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Trivago, the hotel-search company, faces a tough calculus when it comes to wooing independent hotels to list inventory on its marketplace.
Axel Hefer, Trivago’s chief financial officer and managing director, described the problem — and the company’s attempted fix — in an interview.
In brief, the strategy of Trivago, a Düsseldorf-based company that is partly owned by Expedia, Inc., is to appeal to independent hotels with marketing tools.
“Generally speaking, very few of the independents are active in online marketing,” Hefer said. “Primarily they sign up with online travel agencies [OTAs] and let the OTAs do the work. So what we have set up is give them tools to help them become comfortable with do-it-yourself marketing decisions.”
Hefer says “Trivago’s key objective for the Hotel Manager tool is making contact with independent hoteliers and creating a business relationship.”
Hotel Manager is a free marketing platform that enables hoteliers to manage their hotel profile and upload content. About 310,000 hotels have signed up for this tool since the start of 2016.
The primary goal of Trivago’s subscription-based premium version of the product, Hefer said, is not about making money. Across the first half of 2016, a subscription averaged about $210 (181 euro) a year, according to Skift’s estimates.
Trivago says its main goal is to provide hoteliers with additional promotion and analytics functionalities.
“We see our tools as a conversion funnel,” Hefer says. “Some hoteliers will start out with the free basic tools. Then we’ll convert them to try our premium tools.”
“As they get more comfortable with being active online marketers, they’ll become more comfortable participating in our auctions.”
Since January 2016, the number of paid subscribers has reached 33,000 hotels.
Playing the Long Game for the Long Tail
Hefer predicts: “In five to six years from now, this initiative will pay off because online will become an even greater source of distribution for hotels and hoteliers will then need a direct, more cost-effective alternative to using the OTAs [online travel agencies],” Hefer says.
A public company, Trivago is controlled by an online travel agency, Expedia.
The plan sounds nice in theory, but Trivago has its work cut out for it. As of today, only 11,000 hotels participate in its marketplace actively. Yet there may be between 140,000 and 600,000 independent hotels worldwide, depending on which third-party source you listen to.
Most of the properties found on Trivago today belong to chains. But most of the hotels in the world don’t. The travel company needs to expand its inventory to better reflect the world, Hefer conceded.
“The individual hotel market is more of a fractured, long-tail market than the chains, obviously,” Hefer said. “It’s hard to reach them. But this effort will help.”
Brand recognition is another part of Trivago’s effort to appeal to independent hoteliers. The company is spending heavily on digital and TV advertising, as is well known. The latest statistics from iSpot.tv on U.S. TV advertising spend shows Trivago in the lead.
Similarly, the latest global Google Trends data show what terms users are searching on.
For more than five years, TripAdvisor has been a far more popular search term than Trivago, Booking.com, Expedia, or Kayak. But as of this summer, Trivago has come within striking distance of displacing TripAdvisor in popularity as a search term.
Trivago may be onto something with its strategy. Hotels seem to be responding to Trivago’s wide brand awareness.
Through June, Trivago boosted the number of rates hotels advertised in its online marketplace in 2017 by 97 percent, to 290 million.
That long-term challenge aside, the earnings call on Friday delivered upbeat news. Revenues increased in the full first half of the year to $666 million (565.9 million euro), up 67 percent from the same period a year before.
In more positive news, profits materialized in 2017. In the first six months of the year, the company reported $5 million (4.3 million euro) in net income, up from a loss of $59 million (50 million euro) a year earlier.