U[PDATE: German hotel search site Trivago issues profit warning, shares tumble 27% premarket

German hotel search platform Trivago N.V. shares fell 27% in premarket trade Wednesday, after the company cut its guidance, saying earnings for the third quarter and full year would be lower than previously expected. The Duesseldorf-based company said it now expects full-year revenue growth of about 40%. The negative impact on revenue per qualified referral that the company discussed on its second-quarter conference 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," the company said in a statement. Trivago has an unusual business model, in that, unlike other travel websites, it does not allow users to actually make a booking. Instead, it offers travelers a means of searching for and comparing millions of hotels and room prices through its websites and local-language apps. The company earns revenue based on referrals. Customers may click on many hotels but are likely to make just one booking, at which point the company deems them a qualified referral. "Due to the speed with which the above RPQR slowdown unfolded we were unable to pull back planned television advertising spend quickly enough to prevent overspend. As a consequence, we will have lower Return on Adverting Spend (ROAS) in July and August and adjusted EBITDA margins in those months have been negatively impacted. Note that we do expect ROAS to stabilize over time with an adjustment of brand marketing expenses," said the statement. Shares have gained 27% in 2017, while the S&P 500 has gained 9.8%.

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