Shares of Trivago (TRVG - Free Report) were down more than 23% in early morning trading Wednesday after the hotel search website issued updated guidance and warned investors that third-quarter and full-year results would be softer than previously expected.
Based on this new understanding of its performance, Trivago now anticipates annual revenue growth to be around 40%, while adjusted EBITDA is now expected to come in lower than in 2016. The company cited a slowdown in its all-important revenue per qualified referral (RPQR) figure for the weakened outlook.
Unlike other travel sites, Trivago users don’t actually make their booking on the platform itself. Instead, site visitors compare offers from a number of different hotel providers using Trivago’s search engine, and if they end up booking something, Trivago gets a referral fee.
Company management had previously warned about a pullback in RPGR, but today’s note mentioned that the “anticipated negative impact on RPQR that we discussed on our second quarter 2017 earnings call has been more significant than previously expected.”
“As a result of this impact, we have algorithmically pulled back our performance marketing activities more than previously anticipated, which has resulted in a further slowdown in traffic and revenue growth from those channels,” Trivago added.
On top of these two issues, Trivago also said that currency headwinds and tougher year-over-year comparisons—due to exceptionally strong results during the summer of 2016—are to blame for its cautious guidance.
“Although the above factors represent near term challenges, we remain unwavering in our belief in the medium to long-term potential of the business,” the company concluded.
The news comes just one day after stocks in the travel industry were hit by the news of Hurricane Irma. As the Gulf region begins its recovery from Harvey, Irma—a Category 5 storm currently moving through the Caribbean—threatens to wreak havoc in the area and further disrupt the end of the summer tourism season (also read: Hurricane Irma Hammers Travel Stocks).
Trivago is currently a Zacks Rank #4 (Sell), and its weakened outlook could initiate further negative earnings estimate revisions, which would move its rank even lower.
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