Why Did Travelzoo Sell Off Fly.com?

by Trefis Team
+9.04%
Upside
6.20
Market
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Trefis
TZOO
Travelzoo
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After gradually ramping down its Search and Local Deals business for the last couple of years, Travelzoo finally took the decision to sell off its metasearch engine business, Fly.com. Since 2014, Travelzoo has been trying to transform itself from a deals publishing website to a hotel booking platform with demand-based deals predominating its erstwhile supply-based offers. The selling off of Fly.com is a major step towards this transformation goal. The company sold the Fly.com domain to an anonymous buyer who has privately registered it.

Travelzoo bought the Fly.com domain for $1.76 billion in 2009. It initially launched a metasearch for flights on the domain and later added hotel search to it. It aimed to compete with the metasearch giants such as Kayak in the U.S. and Skyscanner in Europe. The business model allowed travelers searching for or buying flights on its platform, to take a look at the hotels and holiday deals that were already present on the Travelzoo platform and in the weekly newsletter that the company sent to its subscribers. However, the search model didn’t meet with resounding success as was expected in the beginning.

What Went Wrong?

It seems that Travelzoo had too much on its plate to concentrate well on Fly.com. Since late 2010, the company was focused on its Local Deals and Getaway offerings in order to pose competition to Groupon which was experiencing a huge success with its vouchers at that time. Along with this came tougher competitions in the metasearch domain for Fly.com. In 2012, Priceline acquired Kayak and that made user and supplier acquisition a tougher challenge for Fly.com.

After that came Travelzoo’s focus on its hotel booking platform, which made it reduce its marketing spend on other divisions including Fly.com. The monthly searches declined by around 50% between 2013 to 2016 on Fly.com. Travelzoo’s search revenues declined from $23 million in 2013 to $14 million in 2016.

It seems that the deal publishing website is gradually finding a grip in the hotel booking domain. With the reacquisition of its Asia Pacific business to expand its global outreach (with a focus on Chinese outbound travelers), the company currently boasts of a ~29 million user base. Though its revenue decline continued in 2016 as well, the demand for its travel related products have seen significant improvement. With the success in its Travel division, Travelzoo had predicted that the other two divisions’ (Local Deals and Search) importance will decline in the company’s overall portfolio. Selling off Fly.com seems to be yet another step in that direction.

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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