Travelzoo Q3 2015 Pre-Earnings: APAC Business Reacquisition And Management Changes In Focus

Travelzoo (NASDAQ: TZOO) is slated to release its Q3 2015 earnings on November 3rd. After a weak performance in 2014, the company started 2015 on a more hopeful note. Though the company still reported a year-on-year decline in revenues, its new hotel booking platform has started generating interest and its search traffic showed signs of increased monetization. Travelzoo is also trying to get rid of its voucher format for local deals and currently focusing on demand-based live deals. The company has increased marketing spend and has consequently witnessed an increase in its user base and increase in mobile downloads. Travelzoo has recently repurchased its Asia Pacific (APAC) business to increase the reach for its hotel platform. Also, on account of several changes in its products and geographic focus, Travelzoo has announced some changes in its top management.

In Q3 2015, Travelzoo expects the year-year decline to continue due to the ongoing transition of its products and services, loss of certain vacation package revenues, and adverse FX impacts. The company plans on an additional $500,000 quarter-over-quarter spend on its product development, member acquisition, and marketing costs. Hence, losses might continue in the third quarter, as well. ^[1]

Our price estimate of $9.30 for Travelzoo is slightly higher than the current market price. We will be updating the price estimate after the earnings release.

See our full analysis of Travelzoo

Travelzoo Reacquired Its APAC Business To Expand Its Global Footprints

Travelzoo underwent a transformation from being a deal publishing website post the introduction of its hotel platform in Q1 2014. Travelzoo’s hotel booking platform, like a regular OTA, enables users to book hotels from Travelzoo’s website or through its mobile application. Hotel suppliers can sell full-priced stays under a commission based model. Also, Travelzoo’s subscribers could find more suitable stay options rather than take whatever is given under the discount deal section. After some initial hiccups, the platform finally started witnessing growth after its relaunch in February 2015. Travelzoo plans to expand its platform beyond North America to the global audience. Hence, it reacquired its APAC business as it intends to tap into the fastest growing Chinese outbound travel market. China is expected to account for over 30% of the APAC travel market by this year. ^[2] China’s online travel market is expected to keep reflecting double-digit growth and reach around $75 billion by 2017. ^[3]

Travelzoo’s Management Shuffles To Better Manage The Changes In Focus 

Travelzoo’s CEO Chris Loughlin resigned recently and its chairman Holger Bartel will assume the position of the global CEO, effective January 1, 2016. Holger Bartel had been the CEO of Travelzoo between 2008 and 2010. Loughlin had been associated with Travelzoo in various positions since 2001 and had assumed the role of Travelzoo’s CEO since July 2010. ^[4]

Travelzoo’s products and services are undergoing major changes. In 2014, the company launched a pull-based hotel booking platform and after initial hiccups, the platform recently depicted significant signs of traction. In August, Travelzoo repurchased its Asian business to further expand the hotel platform’s reach.

In its local deals segment, Travelzoo is trying to promote more live deals and focusing on products that let users find deals closer to their locations. Additionally, Travelzoo is trying to scrape off its rigid voucher format of deals and is still searching for a suitable alternative. Chris Loughlin had been the person behind introducing local deals on Travelzoo and making voucher sales popular. However, it is possible that with these shifts in focus, the company might have found its chairman to be more suitable to handle the transitioning phase of the company. Holger Bartel is also the brother of Travelzoo’s founder Ralph Bartel.

Also, according to Skift, Loughlin might have resigned due to the lack of freedom in performing his functions, as founder Ralph Bartel allegedly makes the important decisions for the company. Ralph is currently the chief talent officer at Travelzoo. ^[5]

Along with the change in CEO, the company had announced the appointment of Mike Stitt as the president of Travelzoo North America, effective immediately. Till recently, Stitt was in charge of Travelzoo’s entertainment and local deals along with its publishing and product planning. Vivian Hong, who currently heads operations in Travelzoo China, Hong Kong, and Taiwan will be the president of Travelzoo Asia Pacific, effective January 1, 2016. Hence, Australia, Japan, and Southeast Asia will be added to Hong’s existing set of responsibilities.

(Source: Travelzoo)

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1. Travelzoo’s Q2 2015 Earnings Call Transcript, Seeking Alpha, July 16, 2015 [↩]
2. Deep Dive Into Asia Pacific Online Travel Market, tnooz, December 20, 2013 [↩]
3. Chinese Travel Platform Qunar Raises $500M, Turns Down Ctrip Acquisition Offer, Tech Crunch, June 1, 2015 [↩]
4. Travelzoo Press Release, October 1, 2015 [↩]
5. Travelzoo CEO Steps Down and Chairman Assumes Role, Skift, October 1, 2015 [↩]