Travel Portals Call In Sick

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It wasn't a good day for most of the online travel specialists. As the news of the swine flu outbreak worsened, investors began cashing out of sector, fearing that travelers would begin dramatically scaling back on trips until global health warnings ease.

The scorecard isn't pretty.


Price as of 4/27/09


Expedia (Nasdaq: EXPE  )


(6.3%) (Nasdaq: PCLN  )



Orbitz Worldwide (NYSE: OWW  )


(7.4%) (Nasdaq: CTRP  )



eLong (Nasdaq: LONG  )



This doesn't mean that every travel-related website was grounded yesterday. Travel deals publisher Travelzoo (Nasdaq: TZOO  ) soared 11% after the company posted better than expected quarterly results.

Revenue climbed 12% to $23.4 million at Travelzoo. A profit of $0.02 a share for the quarter reversed a $0.07 deficit a year earlier. Wall Street didn't see this coming at all; analysts were expecting a loss on a dip in year-over-year revenue.

Travelzoo's business grew in all three of its regional playgrounds (North America, Europe, and Asia Pacific). It closed out the quarter with 15.5 million opt-in subscribers to its Top 20 weekly travel deals emails, 866,000 more recipients than when the quarter started.

Travelzoo continues to post operating losses abroad, and since it can't use those deficits to offset taxable gains domestically, it winds up paying nearly as much in taxes -- $2.3 million -- as the $2.6 million it delivered in pre-tax profits.

Is Travelzoo's turnaround a fluke? I don't think so. Even fears of a swine flu pandemic may play right into its model, since travel providers will get even more desperate to fill empty hotel rooms, airline seats, and cruise cabins. Travelzoo isn't a portal like yesterday's global pool of underperformers. It simply serves as a marketing arm, promoting sponsored vacation bargains.

Now that Travelzoo has returned to its profitable ways several quarters before Wall Street expected it to, it's probably earned a vacation of its own. is a Motley Fool Stock Advisor pick. International is a Motley Fool Hidden Gems selection. Try any of our Foolish newsletter services free for 30 days.  

Longtime Fool contributor Rick Munarriz has been inspired by a deal or two on the Travelzoo Top 20 list but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks before their day in the sun. The Fool has a disclosure policy.

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