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Internet media company Travelzoo (NASDAQ:TZOO) impressed with its 1Q09 results, primarily because it managed to stabilize the U.S. business amid a continuing downturn in the travel industry.

This should not have come as a surprise to those familiar with the company, however, as Travelzoo's Top 20 weekly newsletter represents a preferred capacity liquidation vehicle for many travel providers. When travel companies are forced to sell their inventory on the cheap, they turn to Travelzoo. (Travel companies can't "force" Travelzoo to include them in the newsletter, but they can make their deals so compelling that Travelzoo chooses to include them. Of course, Travelzoo gets paid for each deal it includes in the Top 20.)

Also of note was the fact that Travelzoo grew 1Q09 European revenue by roughly 50% y-y while cutting the European operating loss by roughly in half. With both revenue and profit moving in the right direction, it appears Europe is on the cusp of becoming a contributor to profit rather than a drain on it.

We analyzed Travelzoo in the November 2008 issue of Portfolio Manager's Review and pointed out a number of this we liked about the company:

Travelzoo (TZOO) is a good business run by capable insiders who have loaded up on shares this year. The market values Travelzoo’s international startup operations materially below zero even though the company has a proven model and management knows Europe well (founder Ralph Bartel was educated in Germany and Switzerland). The downside appears limited as the Bartel brothers are heavily incentivized to create shareholder value. If international operations do not achieve desired profitability, management may shut them down and sell the U.S. business to a competitor such as Priceline.com. We value Travelzoo at $25-26 per share, based on a probability-weighted scenario analysis that includes estimated ranges of annualized EBIT for North America and the rest of the world.

We presented a synopsis of our Travelzoo analysis in a Seeking Alpha article in December 2008.

Disclosure: No position.

Source: Travelzoo's Q1 Performance Impresses