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You can’t catch a data advantage

Trivago's Malte Siewert has a clear warning for the consumer travel sector: natural data advantages make the first firm to scale impossible to catch.

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You can’t catch a data advantage

Malte Siewert gave the standout talk at the inaugural Hotel Technolgy Forum, held in Berlin earlier this month. Malte is one of the three co-founders of Trivago. He whizzed through the explosive growth of his meta-search juggernaut, now valued at $4Bn. And gave a clear warning to companies entering the consumer travel market: natural data-advantages make the first firm to scale impossible to catch.

The value of focus

The team's initial goal was to solve a wide range of consumer travel issues. The first Trivago site offered community, vacation rentals, advice on destinations, hotels and more. During year one the complexity of a sprawling website was creating a never ending stream of bugs to fix. The boys yearned for a simpler site. Hotel bookings were driving half of revenue so they took a gamble and chose to relaunch with a focus purely on the hotel vertical. The clearer proposition - your ideal hotel at the lowest rate - proved an instant hit and rather than halve commissions, they doubled within a month. It was a key turning point for the business.

Tight cash management

The average billion dollar tech unicorn raises over $50M. Trivago managed to reach that scale on a single investment of just $1M. A key reason for that was their ability to use Google as a driver of traffic. Updates in the Google algorithm have since reduced the ability for companies to piggyback on their audience. It’s a whole lot harder to ramp traffic today.
The team were pragmatic and ran a tight ship - teaching themselves programming and self-guiding their office furniture.

Copycat products don’t work

An essential part of their success has been a relentless test, learn and iterate process. The team are always looking for new ways to drive traffic and optimize the site conversion. It’s a data-heavy game and with every additional day of experience they were gathering more data and further improving the business.

“In consumer travel the more scale the better. You get data and you learn from it. Then you get more data, learn and improve again. A copycat product will miss out and never improve at the speed of the first company. I feel sorry for copycats.”

Clearly this is one of the reasons why the OTAs have it so good against hotels. They have data-scale that hoteliers cannot match. Booking.com’s ability to test, learn and iterate is far beyond a mid-sized hotel group that lacks statistical significance for AB or multivariate testing.

The future for Trivago

To date Trivago has focussed on rate comparison. In the future the firm will invest more in helping guests find the perfect hotel. The team believe there’s hidden value in solving for personal-fit. If some people would pay £100 more for a certain property, then let’s help them find that property and direct others towards their own perfect-fit.

The ambition of removing deadweight loss from the hotel market is a bold one. By most measures the hotel industry is pretty efficient today - especially as rates are dynamic and already offered to distinct consumer segments at different levels (AAA discounts, loyalty-rates etc.). However improved personalisation would theoretically optimize the supply/demand equilibrium. One thing's for sure, the Trivago team are world class. They’ve shown an ability to gather vast quantities of consumer data and us that behavioural insight to constantly test and improve at scale.

The Hotel Technology Forum, Berlin was a conference organized by Ullrich Kastner and the team at MyHotelShop Speakers included Johannes Reck, Founder of Getyourguide, Simon Lehmann, President of Phocuswright and Jan Sammeck, Director of E-Commerce, Steigenberger Hotels. We’re already looking forward to the 2018 event.

About The Author

The Triptease Platform is built to help hotels take back control of their distribution and increase their direct revenue.

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