There's nothing wrong with a company investing and pivoting, as Travelzoo is doing yet again. There is something wrong when a company controlled by a founder doesn't reboot with new leadership.
Travelzoo is in investment mode in Asia Pacific, where it is piling up losses, and is executing yet another in a long series of pivots, this time into vacation packages.
In releasing its third quarter earnings Wednesday, Travelzoo vowed to be profitable in Asia Pacific in two years, and announced that an experienced executive will lead a project, dubbed internally as Asia Pacific 2020, alongside three staff from Europe and North America, to turn things around.
“We understand that the continued losses are not acceptable neither for investors, and not for us,” said CEO Holger Bartel, the brother of Travelzoo founder, chairman and principal shareholder Ralph Bartel, referring to the red ink in Asia Pacific.
In the hours after Travelzoo’s earnings announcement, its stock fell some 30 percent to $8.11.
In Asia Pacific, Travelzoo lost $1.6 million in the third quarter, about the same as the year-ago period, as revenue in the region jumped 12 percent to $2 million.
In Travelzoo’s largest region, North America, operating profit and revenue in the third quarter were flat at $1.4 million and $14.9 million, respectively, compared with the third quarter of 2017. CFO Glen Ceremony, who’s leaving the company this week for another job, said Travelzoo’s “growth in North America was affected by the large loss of advertising customer, which was taken over by regulators during the quarter.”
He didn’t identify the company. Chinese insurance giant Anbang, a major hotel owner, was taken over by regulators, but that took place early in the year. [Update, a more likely candidate is Canada-based tour operator Sinorama, which promoted tours to China. The Quebec government put the company under trusteeship in June.]
Overall in the third quarter, Travelzoo recorded $118,000 in net income, compared with a $576,000 loss a year earlier. Revenue increased some 2.5 percent to $25.3 million.
Travelzoo announced that while it is not attempting to become a tour operator, it intends to get much more heavily into the vacation package business by bundling flights, hotels and activities.
Holger Bartel said Travelzoo launched packages in Germany in the third quarter, will debut them in additional European markets during the fourth quarter, and begin offering them in North America early next year.
Travelzoo, which now describes itself as “a global publisher of exclusive offers and experiences for members,” has carried out numerous pivots over the years. It thrived for awhile publishing deals to members through its newsletters, pushed Groupon-like vouchers and local offers, tried to become a hotel booking site, and now sees its future as offering exclusive benefits and perks to its 29.8 million members, as well as packages.
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Photo credit: Travelzoo is investing at a loss in China and other parts of Asia Pacific. Worldpay China