Last week we released our latest Skift Trends Report, “Travel Metasearch: What’s Coming Next,” which takes an inside look at the hottest sector in travel and how it really works. The report conveys how hotel brands, airlines and online travel agencies compete; discusses business models; and provides insights on trends and metasearch best practices. It is the most definitive state-of-the-market report on this big-growth sector in travel.
In preparing the report, Skift spoke with Malte Siewert, co-founder and managing director of Germany-based hotel metasearch site Trivago, about Expedia’s investment in Trivago and how the sector is changing.
Expedia Inc. has designs on turning its new hotel-metasearch plaything, Trivago, into the next TripAdvisor.
Not in terms of become a hotel-review behemoth, but as a fast-growing asset that one day can be spun out from the parent company, and make Expedia investors a ton of money, just as TripAdvisor did.
Expedia Inc. last year took a controlling stake in Trivago for $564 million in cash plus 875,200 shares of Expedia common stock over a handful of years, and Malte Siewert, Trivago co-founder and managing director, welcomes the investment and vote of confidence.
In the second quarter of 2013, Trivago’s initial quarter within the Expedia Inc. fold, Trivago’s revenue grew 80% year over year as it focused on international expansion into the U.S., Canada, Australia and New Zealand, said Expedia CEO Dara Khosrowshahi.
But, Siewert bristles at the notion that Expedia is now running the show at Trivago, and he vehemently points out that a dramatic increase in marketing spend that has propelled Trivago’s growth does not come from elsewhere in Expedia, but is self-funded, coming out of Trivago’s own resources.
What’s changed? “Nothing,” Siewert says. “We run the business the same way like we did prior to the Expedia deal. That is actually part of the agreement.”
“Expedia has agreed to not run the business and to keep it absolutely independent,” Siewert says. “And, that is exactly what is happening. All of the advertising we are doing is all funded from our cash flow. So Expedia also is not funding the business in any way.”
Like Steve Hafner, Siewert’s rival at Kayak, Siewert believes that the search piece of metasearch needs to evolve, and part of that not only involves gathering more personal information about what travelers want, but also finding out more about the hotels themselves.
Trivago has introduced on a test basis a Mystery Guest program in Europe that signs up travelers who are visiting a hotel anyway to conduct an extensive survey while at the property, and then Trivago turns the answers into structured information that can be used to improve a search for the right hotel.
The Mystery Guest participants get paid by Trivago, or sometimes by the hotel, to participate, Siewert says.
Skift: How are you changing and improving the Trivago product?
Malte Siewert: We are pretty good in rate search and finding the best deal. Now, it is all down to the search experience and delivering the ideal hotel to the individual who is searching.
We are heading toward delivering individual search results, learning about the visitors to the website, and then showing the right hotel. Ideally in the end you would just go to the website, open it and there’s your hotel deal — the ones that are best for you — so that you don’t even need to search. That’s from a strategic point of view, an ideal version.
Skift: Certainly you’d say there are some advantages to being part of the Expedia fold? I understand that you are operating independently and that’s part of the strategy, but are there no advantages?
Siewert: Yes, we cleaned up our investor base of smaller, angel investors, and we are extremely excited when Trivago got bigger and bigger. And we were more and more hoping that we would do a transaction to help to grow the business. For them, it is a huge risk also. All of the financial success on one plate. And so we wanted to have them also. So that’s fun. So now we only have one investor, which is Expedia.
From an operational perspective, frankly, no. I think we are an extremely fast-growing company. We require a very fast decision-making process and we have very lean processes in place. There is probably potential to share knowledge with Expedia and stuff like that in the back office like making things more secure in the financial department and things like that.
They have a lot of knowledge about all these things. We take the good things from their legal advice and their administrative resources that we can tie into. That is helpful. But, business-wise, commercially, we run the business as before and there is no sharing point.
Skift: From an operational perspective what is the focus now? Are there particular new markets that you are focusing on now, including the U.S.?
Siewert: Yes, you can see it already. That is pretty much the direction. If you look at Trivago traffic development we had a strong year in 2013 in the U.S. From a U.S. perspective we are tiny. Then, in turn, there is growth potential, and I think we managed last year to get a little footprint in the market and so we are likely to go further into that direction. Time will tell what the opportunities are in terms of marketing spend.
We are looking into Asia in several markets, and there is definitely growth potential in South America. And so we are all over the place, and testing things out, testing where the model that we did most successfully in Europe, in which markets it can be applied most easily next.
Skift: For companies that want to participate in Trivago, do you use an auction platform or some other formula?
Siewert: It is a CPC (cost per click) price. We derive it from what it costs us to integrate that partner. Not like insertion costs. When we send traffic to a hotel directly, we take away from someone else. Also, if it’s an online travel agency it’s the same methodology. It doesn’t matter whether it is brand.com or an OTA, it doesn’t matter. There’s always a substitution happening. If we take away from one and shift to number two, so how much does it cost us to shift. So that’s sort of how we look at it. You can’t say it’s this much, it always depends on exactly the type of hotel.
Skift: Who’s going to win first? Trivago in the U.S. or Kayak in Germany or Spain? Kayak has had so much trouble expanding internationally and now you are coming into the U.S. Who has the better shot?
Siewert: I don’t know. Of course, I would always say it is us, but would you expect me to say the other way around? No.
Skift: No, you are going to be honest with me.
Siewert: Of course, I’m thinking positive so I’m saying it’s going to be Trivago. They (Kayak) probably have good reason to say the opposite way around. It’s a good company. I have lots of respect for them. Maybe it’s the other way around. I don’t know. We’ll see. It’s competition; I can’t see the future.
Skift: We’ve seen TripAdvisor seemingly struggle with the initial rollout of its advertising campaign. But what about Trivago? You’ve been so successful in building a brand through TV advertising. What are some of the lessons you’ve learned from that and what are some of the keys to that?
Siewert: It’s really ingredients. Things need to play together well.
For more analysis, get the full report here.