Trivago CEO: Travelers head out of metropolitans areas to nature

Axel Hefer, Trivago CEO, joins Yahoo Finance's Alexis Chirstoforous and Brian Sozzi to discuss where the company is currently seeing high demand among travelers.

Video Transcript

ALEXIS CHRISTOFOROUS: Memorial Day is usually the mark for summer vacation travel to begin. And as states across the US are looking to reopen in varying stages amid the COVID-19 pandemic, it seems that there are people out there interested in wanting to travel this summer.

Here to break it down for us is Trivago CEO Axel Hefer. Axel, good to see you on the show again. So I am curious what you are seeing on your platform. Are people searching for trips? And if so, where are they looking to go?

AXEL HEFER: In the last three weeks, I would say, there has been some increase in interest. So there are more and more people looking for trips, predominantly domestic. And in the US, it is predominantly, actually, the coast where people are looking for accommodation.

ALEXIS CHRISTOFOROUS: Where are some-- if it's domestic, are there particular spots? Is it-- is it by the ocean? Or where-- where are people looking, specifically?

AXEL HEFER: Yeah, it's predominantly out of the big metropolitan areas into the nature, so to the beach. That is the biggest theme. But generally speaking, into the open away from other people. The other thing that is interesting is that there is a trend to apartments and vacation rentals, so-- so more-- more closed units where-- where you're on your own.

BRIAN SOZZI: Axel, what-- what is your business-- what will it look like after the peak of this crisis?

AXEL HEFER: I hope that we've seen the peak of the crisis. So the business completely stopped, and now there is some-- some very slow recovery. The-- what-- what we think what will happen over the next couple of years, there will be a much stronger focus on domestic and local travel.

It is completely unclear at what point in time how much air traffic will come back. So it is much more uncertain. And it also, there are a lot of travelers that feel less safe on a plane than in their own car. So-- so we do prepare for a bigger focus on local travel.

BRIAN SOZZI: Axel, it does appear, just given how the industry is trending the past few months, there is some M&A. There's some consolidation in this space that also-- it pretty much seems inevitable. Are you a buyer or seller?

AXEL HEFER: These kind of things are very difficult to predict. I think you're absolutely right. It is very clear that in crisis, there is more consolidation. And this one is-- is not a normal crisis for the travel industry. Everything has stopped.

So it's the-- the worst crisis that you can imagine. And it will take a very long time to fully recover to the pre-crisis levels. So there will definitely be less players in one or two years from now. But what exactly will happen, yeah, impossible to predict.

ALEXIS CHRISTOFOROUS: Axel, what is your company's position right now? You weathered the storm, thus far, but what's-- how much cash are you sitting on? And do you feel confident and well-positioned for the future?

AXEL HEFER: We are fortunate that we are sitting on a quite sizable cash position. So we-- we kept the proceeds from our IPO four years ago and have approximately $200 million in cash. And we, unfortunately, had to-- had to optimize our cost structure and let go some of our colleagues. So we do think that we now have a structure and a setup that allows us to pursue the opportunities that are ahead of us and are well-funded to do so.

ALEXIS CHRISTOFOROUS: Do you see-- you say you had to tighten the belt a little bit. Are you done with-- with layoffs for the time being?

AXEL HEFER: We are. So we worked really backwards and said, OK, what do we need to be, and-- and what do we need to focus on to support travelers in the recovery phase? And that destruct-- that's the structure that we've implemented already.

ALEXIS CHRISTOFOROUS: With-- with travel sort of going more domestic, how is that sort of changing your business model and your strategy as you see people's tastes changing for travel?

AXEL HEFER: So as-- as a provider of accommodation, we are-- we are in a, relatively speaking, fortunate position that as long as there is traveling activity we benefit from it. So we don't need travelers to travel internationally. But-- but it is clear that the volumes will be lower. Business travel will be-- what would be a lot lower for a very long time. And also leisure travel will be on a very low level.

So what we are doing and the current product, we-- we focus a lot more on free cancellation to-- to accommodate the-- the need for safety and also the lack of certainty whether, actually, you will want to travel in a month or two months from now. The other thing that we've started to do is we are-- we are building product-- building a product that is focused on local travel that allows you to give you more inspiration in a radius that you feel comfortable in driving.

ALEXIS CHRISTOFOROUS: All right, the CEO of Trivago Axel Hefer. Thank you so much for being with us and best of luck.

AXEL HEFER: Thank you.