Trivago Treks a Troubled Trajectory, Still Faithful in Their Future

One of the markets leading hotel search platforms has released an updated full-year guidance for the fiscal year 2017, due to new projections and announcing they are expecting “softer” results for the third and fourth quarters. Trivago NV (NASDAQ: TRVG), now expects their annual revenue growth to stay around 40% and adjusted EBITDA to be lower than 2016, albeit still remaining positive. One reason given is the recent weakness in the US Dollar and other currencies opposite the dollar. But that is only half the story.

The impact to their Revenue per Qualified Referral (RPQR) and its negative impact on Q2 2017 earnings has been much more substantial than initially projected. As a result, they have pulled back more performance marketing activities than they were hoping, causing further hits to be taken in regards to web traffic and revenue growth from those avenues. The RPQR issue came too quick for the company to really reign in advertising expenses, via television, to prevent the “overspend.” Trivago is now expecting lower ROI from advertising expenses, or Return on Advertising Spend (ROAS), in July and August and EBITDA has experienced a considerable amount of their margins going negative.

Difficult revenue comps as results for summer period in 2016 were much stronger than both 2014 and 2015. While competing against the likes of HotWire, Expedia Inc (NASDAQ: EXPE) and Travelocity, Trivago still remains faithful and “unwavering” in their commitment and belief in the medium to long-term potential of their company.

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