Trivago tackles the fluctuations of concentration


Hotel meta Trivago has filed its first full-year accounts as a Nasdaq-listed company, revealing a billion-dollars-plus of revenues and a narrowing of net losses, while reminding the market of its exposure to the decisions of Priceline and Expedia.

Revenues for the year of €1,035.4 million were 37% up compared with 2016, while the net loss dropped from €51.4 million to €13 million, with its financial performance stronger earlier in the year.

On the earning call with analysts, CEO Rolf Schrömgens talked about an “intense year” and experiencing “the full bandwidth of emotions being a public company.”

Part of that intensity comes from the “volatility” in a number of business-critical contexts, from forex fluctuations to “a rebalancing of the marketplace”.

The marketplace for Trivago is mainly defined by its advertisers, with the business still seeing a concentration around Expedia Inc and Priceline Group brands.

“This concentration means that changes in these advertisers’ strategies can have material impacts on our referral revenue,” it said.

Expedia Inc remains Trivago’s majority shareholder, and has subjected Trivago to less of a rebalancing than Priceline. The financials show that, as a proportion of total revenue, Expedia brands accounted for 36% of revenues in 2017, the same proportion as last year.

Priceline’s contribution was actually up year-on-year in percentage terms, climbing from 43% in 2016 to 44% in 2017.

However, the last three months of the year tell a different story with both brands dropping their share, Expedia falling from 39% in Q4 2016 to 37% this time with a much sharper decline from Priceline Group, down from 42% to 33%.

So while Trivago is exposed to the ad spend vagaries of Expedia and Priceline, it does have its own sales and marketing decisions to make, and it is very committed to building its brand. Across 2017, its sales and marketing spend came in at €946.9 million of which €884.7 million went on advertising.

Its return on advertising spend across the year was 115%, down slightly from 120% in 2016.

An outlier in the Expedia, Priceline and Trivago triumvirate is Google Hotel Finder. In the Q&A with analysts, Schrömgens said: “We’re trying to diversify our channels more and more and Hotel Finder is one of those channels you can diversify in. We see it as an interesting opportunity but for us at least it’s quite early on.”

Trivago looking at Google Hotel Finder as a channel where it could advertise its inventory, or onboarding Google as an advertiser on Trivago – would certainly be “interesting” and add some gigabytes to the bandwidth of emotions currently being experienced,  not only by Trivago.

Click here to access Trivago’s Investor Relations page to access the results in full, the presentation for analysts and a webcast of the earnings call.



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