Travelzoo Has 1 Investment Catalyst Remaining

While Travelzoo may have little fundamental hope alone, it might be attractive to larger competitors.

Jul 7, 2014 at 1:40PM

Travelzoo (NASDAQ:TZOO), a company that's arguably too small to compete, has seemingly lost its relevance in the online travel space. Yet, it does have a niche market in deal packages, along with certain other features, that might be appealing to (NASDAQ:PCLN) or Groupon (NASDAQ:GRPN).

The rise and fall of Travelzoo
For the first time in Travelzoo's history, it posted a year-over-year revenue loss in the first quarter. Its total revenue declined 5% to $40.2 million, while its operating profit declined 13% to $7 million.

This poor performance was driven by a 12% decline in North American revenue, which makes up more than 65% of its total business. The single bright spot for the company was Europe, which grew revenue by 13% but accounted for less than $14 million of total revenue.

With that said, it seems like just yesterday that Travelzoo was growing at a 30%-plus growth rate and trading at nearly $100 a share, back in 2011. However, after management shakeups, like the resignation of its local deals chief Mark Webb, and continued struggles with PC to mobile monetization, Travelzoo's future looks bleak.

Not to mention, there are other problems that Travelzoo faces such as much larger competitors with far more resources and better operational strategies, like Priceline and Groupon just to name a couple.

Priceline's recent acquisition creates a need
Travelzoo may look like a dead stock by itself, but this alone doesn't mean that it's unattractive to larger peers that may wish to acquire the company. In fact, two specific companies come to mind: Priceline and Groupon.

Priceline is a company with more than $7 billion in annual revenue. Therefore, investors might be wondering what it could possibly want with Travelzoo, a company with 12-month revenue of just $156 million. The answer to this question might conveniently lie in Priceline's most recent acquisition, OpenTable, and its move to offer more than just flights and hotel packages.

Priceline now has a restaurant-reservation platform to make traveling more convenient for its users, giving consumers the ability to make reservations at their travel destination. This is where Travelzoo could come into play, a company that not only sells cruises, flights, and hotels but also packaged deals at restaurants, theater, and other services of this kind.

Hence, Priceline might now find this element of Travelzoo's business attractive as well as its growing European business, where Priceline is strongest and will aim to grow its new reservation technology. With a market capitalization of less than $300 million, Travelzoo would be a relatively small risk for Priceline but an acquired asset with the capabilities to grow with increased scale and exposure to Priceline's enormous platform.

All those users have value
As for Groupon, there are many similarities between it and Travelzoo; both sell discounted travel and deal packages, with the former operating as an e-commerce company of sorts. Groupon has been quickly transitioning from its daily deals email-blast business model with coupon-like offers to now selling its deals on a platform where users can scroll and find deals for longer periods of time.

This strategy has worked well in Groupon's favor, as its e-commerce segment grew 68% in its last quarter, outpacing overall revenue growth of 26% and now accounting for half of Groupon's total business.

Ironically, Travelzoo sells similar packages but still relies largely on an email strategy, or Groupon's old approach. Therefore, Groupon might see upside in Travelzoo's core business, acquiring and implementing an e-commerce like platform.

Also, for Groupon an acquisition might revolve around subscribers, or active customers. Currently, Groupon has 51.8 million active customers, 24% growth year over year. Groupon has figured out how to successfully monetize these users as returning customers, an area where Travelzoo struggles. Therefore, Groupon might find Travelzoo's 20 million-plus subscribers appealing and its growing European presence as well as Groupon looks to tackle other regions of the globe.

Foolish thoughts
Travelzoo alone likely has little to no upside, but with a Priceline or Groupon buyout, its platform and existing business could enhance those business' fundamental advantages. Interestingly, much of the reason that Travelzoo's fundamentals have stalled and fallen can be traced to the rise of others like Priceline and Groupon. However, if working together Travelzoo does have assets of value, and for this reason it might be an attractive acquisition target looking ahead. And if not, don't anticipate a Travelzoo resurgence.

Leaked: This coming device has every company salivating
The best investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we buy goods, but potentially how we interact with the companies we love on a daily basis. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need The Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.


Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Priceline Group. The Motley Fool owns shares of Priceline Group. 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. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers