trivago Business Model | How Does trivago Make Money?

Trivago is a hotel search website whose primary objective is to reimagine how people compare and book hotels online. 

Trivago Hotels enables advertisers to grow their businesses by providing access to a big customer base that visits their platforms via a website or mobile application.

Trivago was founded in 2005 in Düsseldorf, Germany. Three university buddies founded the hotel aggregator: Rolf Schrogmens, Peter Vinnmeier, and Stephan Stubner. As is the case with most start-ups, the business’s initial foundation was established in a garage.

Additionally, one of the 2006 founding members, Stephen, chose a career in education, and Malte Sievert joined the founding team. CEO Rolf Schrogmens, CFO Axel Heffer, and COO Johannes Thomas comprise Trivago’s executive team.

Trivago business model is multifaceted, with two distinct client segments essential for the site to function: hotel/lodging brands that advance their offerings on the web and customers who contrast offerings and costs before making a purchase decision.

What is trivago?

Trivago is an online hotel booking platform that presents listings from over 100 different travel-related websites and aggregates them. 

Visitors to Trivago’s partner sites can browse over 2.5 million hotels and make bookings directly (including platforms like Airbnb or Booking.com).

trivago Business Model

Trivago’s business model is built on the Cost-Per-Click (CPC) concept. As a result, the corporation earns money each time a user clicks on one of its listings. 

The company also sells a subscription service (called Business Studio PRO) to hotels signed up on its platform.

Trivago was founded in 2005 and headquartered in Düsseldorf, Germany, has grown to enormous success. Expedia later acquired a majority share (61.6 percent) in the company for $632 million in 2012. 

Trivago became the first German startup to be listed on the Nasdaq four years later.

Company Nametrivago
Company TypePublic
FoundersRolf SchrömgensStephan StubnerPeter VinnemeierMalte Siewert
ProductTravel, Hotel, Information Technology, Marketing
OwnerExpedia Group
Founded DateJanuary 2005
HeadquarterAmsterdam, Netherlands
Location ServedWorldwide
Websitehttps://www.trivago.com/

How Does Trivago Work?

trivago is a hotel booking platform that aggregates listings from more than 100 different websites.

The company operates a metasearch engine, which scrapes content from other websites and displays it on its page. Many organizations, like Indeed and Zillow in the job and apartment listing space, have used similar methods.

The number and variety of offers available to consumers are significantly enhanced. Trivago scrapes websites such as Booking.com, Agoda, Airbnb, and Expedia.

Trivago also ensures that only the best listings will be returned for each query apart from listing gathering. 

The service accomplishes that by a) allowing for more precise filtering (e.g., by ratings, scores, distance, or price range) and b) applying machine-learning algorithms that identify best listings and start recommending them.

The payment or quality of the stay is not the responsibility of aggregators like trivago. It remains the responsibility of the hotel or booking site to do this.

Trivago’s platform connects travelers to more than 2.5 million hotels in 190 countries. There are approximately 5 million visitors to the website each month.

Trivago Business Model

Trivago is a pricing comparison website where hotels and brands can promote and sell their products and services.

Trivago charges for these services on a Cost-Per-Click (CPC) basis.

Additionally, it provides free and paid versions for firms looking to market their products on the Trivago platform.

Trivago offers various products and services, including a hotel search, a mobile application, a hotel manager, a pro hotel manager, and connect prices. 

trivago Business Model

Additionally, Trivago offers various indexes and rankings, including the Trivago Rating Index (tRI), Travel Advice Calendars, and the Trivago Hotel Price Index.

Trivago’s brand is abbreviated as ‘Trivago’ in lowercase.

Trivago’s Business Model includes the following goods and features:

1. Search Hotels

Trivago’s Hotel Search Page is available in more than 50 countries worldwide. The world’s largest online hotel search engine indexes over 1 million hotels and 250 booking sites worldwide.

2. Trivago Mobile App

Trivago’s hotel search software is also accessible as of Android and iOS applications.

3. Trivago Hotel Manager

Trivago’s business-to-business platform enables hoteliers to promote their features and amenities on the Trivago platform.

4. Hotel Manager Pro

It is a subscription-based version of Trivago’s Hotel Manager software that enables hoteliers to configure and manage their listings with access to competitor rate statistics.

5) Rate Connect

Trivago’s Hotel Manager Tool enables hotels to change their availability and current rates.

How Does Trivago Make Money?

It is important to note that trivago maintains a single focus on surfacing the best hotel rates instead of competitors like Booking.com or Kayak.

Several other aggregators have begun introducing flights, activities, and travel insurance as part of their services.

The company intends to diversify its business to put itself above competitors like Google, which have begun to cannibalize aggregators’ companies by advertising their goods in search results.

trivago Business Model

The trivago website, on the other hand, focuses solely on hotel bookings. The company believes that specializing in a specific sector will provide an excellent user experience, surface the top results, and build a strong brand independent of Google.

The business model of Trivago stays consistent with this fundamental strategic objective. 

Trivago earns money in two ways: by charging click-through fees and through subscriptions. Let’s look at them in more detail in the sections below.

Cost Per Click Model

trivago runs on a cost-per-click (CPC) basis. Whenever someone clicks one of the company’s advertiser listings, the company earns money.

Referral revenue is what the corporation refers to in its financial accounts. Referral revenue accounts for the majority of the company’s revenue.

Platform advertisers, including Expedia, Booking, and Airbnb, can reach consumers in the following ways:

  • As a first step, they set up a budget for trivago advertising.
  • A second step is to determine the search phrases they wish to rank for, such as “London” or “Barcelona,” and create listings for these categories/cities.
  • Advertisers then begin bidding on these terms. Advertisers who place more bids on a certain term are more likely to appear higher in search results.
  • Fourth, when a user clicks on a hotel listing, the budget is recalculated no matter where he is redirected to.
  • Afterward, Trivago’s algorithms display the most attractive deals, that is, those resulting in the most clicks and bookings.

Subscriptions Fees

The second source of revenue includes a monthly fee for access to Business Studio PRO, even though it only represents a small part of the company’s revenue.

Hoteliers will benefit from Business Studio. It allows them to compete against Booking.com, Agoda, and Airbnb by allowing them to:

  • You can upload and maintain your listings.
  • Analyze how many impressions and clicks their listed properties receive.
  • Guest rating summary received
  • Promote special offers
  • Learn more about visitors so you can target them better

Business Studio’s basic edition is free, but clients will need to pay for access to some of its more sophisticated features. You can display any regional information, advertise hotel activities, and present local news with the PRO features.

Trivago will provide a price quote upon request. The firm reports that the PRO package results in an average of 21% more clicks and 45% more reservations.

What is the Funding and Valuation of Trivago?

Crunchbase reports that Trivago has raised $55 million in venture funding over three rounds. Howzat Partners, Global Founders Capital, and Insight Partners are notable investors in the company.

Expedia acquired a 61.6 percent stake in Trivago for $564 million in an all-cash deal valued the company at roughly $915 million. When Trivago created its first public offering in 2016, it was valued at about $4 billion. The company raised another $287 million in its first public offering.

Its valuation fell to $700 million by the end of the last decade, and shares were trading for $1.98 (its initial public offering price was $11.20).

What is the Revenue of Trivago?

The coronavirus outbreak has decimated the travel industry, and the company’s sales decline over the last two years. 

Trivago’s revenue fell to $914.5 million in the fiscal year 2019, down 8% from the previous year. The company earned $18.76 million in profit during the same period.

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Success Story of Trivago

trivago was started in 2005 by Rolf Schrömgens (pictured), Stephan Stubner, Peter Vinnemeier, and Malte Siewert in Düsseldorf, Germany.

Schrömgens, Stubner, and Vinnemeier (who became friends during their studies at the German business school HHL in Leipzig) had already established themselves in the German startup scene before starting trivago.

In 1999, during the height of the dot-com boom, the trio established Amiro.de, a platform that enabled users to compare pricing on various products. 

They merged with ciao.de, another pricing comparison platform, shortly after the company’s start.

Ciao went on to raise nearly $20 million in venture funding in the months that followed. Regrettably, the merger and investment diluted their shares, leaving them with almost little to show for their efforts.

Soon afterward, the company’s three founders departed. Schrömgens then embarked on another venture, which finally failed. He then dabbled in academia but left shortly after completing his Ph.D.

Without alternatives, he returned to his hometown of Düsseldorf to take over his family’s restaurant business. He was virtually bankrupt and could not pursue any important concept.

Fortunately for him, that was not the conclusion of this story. Schrömgens then taught himself to program after quitting ciao. 

He experimented with different software projects alongside his university classmates Stubner and Vinnemeier.

And, as luck would have it, one of those projects grew into trivago. The company was founded when several other hotel booking websites were either about to launch or had already begun. 

The company’s role models became Booking.com and Hotels.com, which have grown to become juggernauts in the tourism business.

One year after the trio’s launch, Siewert was joined by the original team. He obtained substantial experience in the financial sector by assisting institutions such as HSBC and Merrill Lynch with M&A transactions.

trivago swiftly gained traction in Germany as the country’s first local booking site. Two years after its formal introduction, the company’s website received more than two million monthly visitors.

And this time, the founders took note. This necessitated being highly resourceful in terms of both spending and raising funds. trivago raised less than $2 million in venture capital funding throughout the first five years of its existence.

The emphasis on resourcefulness would ultimately prove to be the correct choice. Expedia acquired 61.6 percent of trivago in 2012 for $632 million in cash and common shares. 

Once again, Schrömgens and his crew would maintain their ownership. 

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Even after the investment, the founding team would retain more than 30% of the business.

trivago would go on to develop into new countries and areas under Expedia’s leadership. 

The company’s sustained expansion resulted in its initial public offering (IPO) in 2016. Apart from raising $287 million in its initial public offering, it became Germany’s first company listed on the Nasdaq.

One of trivago’s success formulas is based on how it treats its staff. The organization is not structured hierarchically and allows employees to choose how many vacation days they use each year. 

The company relocated to a new state-of-the-art headquarters in 2016, with architecture showcasing several of the company’s ideals.

Second, to erode its reliance on Google and boost brand awareness, the corporation scored significant advertising victories. Its motto, “Hotel? trivago,” became one of the company’s most recognizable features.

However, maintaining public investor satisfaction and continuing on the growth path might provide its own set of challenges. 

Taking Google as an example, the search engine behemoth launched Hotel Finder (later renamed Google Hotel) in 2012, a metasearch engine similar to Trivago that lists hotels and other accommodations.

As D-EDGE Hospitality Solutions points out, Google’s market share in the hotel search business has grown from 0.2 percent in 2012 to 52 percent in 2019. 

Similarly, trivago has indicated in its revenue reports that this has a significant impact on its business.

Additionally, the company was charged with violating Australian consumer laws for making false promises regarding the pricing of its hotel rooms – both on the company’s website and in television commercials.

After years of success and volatility, Schrömgens chose to leave the company he founded. He delegated his CEO duties to Axel Hefer, who joined the company as CFO in 2016. Schrömgens resigned from his job in December 2019 and joined the advisory board of Trivago.

trivago now employs over 1,000 individuals. Its website and mobile application are used by over 150 million people each month. 

There are currently over 5 million listings on the company’s 54 regional websites, accessible from more than 190 countries.

Key Takeaways From Trivago Business Model

Trivago is a hotel search engine headquartered in Dusseldorf, Germany. It was founded by three university buddies who recognized a void in the internet hotel search business.

Trivago earns the majority of its revenue through cost-per-click (CPC) advertising. When a consumer clicks on a hotel listing on Trivago’s site, the hotel pays a modest commission to Trivago.

Trivago earns a substantially smaller percentage of money from their largely free Business Studio offering. The tool teaches hoteliers how to increase Trivago bottom line revenue by optimizing ad placements.

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