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Trivago would likely be a hot IPO given its hyper growth and the potential further expansion of online travel around the world. However, investors will question whether the huge amount of money Trivago pours into sales and marketing is an overreach.

Making good on an earlier pledge, Expedia has begun to put in motion an initial public offering of its Trivago hotel-metasearch unit and the IPO could be valued for more than $1 billion, according to a published report.

Reuters reports that Expedia is soliciting pitches from investment banks seeking to handle the IPO, which would be listed in New York.

Expedia officials stated during the company’s second quarter earnings call in late July that Expedia and its majority-owned Trivago unit would seek to execute a Trivago IPO before the end of 2016 but they would pursue other options if they couldn’t put Trivago on the public markets before the end of the year.

Expedia owns some 63 percent of Trivago and the founders of Germany-headquartered Trivago own the bulk of the rest.

Raymond James estimates that Trivago, which ploughs an inordinate amount of money into TV advertising to fuel top-line growth, would generate revenue of about $768 million in 2016. When the bankers determine a valuation of Trivago for an IPO they will take into consideration the fact that Trivago’s revenue numbers would make it 20 percent larger than TripAdvisor before Expedia spun it out in 2011 and three times larger than Kayak was before its 2012 IPO.

In that 2012 Kayak IPO, the company was valued at around $1 billion, and then The Priceline Group closed on an acquisition of Kayak the next year for $2.1 billion.

In October 2013, Expedia CEO Dara Khosrowshahi made it clear that his company, which took control of Trivago seven months earlier, would allow Trivago to operate independently and that its growth trajectory could follow the TripAdvisor formula.

Based in Dusseldorf, Germany, Trivago serves about 55 countries with its hotel price-comparisons, and the U.S. recently became its largest market. Already profitable, Trivago would benefit from an IPO that could provide a funding infusion to spur further expansion.

Unlike fellow hotel-metasearch site TripAdvisor, which completed its rollout of Instant Booking globally in June 2016 and has found it tough going, Trivago has not labored in trying to become a booking site. Instead, Trivago has tested ways to ease bookings for partners on their mobile and desktop sites.

If Expedia is successful in taking its Trivago unit public in 2016, then it would be Expedia’s second trip — including the TripAdvisor spinoff in 2011 — to the public markets to monetize a fast-growing asset in five years.

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Tags: expedia, ipo, trivago

Photo credit: Trivago could have a lot more money for TV advertising if it can successfully complete an initial public offering in the next few months, as planned. Trivago

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