Digital Booking Sites

Travelzoo goes shopping for hotel booking site to buy as its voucher business stalls

@denschaal

Oct 12, 2012 9:58 am

Skift Take

Critics always claimed that the voucher business was built on a house of cards, and now Travelzoo is admitting that the house is falling.

— Dennis Schaal

Free Report: The Changing Business of Extended-Stay Hotels

There’s trouble in paradise at Travelzoo, which revealed that its voucher and hotel-search business is under-performing, and it is actively looking to alter its product mix and acquire a hotel booking website.

“We continue to be positive about our long-term growth strategy,” said Chris Loughlin, CEO, in an unusual announcement of preliminary results for the third quarter, “but we have found our hotel search offering and the group-buying voucher model not meeting the needs of hotels and users well enough, and therefore plan to adjust our product offering.”

Travelzoo also revealed that is carrying out “active negotiations to acquire a hotel booking website.”

“Our hotel commission tests during the third quarter have shown positive results,” Loughlin said, “so we are excited about adding, or developing, a hotel booking platform to our deals business.”

Group-buying shakeout?

The announcements are somewhat of a stunner for Travelzoo, which built an advertising business based on deals newsletters, but carried out a strong pivot a couple of years ago, supplementing newsletter business with Groupon-like Local Deals, including vouchers for hotel and restaurant offers.

Travelzoo always argues that its voucher offers are more upscale than Groupon’s and thus differentiated.

However, like Groupon, Travelzoo’s voucher business has now-admittedly faced pressures from hotels and users, and now the company wants to branch out into hotel booking, apparently with a transaction website.

Travelzoo’s stock has taken a hit in recent months when investors were disappointed with results in the voucher business.

With today’s announcement, it is apparent that Travelzoo wants to refocus on its core newsletter business, and transition into hotel-booking with an acquisition.

The latter could put pressure on the newsletter business, though, as Travelzoo would find itself in competition with some of its hotel and online travel agency advertisers.

Travelzoo’s stock price today was down more than 14% around mid-day at $20.05 per share.

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