused on our core value proposition -
price comparison - and in the current environment that was perceived very well.
“I think a lot of people can relate to that message. They
want to travel, but prices are high … and any way to mitigate that effect and
to save is welcomed,” Tillman adds.
Looking ahead, the company plans to reduce operating
expenses by focusing spending on its core product: meta price comparison. Trivago
has stopped certain non-core products, such as Weekend, an “inspirational”
product that helped travelers book weekend getaways, Tillmann tells PhocusWire.
He adds that the company could revive inspirational products in a year or two.
“We want to focus our resources on the core product because
there we can build quite a few features that will help our users to get even
more transparency, show them what good options are, show them great deals,” he
says.
The company aims to become “attractive to more people, even
people [who] historically have not really focused on price comparison or used
us as a channel,” according to Tillmann, “but now in this high-price environment might
consider using us.”
Seventy percent of Trivago’s traffic comes through mobile
phones; the company doesn’t share how much traffic comes through the mobile app.
“Historically we have not really focused on the app but
focused on mobile web, and I think there’s a lot we can do actually in the app,” says Tillmann.
The company is also looking to onboard independent hotels to
diversify their advertising mix. Tillman says Trivago has made some progress,
but in parts of the world, OTAs already have the connection and “smaller
hotels are reluctant to onboard other partners.”
To overcome that obstacle, Trivago is paying a technology
company that uses scraping technology to take information such as nightly
rates from the hotel’s website and display it on Trivago’s platform.
“We now have a goal over the next couple of months to
increase coverage and really build up the independent hotel offering. And I
think that that will be hugely relevant for users,” Tillmann says.
As of Sept. 30, Trivago says it offers access to more than five million hotels and other types of accommodation in more than 190 countries,
including nearly four million short-term rentals.
In August, Hefer
and other heads of travel companies discussed the economic outlook.