Travel prices ‘will continue to go up’ due to staffing issues: Trivago CEO

Trivago CEO Axel Hefer joins Yahoo Finance Live to discuss company earnings, the state of the travel industry, labor shortages, the demand for travel, consumer spending, and rising travel costs.

Video Transcript

BRAD SMITH: Welcome back, everyone. As the world deals with an economic slowdown, the demand for travel has remained relatively high as European booking company Trivago says they are positioned and prepared to serve travelers in this new environment.

Joining us now, we've got the CEO of Trivago, Axel Hefer. Axel, always a pleasure to get some of your insights from the business. And thanks for joining us here today. First and foremost, what are you seeing in the travel demand right now? We know so much of the spending from consumers have shifted from goods into services, but this is for the summer time period. Do you see that sustaining?

AXEL HEFER: Yeah, I mean, we clearly see a very, very strong summer. That's for sure. And you can see that a lot of people have actually saved their money during the pandemic and also were looking forward to the summer trip. On the other hand, you also see that they are-- there is a fundamental imbalance in quite a few sectors in travel. So you have labor shortages in a lot of the areas in transportation in particular, but also in the hotels as such. And there's a lot of demand. So that will have to balance over time.

BRAD SMITH: What are you seeing in corporate travel right now specifically? Because we had seen some warnings, and there was a report from "Wall Street Journal" even about how Microsoft, one of the largest tech companies in the world, of course, is going to be looking across where they're cutting or monitoring travel spends.

And there's kind of this need to go basis that might come into play for many companies. And so that's where the margins typically come in from. For Trivago, where would you see that start to show up in the business? And what adjustments would need to be made?

AXEL HEFER: And business is a very small segment for us I mean, we are helping travelers to compare prices and save money. And unfortunately, a lot of the business travelers are just booking with their corporate travel agency. So but I do agree. I mean, the economic outlook is deteriorating. And in times like that, it is very likely that companies will keep their costs and optimize their costs and reduce non-necessary travel.

JULIE HYMAN: Axel, it's Julie here. You all have a price comparison tool. And I'm just curious how-- if you've seen a big uptick in demand for that and whether people are able to find lower prices right now with, as you alluded to, all of the price gains we've seen across travel.

AXEL HEFER: Yeah, so I mean, we've seen some. What we've seen this summer, for example, I mean, we are running a TV campaign pretty much everywhere in the Northern Hemisphere in Europe and in the US. And the message of that campaign is very clearly, we compare hotel prices for the same room and help you to save money.

And it's performing very, very well, which is, for us, an early indicator of the behavior that we are expecting to see over the next 6 to 12 months because prices will go up, so the factor costs will go up. And hotels and airlines and airports will have to increase salaries to actually staff up their teams, which will then also ultimately be passed on to the travelers. So we think that our service is actually extremely relevant and more relevant than it has been to the traveler in the last 5 to 10 years.

JULIE HYMAN: So just to make sure I understand you correctly, Axel, we just had, for example, here in the United States, a consumer price index number today that showed a little bit of moderation in gains across the board of prices. It sounds like what you're saying for travel, we are definitely not near any kind of trough or slowdown in the price increases that we have seen because of the strong dynamics.

AXEL HEFER: I think that the costs will continue to go up. And so because you see-- and it depends a bit where you are, whether you are in the US or in certain European markets, and what exactly you offer, but you see a fundamental shortage of people in travel and hospitality.

And the reason is that a lot of companies actually reduced their staffing during the pandemic and are now struggling in very tight labor markets to stop up again. And so they will have to pay up, and that cost will be passed on. Whether that is net positive or net negative, given the current squeeze that you see in certain destinations, that is difficult to say, but generally speaking, we think that prices will go up.

BRAD SMITH: This is also a business that has a heavy deal of advertising spend that you have to account for as well. And at a time where we do know that many companies might be pulling back on advertising, perhaps some of the travel, leisure, experience, [INAUDIBLE] economy companies can't afford to pull back on that. And so what are you monitoring? What are you seeing there?

AXEL HEFER: I mean, right now, everybody is basically keen on seeing the recovery and basically capturing the attention of the traveler now in the trips that everybody was looking forward to. I think it's likely that there will be some softness going forward, but it will be very unevenly distributed.

So, for example, if you are hit by energy cost increases and your disposable income is coming down, you will still want to go for a trip. So you will compare prices more, and you might save on transportation and allocate a bigger portion of your budget to the accommodation, which you can't save on.

JULIE HYMAN: Axel, thanks for being here. Axel Hefer is Trivago CEO. Thanks so much for the time today. I appreciate it.