TRIVAGO (TRVG)

[eastunder]

TRVG

November 1, 2022

Dear Shareholders,

The past few months have given us a better view on the “new normal”. The pandemic appears to be behind us as high immunization levels – achieved both through large-scale vaccinations and mass recovery from COVID-19 infections – have eased the impact of the pandemic on consumer behavior and travel activity in most parts of the world. We have seen a significantly improved summer business in our core Western markets compared to prior year, and believe that travel seasonality this winter will be more in line with what we experienced prior to the pandemic.

Throughout the summer, we have observed a significant increase in average price levels for hotel rooms. We believe that geopolitical conflicts and disruptions, which have led to higher energy prices, are likely to continue for the foreseeable future. We anticipate that this, when combined with the effects of labor cost increases, may continue to result in increases in consumer prices, including average daily rates for hotels. In the third quarter of 2022, we saw first signs of consumers attempting to mitigate this effect through searching for more affordable destinations and accommodations as well as by reducing the length of their trip, especially in our Developed Europe segment.

We believe that this trend is likely to continue in 2023 as inflation leads to consumers having lower real disposable income. While this may result in lower traffic volumes, we continue to believe that our value proposition will be highly relevant for consumers around the globe and that we will be able to benefit from consumers’ greater focus on cost saving and their need for price comparison.

trivago in Q3 2022

The strong start of the summer season in the northern hemisphere continued throughout the third quarter of 2022, and as planned, we increased our branded marketing activities during this period. Our new television advertising creative, refocusing on price comparison, performed very well and led to a healthy growth in our branded traffic to our platform.

Overall, competitive dynamics in performance marketing channels, including our own auction, intensified during the summer as many players in the online travel industry appeared to have focused on gaining traffic share. While we benefited from this increased competition and have experienced a very strong auction during the quarter, these dynamics have also resulted in higher costs in some performance marketing channels in certain markets. We maintained our disciplined marketing approach and continued to focus on high-quality traffic at the expense of more traffic volume to maintain profitability targets that we believe create long-term value.

In the third quarter of 2022, we generated the highest quarterly adjusted EBITDA in our history. We are proud of this strong operational performance, which is a result of our continued cost discipline, increased marketing efficiency and recovering travel demand. However, the macroeconomic outlook has worsened as high inflation and rising interest rates continue to weigh on consumer sentiment. This was also reflected in declining equity markets. We performed our annual goodwill and indefinite-lived intangible assets impairment test which resulted in an impairment charge of €100.4 million, driving the net loss of €67.1 million for the quarter.

In the third quarter of 2022, we have made significant progress on long-term projects:

We have completed the migration of our organic search pages to our new front-end infrastructure, reducing complexity and laying the foundations for further optimizations going forward.

We have launched first tests to significantly improve our coverage of directly bookable hotel rates across our platform.

In a company-wide effort, we have reviewed our company values and launched an updated set of values, providing more focus and guidance while preserving our way of working and collaborating.


Q4 2022 and 2023 outlook

For the fourth quarter 2022 and 2023, we expect consumers to partly mitigate the effect of higher accommodation prices by reducing the duration of their trips as well as by choosing cheaper accommodation options. As a result, we believe accommodation price comparison will become an even more important element in consumers’ travel planning. Going forward, we plan to remain disciplined with our expenses, both for marketing campaigns and in respect of our fixed costs, to enable us to fully leverage our value proposition in this more challenging environment while still delivering robust operational results and strong positive cash flows.

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