Travelzoo CEO Chris Loughlin blasted the competition in the daily deals space for unsustainable practices and acknowledged that the company’s Local Deals business is “hindered in the short term by industry dynamics.”
The backdrop to Loughlin’s assault on the likes of Groupon and LivingSocial, which weren’t specifically identified, was Travelzoo’s release of its first quarter 2012 financial results.
North America revenue in Travelzoo’s Local Deals business, which includes vouchers for everything from whale watching tours to dinners with belly dancing, grew sequently only 7.6% to $7 million despite the fact the fourth quarter was relatively sluggish.
And, in Europe, which is coping with debt jitters, Travelzoo’s Local Deals business saw revenue decline sequentially 12.5% to $2.1 million as average revenue per deal fell, as well.
Thus, the company’s shot at competitors’ business practices, however factual in its broad strokes, might be viewed in the context of the adage — the best defense is a good offense.
Travelzoo says it will focus on “productivity and profitability” in the Local Deals business as it remains very positive about the long-term outlook.
These numbers come as Travelzoo has been the subject of sales rumors, although Loughlin declined to comment on the subject during an earnings briefing with financial analysts.
Loughlin says Travelzoo’s short-term growth has been hindered by competitors operating at below cost.
Travelzoo is not a daily deals site — it doesn’t publish deals every day — Loughlin points out, but the company was quick to point to competitors’ unsustainable practices — an “industry loss in excess of $1 billion in 2011 to drive unprofitable revenue.”
“Merchants are paid quickly, sometimes with 100% up-front payment, leaving refund risks with the publisher,” Travelzoo said of the competition in a prepared presentation.
And, competitors, pushing low-quality deals, go after “subscriber acquisition at almost any cost,” the company says.
Travelzoo will benefit from the inevitable industry shakeout, Loughlin argued, saying the company will take a profitable approach, emphasizing hiring quality mid-level managers, improving productivity and publishing high-caliber deals.
“We are the only company [in the deals space] which is serious about making profits,” Loughlin says.
Loughlin expressed optimism about Travelzoo’s Local Deals business over the long term, adding that Travelzoo is focusing on ramping up its sales force, accelerating subscriber acquisition and mobile syndication to boost its Local Deals, Travel (including Top 20 and Getaways) and Search (SuperSearch and Fly.com) businesses.
During the first quarter, Travelzoo’s Travel division saw a 4% year over year revenue decline in North America and 1% growth in Europe, with its business in both geographies hurt by reduced business from online travel agencies and advertisers going out of business.
Travelzoo’s Search unit grew revenue just 1% year over year in North America and the company cited the “challenging pricing on traffic acquisition.” The company reported that its Search business in Europe, which is a fraction of the size of its Search business in North America, produced year over year revenue growth of 35% due to the expansion of Fly.com metasearch.
Overall for the first quarter, Travelzoo’s net income was $3.74 million on record revenue of $39.3 million, a 6% increase.
Loughlin acknowledged that Travelzoo lags the competition on the mobile front, but sees great potential in producing “single-form apps” to leverage content.