In the world of travel, Trivago has made a big impact. It’s known for hotel search and comparison. But how did this German startup become a top player, beating big names and becoming a search engine giant1?
Trivago started in 2006 as Germany’s first hotel search engine1. It quickly grew, working in dozens of countries1. At first, it aimed to be like a travel Wikipedia, where users could share and earn. But it soon changed its focus to hotel search, using algorithms to show rates from different travel sites1.
Trivago got about $1.4 million in funding early on1. But it chose to be profitable and not rely on Google, which was a big part of its traffic1. This choice was key to Trivago’s success as a search engine giant.
The Founding of Trivago and Early Years
Trivago, a well-known travel search engine, started in January 2005 in Düsseldorf, Germany. Rolf Schrömgens and his team founded it2. They wanted to make a “commercialized Wikipedia for travel” where users could share and earn from content2.
With little money, the founders had to learn to code themselves. This was to build the company’s early search platform23.
From a Bootstrapped Idea to a Commercialized Wikipedia for Travel
In the first two years, Trivago made enough from ads to keep going. But, advertisers were unhappy with the traffic2. Trivago had only taken $1.2 million from outside investors, mostly bootstrapping3.
The founders built the site themselves. They focused on showing hotel rates and availability from different travel sites2.
Learning to Code and Developing the Early Search Platform
This DIY approach helped Trivago grow fast. They could try new things and improve their search engine2. By coding themselves, they didn’t need outside help23.
“We had to learn to code because we didn’t have any money. We couldn’t afford to hire developers, so we taught ourselves how to build the platform.”
– Rolf Schrömgens, Co-founder of Trivago
Pivoting to Hotel Search and Building the Brand
In 2008, Trivago decided to change its focus to hotel search. The company saw that its first idea wasn’t making enough money or keeping users interested. Most of its visitors were looking for hotel deals, not travel content4.
Shifting Focus to Specializing in Hotels and Becoming a Search Engine
Trivago became a specialized hotel search engine. It built algorithms to show rates from different online travel agencies on one platform4.
Investing in Brand Marketing to Gain Direct Traffic and User Awareness
Trivago wanted to get more traffic without relying on Google. It started spending money on brand marketing and direct user awareness. The goal was to get users to visit Trivago’s website directly for hotel searches5.
This plan worked well. Trivago was able to get most of its traffic from direct searches, not from Google or other travel sites5.
“About three out of four bookings on their platform come from customers who directly type the site’s name into their search browsers.”
trivago’s Rise and Public Offering
Trivago’s focus on hotel search and brand marketing led to significant growth before its IPO6. By 2016, it made $425.6 million in revenue, up from $324.6 million the year before6. In December 2016, Trivago went public on the Nasdaq, raising $287 million7.
The company’s shares were initially priced at $11, but closed at $11.85, a 7.73% increase7. Trivago’s IPO aimed to boost its public image, with $235.4 million expected from a $14 share price7. The online hotel market is huge, with 56% of hotels independent and only 33% online7.
Trivago’s revenue jumped 43% year-over-year, from $376 million to $538 million6. The IPO price suggests Trivago needs to grow profits and revenue to justify its valuation6. If it fails to meet these targets, the stock could drop by 86%6.
“Trivago aims to become the top hotel-metasearch engine for consumers, particularly by offering more comprehensive solutions compared to competitors like Booking.com, Hotels.com, Expedia, and TripAdvisor.”
Trivago’s advertising costs in 2015 were 88 percent of total revenue, with a return on spending varying by region7. The company plans to raise $428 million in an initial public offering, aiming for a $5 billion valuation76.
Competing in the Crowded Online Travel Space
The online travel industry is very competitive, with Trivago facing big names like Kayak, Priceline, and Expedia8. Trivago has a 63 percent awareness in the U.S., but it trails behind Expedia (80 percent), TripAdvisor (69 percent), and Priceline.com (68 percent)8. Yet, in Europe, Trivago leads in countries like Italy (92 percent), Spain (89 percent), and Germany (86 percent)8.
Trivago focuses on comparing hotel rates and availability, not booking directly9. Up to 87% of users check hotels before booking, and Trivago is a top choice for this9. The company believes it offers a better search experience by providing a wide range of hotels.
Despite its efforts, Trivago faces challenges from bigger players in the online travel space8. It spends 88 percent of its revenue on ads8. A digital marketing expert says brand interest, as seen in Google searches, is key to success8. Trivago plans to use IPO funds to boost its ad campaigns, aiming to become a well-known brand8.
The Online Travel Booking Market is set to grow at 12.6% from 2023 to 20329. Meta-search ads have created $6 billion in value over the last decade9. Meta-search also gets over 45% of global travel site visitors, more than U.S. OTAs9.
The online travel industry keeps changing, with Trivago facing tough competition10. With travel ad spend expected to rise by 36% in 202210, Trivago must use its marketing wisely. It needs to make the most of the meta-search market to stay competitive8910.
Google’s Encroachment into the Travel Market
In recent years, Google has made big moves in the travel industry. This has raised concerns for companies like Trivago and others in the online travel space11. The rise of “mega meta-OTAs” has given these players more power to negotiate with suppliers11. Major metasearch platforms, such as Kayak, Qunar, and Trivago, are now owned by OTA conglomerates, making the industry more consolidated11.
Google’s Acquisitions and Expansion into Travel Search and Services
Google’s Flights and Hotels have grown a lot in the last 18 months11. It’s now the fastest-growing metasearch platform for hotels worldwide. Yet, TripAdvisor is still the biggest player globally in terms of volume11. Google says it wants to be a travel search provider, not an online booking portal, but its growing presence has raised concerns11.
Google has told OTAs it doesn’t plan to enter the OTA business. Instead, it aims to improve the travel experience for users11. The company believes artificial intelligence will be key in the future of travel11.
Google’s move into the travel market has also caught the attention of regulators. European governments have fined Google, Facebook, and OTAs billions of euros for illegal practices12. As competition in online travel grows, companies like Trivago must innovate to stay ahead and offer a unique user experience12.
“Google emphasizes that it aims to be a travel search player rather than an online booking portal to ‘level the playing field,’ according to Jenn Villalobos, head of travel & hospitality Asia-Pacific at Google.”11
Google’s entry into the travel market, along with industry consolidation, has made the landscape complex and competitive for Trivago1112. As Google expands its travel search and booking services, the industry will likely face ongoing challenges and changes1112.
Challenges Facing Trivago and Other Travel Competitors
As the travel industry grows, Trivago and its rivals face tough competition. Google’s travel services, with their vast data and user base, make it hard for smaller companies to shine13.
The online travel world is getting smaller, with big names like Expedia and Booking.com buying up smaller firms. This makes it tough for independent players like Trivago14. Google’s strong presence in travel search is a big hurdle for others, as it changes the game13.
Also, how people travel is changing. Hotels are focusing on loyalty programs, which can lead to lower prices on their own sites. This affects sites like Google, Tripadvisor, Kayak, and Trivago13. Trivago and others need to find new ways to stand out, build loyalty, and keep up with market changes1415.
Source Links
- https://www.vox.com/2017/2/27/14752834/german-hotel-search-company-trivago-ceo-rolf-schromgens-diversity-innovation-startup – Full transcript: German hotel search company Trivago CEO Rolf Schrömgens on Recode Decode
- https://en.wikipedia.org/wiki/Trivago – Trivago
- https://skift.com/2016/12/07/inside-story-of-how-trivago-built-a-brand-one-country-at-a-time/ – Inside Story of How Trivago Built a Brand One Country at a Time
- https://blog.osum.com/trivago-business-strategy/ – Trivagos Powerful Business Strategy Exposed – Osum
- https://skift.com/2017/03/01/trivago-thinks-it-knows-how-to-outwit-google/ – Trivago Thinks It Knows How to Outwit Google
- https://www.forbes.com/sites/greatspeculations/2016/12/16/three-reasons-not-to-buy-into-trivago-offering/ – Three Reasons Not To Buy Into Trivago Offering
- https://skift.com/2016/12/05/trivago-planning-428-million-ipo-to-help-fund-even-more-tv-ads/ – Trivago Planning $428 Million IPO to Help Fund Even More TV Ads
- https://skift.com/2016/12/15/are-trivagos-brand-awareness-numbers-inflated/ – Are Trivago’s Brand Awareness Numbers Inflated?
- https://colorwhistle.com/travel-meta-search-engine/ – How Travel Meta Search Engines Transform Travel Agencies
- https://www.warroominc.com/institute-library/blog/a-marketers-guide-to-online-travel-agencies-otas/ – A Marketer’s Guide to Online Travel Agencies (OTAs) » War Room Inc
- https://www.ttgasia.com/2016/10/21/googles-travel-push-forces-change-in-online-space/ – Google’s travel push forces change in online space | TTG Asia
- https://reknown.com/2019/05/hotel-brands-under-attack-how-to-stay-relevant/ – Hotel Brands Under Attack: How to Stay Relevant – Reknown: Marketing Strategy for Hospitality & Travel Tech
- https://skift.com/2024/04/01/how-travel-metasearch-lost-its-mojo/ – How Travel Metasearch Lost Its Mojo
- https://www.foster.com/duff-on-hospitality-law/trivago-kayak-metasearches-fareportholdings-jetblue-antitrust-sonder-corporate-travel – Online Travel Update: Trivago and Kayak take different approaches to address metasearches; Fareport Holdings drops antitrust suit against JetBlue; Sonder prepares for expected rebound in corporate travel
- https://www.fool.com/investing/2020/02/13/trivago-faces-a-challenging-2020.aspx – Trivago Faces a Challenging 2020 | The Motley Fool