Skift Take

Travelzoo began a Wall Street darling two years ago based on its pivot into Local Deals, but now there is a plunge back to reality.

Travelzoo’s¬†revenue and profits took a substantial hit in the third quarter because of weakness in its Local Deals and SuperSearch products.

Officials said Google’s move into the hotel business with Google Hotels impacted search revenue, and increased competition and Travelzoo’s own conversion problems hurt the Local Deals business.

At the same time, Travelzoo hinted that it wants to become a sort of online travel agency lite.

“While we are confident about Travelzoo’s long-term opportunity, we are disappointed with our Q3 results,” said Chris Loughlin, CEO. “Declines in SuperSearch and Local Deals were not made up by the positive momentum we saw in Getaways.Continued investments into sales team expansion and subscriber growth, as well as enhancements to our hotel and mobile products are affecting profitability in the near-term, but we believe these are the right steps to position Travelzoo for sustainable and profitable future growth.”

For the quarter ended September 30, Travelzoo saw its net income fall 42% to $3.4 million on $35.4 million in revenue, which fell 8%.

Local Deals are Groupon-like voucher offers for spa services and restaurant meals, although Travelzoo claims its Local Deals are more upscale and provide more value than Groupon’s.

SuperSearch is an advertiser-driven search engine for flights, hotels, car rentals, and vacations.

Travelzoo revealed a couple of weaks ago that its third-quarter numbers would miss targets, and that it was negotiating to acquire a hotel-booking site to make up for weaknesses in Local Deals.

Speculation has centered on Travesse and Jetsetter as possible acquisition targets.

Active negotiations

During the earnings call, CEO Loughlin said Travelzoo has been conducting active negotiations “in the last weeks and we are continuing to assess our options.”

Travelzoo doesn’t “have a candidate necessarily confirmed,” Loughlin said, adding the company would consider other options, such as building its own hotel booking technology, ¬† if an acquisition price isn’t right.

Loughlin didn’t mention any specific sites under consideration, but the price tag to acquire Jetsetter would likely be too high.

“I guess we’ll have to figure out how to finance it,” Loughlin said, if Travelzoo focuses on buying a particular hotel-booking site.

Room for another hotel-booking site?

He argued that despite competition from online travel agencies, there is room for Travelzoo to get into the hotel space.

“Even with the OTAs, hotels are never sold out,” Loughlin said.

“We have no intention of going head to head with the OTAs,” adding if Travelzoo customers don’t want a Getaway or hotel deal on a specific offered, then they would have the alternative of booking a hotel from Travelzoo on multiples dates as an alternative.

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Tags: deals, Travelzoo

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