Europe “not working” for Travelzoo as deals dry up

Deals publisher Travelzoo has managed to add more members in the second quarter of the year but the overall performance of the business remains “disappointing”, according to global CEO Holger Bartel.

The messaging from Travelzoo is very much around giving its members exclusive offers which can be booked in real-time, while trying to increase membership. In the April-June quarter it reached 29.3 million members, 200,000 more than at the end of March.

By region, the 29.3 million is broken down with Asia Pacific accounting for 3.6 million, Europe 8.4 million and North America 17.4 million. The increase over the past three months is split equally between Europe and North America.

Bartel noted the “positive trends” in North America although the revenue is not where he wants it. In the quarter, revenues were $16.6 million, down 7% compared with Q2 2016. Operating income was down from $3 million to $2.3 million.

He also said that Travelzoo will, in the long term, be able to capture the opportunities in Asia Pacific. In the April-June quarter APAC revenues were $2 million, down 16% in constant currencies and 20% when converted in dollars. Operating loss was stable at $1.2 million.

He blamed APAC’s poor performance on Travelzoo being understaffed in the sales department. The recent appointment of new general managers for Australia and Hong Kong will start to address this.

Bartel is also bullish on China, telling analysts that Travelzoo’s new app has been built with China in mind and will launch there. It plans to increase its marketing and product investment and has its eye on using China’s social networks to grow the business. Social is an important channel for the global business, with Bartel saying that “probably 70%, 80% of our marketing efforts these days go into social marketing.”

The situation in Europe is less positive – revenues of $7.9 million equate to a 9% drop in constant currency, or 16% when converted into dollars. Operating income took a big dive, dropping from $1.7 million in Q2 16 to just $268,000 this quarter.

He claimed that Europe has fallen back because “it has become really difficult to source amazing deals” and that the business does not want to offer deals for the sake of it.

He added:

“The environment which isn’t working in our favor right now is Europe. It’s not really the team or business or anything, it’s just that we were not able to promote as many offers as we could in Europe.”

CFO Glen Ceremony admitted that the next quarter will also be difficult financially but hopes that the many initiatives under way will help it get back to topline growth in Q4 17 or Q1 18.

Those initiatives include personalisation upgrades, a loyalty scheme, better deals for members and increased marketing and PR campaigns.

Click here to access Travelzoo’s Investor Relations page to see the financial release and presentation.


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