Trivago, the German hotel search site that went public in December, isn't concerned about competitive threats from rivals TripAdvisor and Priceline Group, as the market is still big enough for everyone to grow.
Sales are expected to increase 45 percent to around 1.1 billion euros ($1.2 billion) in 2017, the Dusseldorf, Germany-based company said Friday, sending shares up as much as 4.8 percent in New York. Trivago spent 136.7 million euros on marketing in the fourth quarter, the majority of the 169.2 million it made in total revenue.
"We're just in the early stage of the market," Chief Executive Officer Rolf Schromgens said in a phone interview. "Competition doesn't play that big of a role. We are not Pepsi and Coca-Cola."
Online hotel bookings still account for only about a third of the overall market, he said. Yet Priceline's $550 million purchase of Momondo and TripAdvisor's aggressive advertising plans prompted Cowen and Co. analyst Kevin Kopelman to lower his recommendation on Trivago's stock to the equivalent of a sell this week. While Kopelman views Trivago's future as largely positive, he warned in a note about the "risk to the company's margin expansion plans as it fends off increasing competitive challenges."
Trivago is a meta-search provider, which means it collects prices from booking sites around the web to let customers find the best price. It then collects a referral fee when users click through to a booking site like Expedia.com, Booking.com or a hotel's own website.
TripAdvisor is Trivago's main competition for hotel meta-search. Priceline's Kayak website focuses on flights but bought Momondo Group this month to expand its presence in Europe. Chinese online travel giant Ctrip.com International Ltd. bought Scottish flight-search company Skyscanner in November, promising to ramp up its presence in hotels, too. Adding to the mix, Alphabet Inc.'s Google has been steadily expanding its own meta-search capabilities.
Schromgens emphasized Trivago's strong brand recognition in the U.S. and Europe as key to its success. Instead of having to rely on paid search advertising, three out of four bookings that originate on Trivago come from customers who went directly to the site on their own accord, he said.
Kayak CEO Steve Hafner has called Trivago "irritating." The German company advertises aggressively on TV to gain market share, and studies exactly what kind of ads perform best, a method it highlighted to public investors last year.
"The global market and the online market are growing strongly," Schromgens said. "I don't look at competitors."