How does a well-known European travel brand, Trivago, get more engagement with customers? Just make a sponsorship deal with Chelsea of the Premier League. The cost might be top-notch, as well.
Trivago Managing Director and CEO Axel Hefer spoke with Skift Senior Travel Tech Editor Sean O’Neill at Skift Global Forum 2021. The two discussed the theme “How Can Metasearch Evolve to Inspire Travelers and Will it Work?”
You can watch a full video of their discussion as well as read a transcript of it, below.
Sean O’Neill: So most of you, when you hear the name Trivago, you probably think about the Trivago Guy, which was one of the most successful — if not the most successful — TV marketing campaigns in travel for the past decade. But a lot has changed at Trivago in the past couple of years. Right before the pandemic, they got a new CEO Axel, and Axel has been diversifying the product and the marketing strategy for the company.
And also, Axel is not a big fan of fully remote work all the time when it is safe to be in the office. So he has been probably one of the most assertive of all the travel industry executives — that sort of A/B testing. What are the ways that we can get workers back into the office? And the future of work as, as Rafat was saying at the beginning of the conference, really impacts the future of business travel. So we’ll be talking about Trivago strategy and the future of work. Thank you, Axel, for joining us here. Grateful.
Axel Hefer: No, thanks for having me. It’s so good to be at a real conference with real people in 3D. Yeah, it feels good.
O’Neill: This feels very good to do our first in-person event. Let’s start with … So by the way, we do have the app and we encourage you to ask questions to participate. Your questions will probably be better than mine. So just feel free to add your questions, and we’ll get to them. I would say future of work … last night, Brian Chesky was talking with our CEO. He has this big vision that the pandemic has fundamentally changed things for especially, tech workers — that in their twenties and thirties — they’re not going to go to be back in the office full time. What is Trivago’s approach toward trying to bring the workers back?
Hefer: Yeah, I think it’s a bit more complicated than what you now got used to. I mean, of course, a lot of us have worked one and a half years from home and it was quite a change in the beginning. But once you got used to it, obviously, you’re comfortable with it. So I think the counter argument to that is … and we’ve seen that our average employee is 31 — I think by now — so it’s exactly that age bracket. And we have predominantly engineers and mathematicians. The issue is that you lose a couple of things. The first thing that we realized already last year was in a very, very stressful second quarter that it was almost impossible to feel whether somebody was really feeling bad and whether it was somebody that was overworking. And we realized (it) far too late. Actually first time in my life that I didn’t pick it up earlier.
So we had a lot of our top, top guys (who were) very, very stressed. So we actually tried to fix it with a mandatory vacation. So we shut everything down and said, “OK, now everybody has to take a break because we don’t really get a good sense. We are not in the same room, so let’s make sure that before autumn, everybody is getting to a (healthier) level.” So that’s definitely one. The second one that — from our experience — doesn’t really work that well is any kind of coaching, learning on the job. Of course, you can schedule training. That’s not a problem, but the small things where you’re like, “OK, can you help me with this? You know, so what about this?” Like the small things in between are not worth a separate call and are just bringing down the learning experience tremendously. And the third one — I guess is the obvious one that most people are talking about — is strategy and creative processes just don’t work as well.
And my explanation is that you still have a bit of a time lag and you don’t feel any energy. So you don’t have this rapid interaction where you interrupt each other, you shout at each other, you put stickers up, et cetera. And it just doesn’t work as well. And even (at) the beginning of the crisis, when the business was falling apart, actually we in the leadership team met in a completely empty office to try to figure out what was going on because it just didn’t work on the screen. So, there are a lot of things that you can do better in person. So now the question obviously is if that is all true, and if you believe in that, and if that’s important to you, then all remote doesn’t work. And it doesn’t work in particularly for that group of people.
If you really think about the long-term development, if you’re right straight out of university, you need all of these things that I was talking about a lot more than somebody who has worked on the job for 30 (or) 40 years, (and) has a family and social integration. Whereas most of our colleagues are coming from all over the world, and they are living on their own. (So) the company is actually the center of their social interaction.
O’Neill: Right. In 30 seconds, what would be the one learning lesson you’ve had about what helps draw people back in for hybrid.
O’Neill: Food? OK.
Hefer: Super easy. I mean, it is — absolutely for that age group. It is food because you are very comfortable at home, but the one thing that is more comfortable in the office is food. You don’t need to cook yourself. So we had the first spot where we just provided certain food and the Japanese food truck showed the highest attendance. So we use that data point and now actually rolled out more and quite attractive food options. And so, (those are) my recommendations: food and coordinated team returns. So if you’re going to the office, you want to feel the office. Yeah. So if you’re on your own and your team members are remote, that doesn’t make any sense. So you need a bit of a push as well. If you go to the office, please all go on the same day because that is where you get the benefit. So otherwise, it’s the worst of all worlds. You have the commute and you don’t see anybody in person. That’s horrible, yeah?
O’Neill: Right. So you want to have that energy to play off. So (about) Trivago’s strategy, what is the most interesting thing about Trivago right now given that your share price is not that interesting?
Hefer: I mean, it depends if you’re a buyer or seller. So it’s all a matter of perspective.
O’Neill: That’s true. Two sides in every market.
Hefer: So I think overall travel is absolutely fascinating right now. I mean, so many things have actually happened the last one and a half years. And the discussions that we are having here all day — what will actually stay and what will not? And how will the competitive dynamic actually change in the future is fascinating. It offers (a) huge opportunity if you navigate that well. And you mentioned it before (that) we’ve started to diversify our consumer facing products. And we as well have started to offer products that are more targeted at companies and try to benefit from the increasing trend, obviously.
O’Neill: So let’s build on that. You have a new product, and so people in this audience, the proverbial TripAdvisor might want to get some of your software, your service for bidding and connectivity technology. So what is the pitch that you’re offering? What do you offer?
Hefer: So basically what we started to offer is our metasearch product. So indeed, the challenge that you’re having with I guess any product but particularly with a metasearch product is you need critical scale to have fresh prices. And so, if your price cache is not fresh, then the page is too slow because you need to send live requests to many, many, many different partners. And the conversion is just dropping. So the smaller the country is, the more it makes sense to actually join forces. And the smaller your market share in any given market is, the more it makes sense to actually piggyback on somebody else to scale and realize economies of scale without really going for full mergers and integration, which obviously doesn’t make sense in a lot of cases.
O’Neill: OK, so Trivago as a service … so the backend economies of scale are much better. On marketing, a lot of people look to Trivago to know what you’re doing next. We heard last night, Brian Chesky said he had an $800 million run rate on ads — mostly on Google ads — and he doesn’t want to get back to that level. So, what are you doing creatively with marketing now in either social (media) or video?
Hefer: So, we’ve done one thing. I mean, we signed at the beginning of the year, but we announced it (in the middle) of the year. We’ve gone for, I think, a quite innovative sponsorship deal with Chelsea.
O’Neill: Chelsea, the football club?
Hefer: Yeah, exactly. So, and (the Premier League) obviously is the one platform that has a really global reach. (It’s) quite interesting. But then in the last couple of years, they started to separate the main jersey that is visible on TV from the training kit. And so we went for the training kit because the training kit basically is worn every day. And so it’s used for all the footage that is collected during the week. So you basically target an online audience with a very, very high frequency and a very high emotional engagement, which we think is very interesting and is exactly the audience we want. Whereas in previous tests that we’ve been running with smaller sponsorships, we couldn’t see any additional benefit from the TV reach because, I mean, we are quite well known already. But we did see an improvement in conversion and engagement amongst the core follower group.
O’Neill: That makes sense that emotions are raised. Do you get your kids the free jerseys? Is that one of the perks?
Hefer: So the kids do have a jersey, but they are supporters of a German club called Schalke. So same colors, but fortunately.
O’Neill: I’m wondering about Google. We heard from Google’s Richard Holden at this conference that Google says they act fair in the market. Trivago last year joined with a couple dozen other companies saying they don’t think Google acts fair when it comes to travel. What could they do that would make Trivago happy? That would be reasonable.
Hefer: Yeah, it’s all a matter of perspective, I guess. So from our perspective, what we don’t think is fair is that we think their own metasearch price comparison product is shown more prominently than our ads when we are advertising on them. And if you’re just looking at the search, I mean, we are bidding for the different AdWords units that are small text ads. Whereas their own price comparison is a huge content rich unit that (is more prominent) in the results, and it’s a lot more visually appealing. And when you think about this self-preferencing concept from our perspective, that is clear self-preferencing.
O’Neill: That makes sense. A company in Germany, HomeToGo, is going public later this year and their specialty is vacation rental price comparison search — so meta-search for vacation rentals. And you’ve been having rentals as part of the mix, along with hotels, for some time. There’s another company, Vacationfinder.com, that’s also trying to get into the space. What do you make in terms of a competitor set and how you’re trying to do rentals with Trivago?
Hefer: So our concept has not really changed. We think that eventually it is a substitute to hotels because there are hotels that are very, very similar to apartments that have a kitchen (and) other facilities. There are hotels that look very different (from) apartments. You’ve got apartments where you sleep on somebody else’s couch. You’ve got apartments that are basically ready for business trips. So, we think it’s more a continuum, and that’s why we are showing the results in an integrated product. And we do think that the pure plays will eventually move to a similar model as well.
O’Neill: OK. We have some audience questions. Axel, we mentioned the one (business-to-business) service that you offer for bidding and connective technology. Are you planning to have other products as well? You’ve mentioned this in your earning seasons.
Hefer: Yes. I mean, we’ve got the first product and obviously there will be more. But I will not talk about them today. More to come.
O’Neill: Expedia is divesting a bunch of businesses. Peter Kern, as Executive Editor Dennis Schaal was saying, he’s simplifying the business. What advantage would happen if they divested Trivago their ownership stake?
Hefer: That’s an interesting question. So, I mean, what is the benefit of having a majority shareholder? I have to say in the last one and a half years, there was a big benefit because you don’t need to worry about your share price the way you have to worry about it if you have a completely fragmented ownership. So that I guess would be a disadvantage (and) also an advantage to have board members that really know your business and know your industry clearly. In terms of advantages, we have always had a struggle with all our other partners that there is the implicit suspicion that we are not 100 percent fair to everybody, which is not true. But (it) is obvious if you have a large shareholder, that is in some of the discussions of problems. So I would say that’s probably the short answer (about) the biggest disadvantages and advantages.
O’Neill: OK. We have an audience poll we can put on the screen. We asked people will travel metasearch companies like Trivago, Google Travel, … , HomeToGo, et cetera, play a larger role (or) smaller role. The audience is sort of divided into sections. So more (believe) metasearch will have more of a role as sort of like a leader, but (some are divided). What is your case? The place where we are now, is it going to go up structurally over the next couple of years?
Hefer: So I think all three answers are correct. Less is correct for the recovery, looking backwards. More is correct for the next one and a half years, and about the same as correct for the time after. And the reason why I’m saying that is that metasearch is in particular useful for price conscious travels when price is on top of your mind. And is in particularly useful for large city travels because that’s where you can compare a lot of different options. So city trips are still under indexing, but we’ll return from our perspective next year — big time. And in the last two summer peaks, you’ve clearly seen that most people were concerned about finding something that fits rather than optimizing for the right price. So price wasn’t as much on top of everybody’s mind as it was before. Will price continue to be one of the key decision factors in the future? Absolutely. That’s why I think overall it will be the same.
O’Neill: It’s interesting because there isn’t really a great parity in the vacation rental space. And a lot of people don’t realize that when they’re shopping on one channel (what) the actual total price after fees (are), so that dovetails with what I think. Axel, thank you so much for being with us. We really appreciated this conversation.
Hefer: Thank you.
O’Neill: Thank you.
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