Trivago CEO: Travel demand still strong but there are 'early signs' of slowing

Trivago CEO Axel Hefer joins Yahoo Finance Live to discuss earnings, travel demand, top destinations, and consumers looking to cut costs amid inflation.

Video transcript

- Shares of Trivago are going on quite the trip today. Up 16% after seeing revenue in the third quarter rise 33% year over year, but warned that high interest rates and inflation will continue to impact consumer spending. Trivago CEO Axel Hefer joins us now. Axel, always a pleasure to speak with you on the back of earnings here. Look, let's dive into some of the results here and some of the trends that you're seeing. If there's one catalyst that really sticks out to you from the quarter, what would you pinpoint?

AXEL HEFER: I mean, the quarter showed very strong demand, as we expected. People want to travel. And it's a basic need from our perspective and, also what we've seen in the pandemic. And you've seen that the demand was very strong. Prices were strong. And that is, obviously, a good combination for us as we compare prices.

- And break it down for us a little bit, Axel, where you are seeing demand both geographically and in what kind of travel.

AXEL HEFER: Yes. So the Western markets were strongest. In Asia, it's obviously very different market by market. But generally speaking, the recovery has not been as strong as in Europe and in Americas. Kind of travel. I mean, a bit all over the place. So our top destination worldwide is London. So the big metropolitan attractive cities.

But then you've also seen in the US a lot of demand for Orlando, for Anaheim. So for the Disneyland trips, family trips. Beaches were very popular. So, really, I would say very, very broad demand. And all the trips that you couldn't do during the pandemic people wanted to do now.

- Axel, Brian Chesky over at Airbnb talked a lot about on his earnings call last night a little bit of slowdown in the holiday quarter. Are you seeing that?

AXEL HEFER: No. I mean, the third quarter was very strong for us. I mean, what we are seeing right now that they are first signs of a change in consumer behavior, which is exactly what you would expect. I mean, the inflation is hitting consumers pretty much everywhere in the Western world. And what we expect for next year-- and we see is early signs of that-- are basically three things. One is that people are reducing their length of stay. So trying to save some money by staying for one day less.

And there we see some early signs in Europe in particular. You do expect people to actually go to different destinations where either transportation is cheaper or the destination overall is cheaper. And, again, we start to see that in particular in Europe. For example, Morocco is becoming more popular, which is a very attractive destination, but usually not on top of everybody's list. And then the last thing is that you expect people, obviously, to compare prices more if things are getting more expensive. And that's exactly what we do. And we also see there an increase in activity.

- What are the types of stays that you're seeing people lean into, especially as they are comparing prices? And where potentially are they beginning to push back on some of those prices?

AXEL HEFER: Yeah. I mean, the types of trips-- the top destinations are actually still very similar. As I said, I mean, London worldwide and the US, New York, is actually on top of the list. But we do see that people start to move away from the top and most expensive destinations to more secondary destinations to still have a good break and to take some time off without sacrificing on the experience, but saving some money.

- Axel, we're trying to just tie a lot of pieces or pieces of the economic puzzle together. So we had Estee Lauder out with earnings this morning noting a slowdown in travel retail and specifically called out Asia. What are you seeing in your business in terms of international travels to the US and then also in Asia specifically?

AXEL HEFER: Yeah. Asia is very difficult to comment on because the situation in Asia is very different market by market. I mean, generally speaking, we see some recovery, but very different. Japan, for example, we've seen a strong increase in Q3. But it's difficult to comment in general. Overall, the US is obviously in a specific situation given the strength of the dollar. So traveling from the US to Europe in particular got a lot cheaper. And so we see a lot more demand from US travelers for the top and most attractive European cities like London, Paris, Rome, et cetera. The other way around, obviously, got a lot more expensive. And you can also see that.

- We've had some CEOs classify this as the golden age of travel. That coming from the Hilton CEO. While we heard from Airbnb last night that for crossborder travel, the return would be choppy moving forward from here. From your purview, is it more choppy than it is kind of golden at this point in time, especially looking across some of the international destinations that you were just mentioning a moment ago?

AXEL HEFER: I mean, it's difficult to say. To be honest, I think my view is somewhere in the middle. I do think that people will continue to travel. And I do think that the spending for traveling next year will be up from this year. On the other hand, I also do expect travelers to cut back on the nights that they stay in hotels to save some money and to compensate for the inflation that you have on travel costs. So yeah. Not a bad market. I mean, the market will be up next year. But not a gold market either.

- Not a bad move in the stock price here today in reaction to earnings here. We've seen them moving higher and holding on to some sharp gains as the rest of the market is waiting for the Fed. We're appreciative of the time, as always. Trivago CEO Axel Hefer. Axel, thanks so much.