Trivago sees revenue slump 70% in 2020, bets on local travel to fuel recovery

Revenue for Trivago plummeted 70% from €838.6 million to €248.9 million for the full year 2020, as the coronavirus pandemic wreaked havoc across the travel industry.

For the quarter ending December 31, 2020, total revenue was down 79% from €155.5 million to €32.3 million year-over-year.

For the full year 2020, the company posted an adjusted EBITDA loss of €12.3 million, compared to a positive $70 million for 2019. For the fourth quarter of 2020, Trivago posted an adjusted EBITDA loss of €3.4 million compared to a positive €18.4 million for the same period in 2019.

For the 12 months ending December 31, 2020, referral revenue in the Americas decreased 71% to €89.9 million. Compared to the same period in 2019, referral revenue dropped 70% to €102.9 million in developed Europe and fell 73% to €46.1 million in the rest of the world.

In the fourth quarter of 2020, referral revenue decreased 77% to €13 million in the Americas, while referral revenue dropped 86% to €8.2 million in developed Europe and 77% to €8.3 million in the rest of the world over the three-month period.

For all segments – the Americas, developed Europe and the rest of the world – referral revenue was negatively impacted by significant declines in qualified referrals and revenue per qualified referrals.

“In the fourth quarter of 2020, a second wave of infections of COVID-19 has materialized in most countries where we operate. Measures to contain the virus, including strict lockdowns and mobility restrictions have been reinstituted in numerous countries, bringing travel activity to an almost complete halt in many regions for the second time in the last year,” the company says in a statement.

Selling and marketing expense was 54% of total revenue in Q4 2020, compared to the same period year-over-year.

In the fourth quarter, selling and marketing expense decreased by 84%, or €89.6 million, period-over-period to €17.5 million, of which €11.3 million, or 65%, was advertising spend.

For the full year 2020, selling and marketing expense decreased by 73% year-over-year to €178.3 million. Advertising spend was reduced in all markets as a reaction to the pandemic.

In a call with analysts, CFO Matthias Tillmann says Trivago will remain “cautious” on brand marketing spend until there is enough assurance there is demand for travel. “Q2 could get a bit better, but it’s obviously hard to tell. There is a lot of uncertainty.”

Net income decreased by €11.7 million to a net loss of €8.6 million in the fourth quarter of 2020 compared to the same period in 2019, driven by a sharp decline in referral revenue due to COVID-19.

In the 12 months ending December 31, 2020, net income decreased by €262.6 million to a net loss of €245.4 million, mainly driven by an impairment of goodwill amounting to €207.6 million recorded in the first quarter of 2020 and the reduction in profitability due to the pandemic.

Though it has taken a substantial hit due to COVID-19, Trivago says it “beginning to see how and when life will start getting back to normal. We are encouraged by the start of large-scale vaccination programs in multiple countries, the initial learnings about these programs gathered in countries like Israel and the U.K. the increased availability of testing and improvement of treatments.”

The company goes on to say that by the second half of 2021, “the return to normalcy will be underway with the COVID-19 pandemic beginning to be much more under control than it is today. And this exact point in time is what we have been preparing for, when travel returns and the industry begins to ramp back up.”

The local bet

As travelers begin to mobilize again, Trivago CEO Axel Hefer says they will be considering shorter trips and easier-to-reach destinations, and Trivago needs to meet them where they’re looking.

To that end the company is investing heavily in its local travel products, which include the launch of a local travel discovery product, announced in November, and its acquisition of Germany-based startup Weekend.com in January.

The local travel discovery product is currently in its first version in core markets focused on destinations within driving distance, but a “major second release” of the product is forthcoming.

Compared to Trivago’s core metasearch product – which is a place consumers go when they know where they want to travel – the “local travel product is one step away,” Hefer says. “It’s complementary.”

“Maybe you made one decision that you don’t want to go far, but you haven’t made up your mind where to go,” he continues.

“We do think it’s important to not only offer the broadest choice and the best rates as we do in our core product, but also draw some inspiration when and where to travel. … That’s the core of our local travel product.”

The next iteration of the product will have more suggestions on where to travel and reasons to travel, which Hefer says are vital to building out a specific local product.

With Weekend.com, an online travel agency targeting travelers looking for short breaks, the acquisition marked Trivago’s first since 2017.

Hefer says the site’s packaging of hotel rates and flights for price-conscious consumers filled a gap in Trivago’s existing technology. While Weekend.com is not technically a packaged metasearch engine, it does offer price comparison through dynamic pricing.

He says future acquisitions are not off the table so long as they “accelerate our own development and our evolution on our strategic roadmap,” which is the outlook Trivago has taken since its IPO in 2016.

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