Here Are The Key TakeAways From Travelzoo’s Q3 2016 Results

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Travelzoo’s third quarter earnings revealed that though the company’s top line decline continues, it was mainly due to investments on new markets and product enhancements. The company is focusing on expanding its Asia Pacific business, along with providing an enhanced website experience to its members where hotel booking deals take the center stage. Travelzoo is gradually phasing out its local and getaway related deals, while focusing on an enhanced airline search experience for its SuperSearch business. The investments in all these changes are dampening its short term results though the company seems to be on the right track towards a significant growth in sales and profitability in the future.

In line with its recent quarters, Travelzoo witnessed a 10% year-on-year revenue decline to $30.4 million in Q3 2016. This was mainly due to the company’s planned reductions of the local search and syndication revenue along with the negative impact of foreign exchange rates. However, the company’s profitability significantly improved with the non-GAAP earnings per share standing at $0.12 reflecting a 300% year-on-year rise. This was the result of the decline of operating costs and the company’s efficient elimination of non-profitable business activities.

Travelzoo expects the year on year revenues to continue declining in the fourth quarter as well, due to the ongoing transitioning of its products which includes the decline in the local getaway deals and search related services. It is noteworthy to mention here that Travelzoo was erstwhile known for its supply or push-based offerings, however, now the company is trying to transform primarily into a provider of demand or pull based services. After the introduction of its hotel booking platform, it is focusing on its travel related services that over time are expected to contribute to a higher portion of the company’s revenues. The local deals and search related services’ contribution to revenue will continue declining over time.

contribution of travel

The fourth quarter revenues and operating income is expected to decline both year-over-year and quarter-over-quarter due to factors including seasonality, negative foreign exchange impact, and a decline of search revenue sequentially to the tune of $1 million to $1.5 million as the company keeps reducing its search traffic acquisition spend. Travelzoo’s renovated website is also expected to shift traffic away from SuperSearch. On the other hand, the company’s acquisition spend will continue to rise in the Asia Pacific region with a focus on China.

Travelzoo’s key strategies include:

  • Continued investments in member acquisition that had resulted in the addition of 750,000 members to its network in the third quarter.
  • Continuous improvement of the quality of offerings and services which resulted in the introduction of an enhanced website (currently available to the U.S. based members with the global roll out planned over the next couple of quarters).
  • The hotel platform is being strengthened in the APAC region with more hotels on its platform.
  • The company’s upgraded website now gives main focus to the travel deals.
  • Additionally, the company is expanding its offerings beyond hotels to vacation packages and cruises.
  • SuperSearch is being boosted with improved flight search experiences.
  • Better engagement with members beyond the usual emails through social media channels such as Facebook in North America and Europe and Weibo in China.

Have more questions about Travelzoo? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Travelzoo

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