Travelzoo Made $1.8 Million by Selling the Fly.com Domain

Gains from the sale of the Fly.com domain name improved net income for travel deals publisher Travelzoo in the first quarter of 2017.

The sale price of the domain was not specifically revealed. But Travelzoo executives disclosed today that, in the first months of this year, it received $2.89 million in cash proceeds from the sale of the Fly.com domain name, according to financial filings released today.

But once tax and all costs related to discontinuing the operations of its search business and the sale of Fly.com were accounted for, the net income for the company from discontinued operations was $1.84 million.

The total price exceeds the $1.8 million price Travelzoo paid for the domain in 2009.

Fly.com updated its privacy policy in the weeks after the sale to say that the new owner is Fly Holdings LLC., a holding company. The company did not say who bought the domain, and the site is registered privately. Given its juice and relevance to travel, many assumed that Fly.com would be snapped up by a travel company.

It just so happens that there is a Fly Holdings LLC holding company in Dallas, Texas, that is attempting to launch a Fly-branded line of pomades and men’s grooming products.

Its chief executive Ted Hoffman did not respond to our queries by publication time. Nor did Fly Holdings co-founder Hallie Alford.

At first glance, it seems unlikely anyone would drop a couple million bucks on a domain for a hair products company that’s the outgrowth of a single high-end barber shop in Dallas’ design district.

On the one hand, Hoffman has a past background of working on Wall Street for hedge funds and banks and he has invested in at least two other businesses. On the other, perhaps there is another holding company with a duplicate name we have been unable to find.

CONSIDERING ACQUISITIONS

On an earnings call with investors, Travelzoo chief executive Holger Bartel admitted that he was “disappointed” that there were no year-over-year revenue gains to report, while almost all other publicly traded online travel companies have been thriving. The company’s first-quarter revenue was $28.4 million, down five percent in constant currencies from the same period a year prior.

Declines like that have spooked investors over time. Since summer 2013, investors have knocked two-thirds off of Travelzoo’s valuation, to today’s $124 million — about the same as its annualized revenue.

Looking ahead, Bartel says investment and stock buybacks would keep operating profit small until next winter. The company may also spend on acquisitions to plug holes in its portfolio, he says, particularly in companies that might help it sell vacation packages. Given the company’s limited financial flexibility, such as acquisition would likely be small, if one ever took place.

On a separate note, Bartel says China-based companies have met with Travelzoo executives in recent months to better understand the value that Travelzoo provides the industry.

Related to that point, Travelzoo this month added Carrie Liqun Liu to its board of directors. She has been director of Fosun China Momentum Fund, a billion-dollar fund that the Wall Street Journal describes as “aspiring to be China’s Berkshire Hathaway” since July 2011.

NEEDING MORE VISITORS TO THE TRAVELZOO

Having recently upgraded its website, Travelzoo plans to grow in the second half of the year by partnering to make sure that there is always deal content available for the most popular destinations, something that isn’t true today.

Bartel says the company is looking to add more exclusive rates through negotiated deals and add more benefits to consumers for being a loyal customer of Travelzoo. The company is also updating its recently added hotels product so that a user anywhere in the world can see and book the same negotiated offers at selected properties. The company also intends to broaden its vacation package offering primarily via partnerships but possibly through an acquisition.

Bartel is the brother of Ralph Bartel, the Travelzoo founder, whose trust controls more than a fourth of the outstanding shares in the public company.

The domain sale is a bittersweet moment for Travelzoo, which launched a metasearch site on Fly.com for flights (and later hotels) nearly a decade ago. The business model was to upsell buyers of flights on some of the hotel and holiday bargains listed on its platform and in its weekly email newsletter offers to millions of subscribers. The goal was to challenge Kayak in the U.S. and Skyscanner in Europe. But the plan didn’t fly due to poor execution and bad luck.

On the bright side, the cash has given the company a boost for this quarter and enabled it to buy back stock while achieving a first quarter operating profit of $2.1 million.