Travelzoo Update

July 24, 2012 at 11:00 pm Leave a comment

Travelzoo posted Q2 2012 results last week that were initially well received by the market, but the conference call details apparently fueled concerns about the company’s rate of growth going forward.  Revenue was up a reasonably good 5% year over year and the company’s main drivers of growth (Getaways and Local Deals) continued to  outperform both domestically and abroad. The travel segment in North America booked a 3% rise due to growth in hotel  Travelzoo’s getaway offerings, while Europe booked 8% year over year growth as the company brought on additional sales staff early in the quarter. Local Deals revenue showed  significant year over year growth in North America (15%) and Europe (28%). The big drag on revenue in Q2 came from the search division where the company’s reduced spend on traffic acquisition combined with lower spending by airlines resulted in substantial revenue declines.

The post earnings call sell off has accelerated with the overall market declines and pushed Travelzoo to a new  52 week low.  While we believe that buyers at these levels will certainly be rewarded over the long term, we remain concerned about the price weakness and were very disappointed that more has not developed on the potential sale of the company and believe that some of the weakness may be from dumping by investors who bought in hoping for a quick buyout at a nice premium.

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