Bed Investment No rest for hotel portal Trivago

Trivago's management team believes they have a winning strategy, making hotel searches better for customers and sticking to what they know.
Rolf Schömgens say he and his co-founders are keeping the business concentrated on hotels while growing into new markets globally.

Despite considerable growth over last year, online hotel portal Trivago isn't resting easy as they aim to make 2017 the year they crack the the billion-euro turnover.

Since launching onto the stock exchange, the Düsseldorf-based company, which was founded in 2005, has made its figures public. Its bottom line grew by 53 percent to €754.2 million, $797.5 million.

In an interview with Handelsblatt, founding team member and chief executive, Rolf Schrömgrens, said that they plan on furthering their growth by 45 percent this year to make more than €1 billion, followed by a period of slower, steadier growth.

"After 11 years, growth that strong isn't necessarily a given," he said, crediting the boost to Trivago's expansion beyond Europe. "Today, Europe only makes up about half of our turnover of €754 million. And there are still several fields into which we can grow into."

But the business, of which Expedia is the majority share holder, isn't getting out of bed with hotels, but rather, strengthening it's offerings on the market for its users.

The more we know about the individual user and their interests, the easier it is for us to make individually tailored suggestions. Rolf Schrömgens, Chief Executive, Trivago

Today, a third of hotel bookings are carried out online, but instead of expanding into other travel bookings, like cheap flights and car rentals, Schrömgrens is staying focused on improving its hotel offerings for individual customers based on their own unique tastes. He and his two co-founders Peter Vinnemeier and Malte Siewert said they are sticking with what they know.

This let's them differentiate from their competitors Kayak and TripAdvisor, whose parent company, PriceLine, recently added booking group Momondo to its stable for $550 million, and keeps them concentrated on organic growth.

"Nor will we go deeper into the value chain and make our own bookings," said Mr. Schrömgens.

Instead, the company, which is set to add 800 new jobs this year alone, is making its search result more personal. After four Trivago managers took a trip to Los Angeles, they realized the need was there for individualized preferences.

“Two of us thought it was great: a fantastic hotel, lots of space and no clutter,” he said. “The other two said it was too spartan, not even a proper closet.”

Mr. Schrömgens said he believes that in the future, each customer should find the hotel that fits them best in the current circumstances.

“The more we know about the individual user and their interests, the easier it is for us to make individually tailored suggestions,” he said. Eventually, everyone who searches for a hotel in London, for example, would get different suggestions based on their previous searches and bookings.

But still, Mr. Schrömgens said that expanding Trivago's reach is still the top priority on their way to a sustainable level of profitable growth.

"Conquering new countries, that's still the bread and butter of our business.”

In the United States, Trivago was a German newcomer from a town nobody had ever heard of called Düsseldorf. Rolf Schömgren, Chief Executive, Trivago

The company had a slow start on the Nasdaq after a reporting rule in conjunction with its merger into the Expedia group reported the company's bottom line was €51 million in the red.

But Mr. Schrömgens contends that the company has always been profitable.

"We were still in the Quiet Period (before the IPO) and couldn't clarify where the numbers were coming from," Mr. Schrömgrens explained. "That was extremely frustrating."

The reporting translated into a lower than hoped-for IPO, with shares priced around $11.00.

“In the United States, Trivago was a German newcomer from a town nobody had ever heard of called Düsseldorf," Mr. Schrömgrens said. "We never built up a founders story around us the way Uber or Airbnb have. We just built up our hotel search engine on our own means over several years and have been profitable the whole time."

Since its December entry, shares have topped $13.00. The early prices were much lower than expected. Mr Schrömgrens said there had to be some skepticism before the launch.

Experts predict the one year target price will be set at $14.85. Four analysts contacted by Handelsblatt recommended to sell Trivago shares, five others counselled to hold on to them. The company's value has been estimated to be around $4 billion.

Despite its international success and global ambitions, Mr Schrömgens says that he and his co-founders still see the business as part of the German Mittelstand, the group of small and medium sized businesses that form the backbone of the country's economy, and want to keep the future of Trivago in Düsseldorf.

"It was very important to us that we continue to pay our taxes in Germany," he said. "The founders really pushed that it stays that way, even when we're committed to our shareholders."

 

Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany's Mittelstand and family-owned businesses. To contact the author: [email protected]