Ep. 103: Matthias Tillmann - Managing Industry Disruption & Crisis Management

Contact Matthias Tillmann:
https://www.linkedin.com/in/matthias-tillmann-58997a53/


Trivago: https://www.trivago.com/


FULL EPISODE TRANSCRIPTAdam: (00:00)
 Welcome back to Count Me In, IMA's podcast about all things
affecting the accounting and finance world. I'm your host, Adam
Larson. And I'm here with episode 103 of our series. Today's
expert guest is Matthias Tillmann, CFO of Trivago. In this
episode, he speaks with Mitch about how COVID-19 crisis impacted
the travel industry and speaks to the various crisis management
plans he implemented to maintain operations. For an interesting
discussion around business continuity, technology, enablement,
and finance in the travel industry, keep listening as we head
over to the conversation now.

Mitch: (00:42)
The COVID-19 crisis disrupted the global travel and hospitality
industry immensely, and I know it affected everything from air
travel to hotel accommodations. So in your line of business, what
were the immediate steps that you took to ensure business
continuity at Trivago?

Matthias: (01:01)
Yeah, that is right, the COVID crisis had a huge impact on our
business. And let me start with giving you an idea of the
magnitude of that effect, and just for context, we are an
accommodation  meta search platform. So comparing price of
hotels, apartments, vacation rentals, and other accommodations on
this, so we're not active in the air space, for example. So while
we run and operate over 50 countries, only a minor part of our
business is in Asia and we have no presence in China. So when the
virus first broke out there, we got an idea of what this could
mean to our business, but we did not see it immediately in our
numbers. That quickly changed when infection started to spread in
Italy, end of February. Within a couple of days we lost all of
our revenue in that country, and as the virus spread throughout,
Europe first and then Americas, our revenue declined more than
95% year over year by end of March. So why, I'm  telling you
this, we did not have much time to react. Our cost structure pre
COVID was roughly 80% variable, which is predominantly marketing
and 20% fixed costs. So  to preserve our cash, we first
focused on cutting our marketing spend and on the performance
marketing side, you can do that immediately as you just lower
your bids  or stop campaigns altogether. On the other hand,
on the brand marketing side, it is a bit more tricky. So we
usually have part of our budget committed with certain TV
channels, and you also need to brief the channels and commit
budgets a bit in advance to go through clearing and secure the
desired ad products, et cetera. So we started right away to
cancel commitments and negotiated to post campaigns. And that was
very important. As every dollar on TV advertisement obviously
would have been wasted and might've had a negative effect as
during a global pandemic countries and countries being in
lockdowns. The last thing you want to do is to promote travel. So
after we had taken care off of the 80% of our costs, we started
to analyze our overhead structure as well. We are based in
Germany. So as an immediate action, we utilized short labor, a
government aid scheme where people work reduced hours and the
government subsidized the salaries. This bought us some time to
think about the implication of the pandemic, not only for us, but
for the overall industry for the next couple of years and then we
spoke to other industry participants to get different
perspectives and try to understand how the action would impact
the dynamics and all that occurred. And based on that, we formed
a hypothesis around different phases of recovery. And by doing
that, it became apparent that we cannot manage, through the
spirit by just putting people on short labor, but we needed to
restructure the business. That means reducing complexity,
streamlining operations, and certainly also letting some of our
talents go.As a consequence we closed or sold our remote offices
and moved to everybody to our headquarter in Dusseldorf. And we
reduced our headcount. but on the other hand, brought back
everyone from, from short labor. And then lastly, I would mention
that on the B2B side, we proactively reached out to our partners
and implemented payment plans for those being in a difficult
financial situation. And, that was very important because, at
that moment we had a high amount of outstanding accounts
receivable, but as we acted as a partner of trust and we
collected almost all of the receivables, by the end of the second
quarter, and as a result of all these measures, we did not burn
any cash over six months period since the outbreak of the
virus.

Mitch: (04:59)
So it sounds like you had to, you had to take a lot of steps
upfront, but I'm just curious if you had any crisis management
plans or any of these ideas in place prior to actually having the
change the business.

Matthias: (05:13)
Yeah. We have operated in a very dynamic environment over many
years and despite our global footprint and, a well known brand,
we are still a small company, thus we always had to adapt change
and innovate in order to be able to compete with large global
companies. And this, I believe has fostered a very agile culture.
So we always had to prepare for big changes and learn to stay
flexible and adapt fast. So when the crisis hit, it did not take
us long to adapt, and also, we also have a relatively simple
business, with key leavers and product marketplace and marketing,
and the biggest short-term, is clearly marketing. I mentioned it
before. however, during, even during normal times, our marketing
channels can be very volatile. And so we constantly reassess what
we are doing there, and we always keep the flexibility to adjust
quickly. So in a way we are at any time prepared for different
scenarios, on the fixed cost side, our largest cost category by
far is personnel and related costs. And, we are investing in
people, thus we constantly have to evaluate how to allocate this
precious resource. And when the crisis hit, we had to reassess
our investment and projects outside of our core. And based on
that, we came up with a restructionplan. So in a nutshell, I
think we almost always operate, in an environment where we do
have, a plan for all kinds of different scenarios and didn't need
a specific one for this crisis.

Mitch: (06:54)
Well, that's great. And I know, you know, you've mentioned talent
a few times now, already in this conversation, and I'd like to
kind of talk about that a little bit further. You know, obviously
you had urgent financial needs going into this crisis and you
certainly had to adapt the business, but how did you really
balance that with your desire to maintain the top talent in your
organization and also, you know, address the concerns of the
talent and the organization?

Matthias: (07:18)
Yeah, absolutely. So our first reaction was to focus on
preserving our cash. and that means that we, cut all unnecessary
costs and, came up with a reconstruction plan, as I mentioned,
and have all partners with flexible payment terms. Internally we
were very open-ended and transparent about this. So for example,
we established weekly all hands Q&A's where we as management
gave updates on our view of the industry, the implications for us
and how we need to react. And the feedback from our talents was
very positive on that, and I believe that the transparency about
how we are approaching the crisis increased the acceptance of our
measures. And, just to remind you that we had to take some very
difficult decisions, like the headcount reduction. On the other
hand, we clearly communicated as well that we will continue to
invest in key...