Travelzoo (NASDAQ: TZOO) has been struggling with its performance for almost three years now. Travelzoo’s foray into hotel booking with the introduction of a platform in 2014, and subsequently attempting to make this segment, its business, didn’t seem to work well enough for the company. However, the company started 2018 on a strong note with over 8% growth in revenue in Q1 and 2.5x jump in its stock price in less than a month. We anticipate a lower revenue decline over the next couple years in comparison to the previous years. We have a $16 price estimate for Travelzoo’s stock, which is slightly below the current market price.
We have also created an interactive dashboard which shows our forecasts and estimates for the company. You can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.
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Travelzoo generates revenue from two segments: Travel revenue and Local revenue. The travel-related subscriber base hit 29.5 million in 2017 and we expect them to grow by 2% annually. The company has witnessed increased subscribers over the past couple of years. However, a decline in revenue per subscriber led to a decline in revenue from this segment. With an annual decline of 2% in revenue per subscriber from $3.05 in 2017, we estimate Travel revenue to remain around $90 million for 2018 and 2019.
Local revenue declined by 19% annually over the past couple of years. We expect a further 16% annual decline in revenue from this segment owing to increased competition and lower deal advertisements on the website.
The company is working on technological improvements that will better help gauge the member usage behavior. Once this technology is in place, it will help the company work more aggressively toward customer acquisition. Travelzoo has also increased focus on the areas of hotel bookings and vacation packaged bookings, but this segment remains highly competitive with bigger players like Booking Holdings (NASDAQ: BKNG), Ctrip (NASDAQ: CTRP), and Expedia (NASDAQ: EXPE). The company is also looking for acquisition targets to strengthen its offerings in the packaged booking segment. Finally, the Getaways deals contribution to the business has declined and gradually it will be replaced by offerings from the hotel booking platform.
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