Trivago Feels Scammy

Because multiple intermediaries are involved consumers have complained that even completed bookings end up not showing up as valid at the property they intend to stay at. This is probably just a transaction processing hiccup but it still casts doubt on the stated goal of Trivago as being to “streamline and enhance the booking process.”

It’s also worth noting that the major chains including Marriott, Hyatt and Hilton have started to lobby for industry changes to counter the consolidation that both Expedia and Priceline have promulgated on hotels and consumers. As these industry giants wake up they may become more aggressive at building their own online consumer relationships and booking technology.

For a user, Trivago feels too much like a shell game to be reliable. You can get the same results using normal Google search. Google allows you to put in parameters just like Trivago. Google’s results are not perfect either but clicking through often led you directly to the hotel booking site and not yet another intermediary like booking.com.

In the near-term none of this hurts Trivago since they get paid for all those clicks to try and find a good deal. In some ways if the site worked better they would make less money. But their goal of “building a consumer brand” requires some different success factors than getting clicks on phantom hotel offers.

Recent Results & Valuation

Results have been good over the past several years and in their first reported quarter of 2017. (Even acknowledging that related-party Expedia contributes substantially to this growth.)

Guidance for the full year 2017 is for growth of 50% which will put revenues over 1.1B Euros. EBITDA guidance is for a slight increase over 2016. Their stated long-term goal for EBITDA is 25% of revenues.

When we first wrote up Trivago we pegged the IV at $34/share. The only factor in the Quick IV model that looks like it should be adjusted is the P/E multiple. Unless they can actually improve the user experience and dial in better data they will always be at risk from someone like Google simply launching Google Hotels with a decent UI on their already-good data.

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Disclosure: We do not have any vested interest in the shares of this stock at the time of writing and publication. We may however take a position post publication and are not under any obligation to ...

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