Is Travelzoo the New Groupon?

Slowly but surely, Travelzoo (Nasdaq: TZOO  ) is hopping on the Groupon bandwagon.

Shareholders have been enjoying the ride since the travel deals publisher introduced Local Deals this summer. The stock has nearly tripled since the initiative was announced four months ago.

Travelzoo typically relies on its weekly Top 20 emails of sponsor-backed getaway deals to bring home the bacon. It has certainly proven to be a juicy model for Travelzoo. It had 18.7 million willing recipients as of the end of September.

However, the Groupon model -- where it could generate as much as half of the money it rings up in discounted voucher sales -- offers it the opportunity to widen its margins on incremental sales.

As one of the 18.7 million free subscribers, I wasn't receiving a whole lot of Local Deals initially. However, the deals in the Miami area have started to heat up. Over the past two weeks alone, I've received three marked-down voucher offers from Travelzoo:

  • Three spa treatments with pool access at the swanky Shore Club for $99, a deal which presumably retails for $254.
  • A $75 Biscayne Bay sunset cruise with food and drinks for just $35.
  • This morning's offer was $89 for a four-course meal for two with a pair of mojitos at the trendy Asia de Cuba. That may seem like a lot, but eyeing the upscale South Beach eatery's menu shows that the deal is roughly half off the a la carte pricing.

Spas, touristy outings, and restaurant deals? This seems a lot like Groupon. This is obviously more than just the hotel and flight deals that one would expect from Travelzoo.

Travelzoo was just one of the many dot-com darlings to introduce Groupon-esque initiatives. OpenTable (Nasdaq: OPEN  ) , The Knot (Nasdaq: KNOT  ) , and Yelp also jumped on the bandwagon. AOL (NYSE: AOL  ) is populating its Wow.com domain name with localized bargains. Amazon.com (Nasdaq: AMZN  ) paid $175 million for a piece of LivingSocial. Google (Nasdaq: GOOG  ) reportedly failed in nabbing Groupon itself in a $6 billion deal that fizzled out.

However, Travelzoo is probably the one that is best situated strategically to take on Groupon. Its millions of subscribers are already on the lookout for deals hitting their inboxes. Can the deals intensify? Travelzoo's Rolodex is awfully thick with travel-related companies that are preconditioned to paying to promote discounted offers. Right now, only a few of its sponsors appear to be playing along. Two of the three deals that I have been offered over the past two weeks -- the Shore Club spa treatments and dinner at Mondrian's Asia de Cuba -- are in Morgans Hotel Group (Nasdaq: MHGC  ) properties.

However, Travelzoo earned twice as much as Wall Street was expecting a quarter ago. If pumping up the volume on Local Deals creates even greater disparities, Travelzoo's heady stock gains will continue.

Have you ever used Groupon or a Groupon-esque site for a deal? Share your thoughts in the comment box below.

Google is a Motley Fool Inside Value choice. Google, The Knot, and OpenTable are Motley Fool Rule Breakers recommendations. Apple and Amazon.com are Motley Fool Stock Advisor picks. The Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a fan of discount sites, and he's already tracking local deals through Groupon and LivingSocial -- as well as Travelzoo. 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 a day early. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2010, at 12:47 PM, roryrobert wrote:

    The competition is not just from Travelzoo. One of the problems Groupon facing is that it's the products or services that the buyer cares the most. With the increasing number of deals offered, buyers can just visit a daily deal aggregator like http://www.shopway.com to check all the available deals easily. As a user, it makes absolutely no difference to me if I get an email from Groupon, LivingSocial, or ShopWay telling me about a deal, since I'm after the deal itself. With all of these clones coming up, Groupon's model runs the risk of becoming a commodity.

  • Report this Comment On December 29, 2010, at 4:58 PM, EquityBull wrote:

    Groupon will regret dearly one day turning down 6 billion dollars. Their model is subject to much competition and aggregators. Zero moat. Sorry. They blew it. Should have taken that money and run like Mark Cuban did with Broadcast.com

  • Report this Comment On December 29, 2010, at 6:24 PM, BlackThought wrote:

    The author of this article clearly did not do his research on Travelzoo.

    Just by site statistics alone, you can clearly see which deal sites are growing:

    http://siteanalytics.compete.com/travelzoo.com+livingsocial....

    The yearly change on visits to

    Travelzoo is -49.20%

    Livingsocial is +1,144.75%

    Groupon is +613.61%

    Now it took Travelzoo 12 years since it's launch in 1998 to get 21 million subscribers

    Groupon launches in Nov 2008, and currently has over 35 million subscribers

    http://www.guardian.co.uk/business/2010/dec/29/groupon-priva...

    On top of this, Travelzoo desperately offered shares to subscribers upon it's launch. Groupon on the other hand let it's business model attract subscribers.

    And who knows how many out of the 21 million Travelzoo subscribers from 1998 are still actively using the same emails?

    Travelzoo is a failure and was nothing more than a short squeeze play this year, as it was in 2005 when it ran to $100+ then took a 50% haircut in a month's time.

    Travelzoo stock is the CEO Ralph Bartel's ATM Machine. This CEO announced a buyback of shares to attract investors then he dumped his millions of shares into the BUYBACK negating any increase in the shareholder value.

    This same CEO was under a SEC probe for insider trading on Travelzoo back in 2005.

    http://www.thestreet.com/story/10204735/secs-travelzoo-probe...

    As always do your research before you blindly follow a poorly written article such as this one.

    Take a look at the insider/institution ownership and you can clearly see that Ralph's trust holds majority of the float.

    This becomes a dangerous game for the investors because the stock can tank 50% in a month, based on Ralph's level of greed.

  • Report this Comment On March 02, 2011, at 5:37 AM, jeff432 wrote:

    Have you guys heard of the new Groupon like site?

    It's the same thing as Groupon except when someone signs up through your referral link, if they or anyone they sign up ever buys a coupon from this site (which you get in a daily e-mail), you earn 5% commission of the coupon purchase price! You earn 5% commission up to 5 levels deep!

    Also, if you sign up a business and they ever offer a coupon, you get 2% of all of their coupon sales!

    About 1000 members are joining everyday now.

    It is 100% free to join.

    There are no coupons yet since the company is in pre-launch.

    It is launching around March 2011 though!

    Check it out:

    http://newgroupon.thecustomeradvantage.com

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