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Travelzoo: Not Competitive Enough

May 04, 2020 5:25 PM ETTravelzoo (TZOO)13 Comments
Tech and Growth profile picture
Tech and Growth


  • The business was growing until 2013, where revenue reached ~$170 million. Since then, revenue has been in continual decline.
  • Both the advertising and local deals businesses have no competitive moats.
  • Management spent ~$16 million over the last two years on buybacks to possibly keep the share price at mid-teens despite no apparent undervaluation.
  • The stock is likely fairly valued at its current ~$6 price per share and ~0.58x P/S. There may be a near-term rebound, though we struggle to see any long-term upside.


We struggle to find any particular reason to be bullish on Travelzoo (NASDAQ:TZOO) stock. Aside from the near-term rebound opportunity due to being down ~50% post the COVID-19 selloff, the stock offers little to no upside in the long term. The business is in a secular decline as key metrics continue to weaken. It is, however, still just one of the many challenges at present. From a high-level view, the business lacks strategic direction and competitiveness. Moreover, COVID-19 will put more pressure on the travel industry and the business due to the drastic drop in demand.


What Travelzoo does is aggregate travel and local deals from airlines, hotels, and other travel operators, and then distribute them to its users by mobile app and newsletter. It earns commission revenue through voucher sales and performance advertising revenues from travel companies listing their offers on Travelzoo. Given the nature of the business, technically all of the travel giants such as Expedia (EXPE) or Booking Holdings (BKNG) can easily drive Travelzoo out of business. As a result, of all the many risk factors we see in the stock, the lack of a competitive moat is the most severe risk.

(TZOO. source: stockrow)

It has been difficult for Travelzoo to grow both its business and market share. Having reached $170.6 million of annual revenue in 2013, revenue has since then declined by ~34% to ~$111 million in 2019. In the process, shareholder value has been destroyed. The stock plunged ~60% from ~$29 at its peak in 2013 to approximately ~$11 before the COVID-19 hit in early 2020. It is now trading at merely ~$6 per share. Within the same period, the giants such as Booking Holdings and Expedia have almost doubled and tripled their revenues as they acquire the lion's share of the online travel market.

This article was written by

Tech and Growth profile picture
Former tech operator, entrepreneur, and venture capitalist with over a decade of experience starting, investing, and building companies in Asia and US. Long-only manager seeking multi-asset technology / growth opportunities driving disruptive innovation globally.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (13)

thinkofme profile picture
May I please ask you all a question? When you are buying and investing shares/stock with companies but your gut feeling is giving you mixed resuts - do you ever think if you cant figure it out maybe it's something happening within the business that you can't see?

Sept 2016 - seekingalpha.com/... - excellent very in depth article and spot on the mark - this was 4 years ago.

If after this article you thought 'I wonder what it is? Where could I get more information? Maybe inside goss? - Answer - GLASSDOOR Travelzoo ex employee reviews. There you will find the REAL REASON behind Travelzoo's constant and embaressing failings.

May 2020 - seekingalpha.com/... - this article is so ridiculously perfect and on the mark regarding Travelzoo it's scary. fyi regarding Google, will never happen. You are talking about 2 over confident old german boof heads that still think email HTML is the best way to get/ communicate with consumers (don't even ask about open email rates HA!) for them to not even bother with simple and cost effective SEO stratergies is extremlley poor business form and shows how un-creative and out of touch they are.

From years of expereince with in the very same zooTravel Sector, I would highly suggest you sell your shares ASAP. They will not increase in price and will tumble to almost nothing before the company is sold to someone for $1. The Germans will walk away with Millions - you? Nudda.
Keerthi Prasad profile picture
are you an employee or ex-employee?
Nat Stewart profile picture
If they can manage through this period, the upside potential will be enormous from today's stock price.

The overhead has been bloated for years with the type of useless employee who gripes on Glassdoor. Many of us who have followed the company for years are aware of this.

Fortunately, Covid has provided the framework to cut the bullshit and padding away, which is a good thing.

Certainly, Management has made some bad investments, such as Asia.

Fortunately, they have dumped Asia and clearly are now are fixated on getting the ship righted - and the stock price up.

Bottom line - this doesn't need to be a perfect situation or business (or close to it) for the stock to double or triple from here - while risk is capped at the share price.

If Jack's captures just a miniscule % of subscribers and grows operating income while travel resumes, the stock could explode substantially higher than and be a multi-bagger. If this happens *after* shorts get interested, it could be scorching. That is today's market. U don't think Bartell's don't want to see that?

They do.

As to product - I am having a blast reviewing deals for a family vacation. Also love the Jack's product.

If or if not IT systems are grand or every employee gets the full snowflake treatment, we longs don't care. Risk/reward favors us - enormously so.
thinkofme profile picture
Asia Incl Australia were not bad investments, the 2 owners acquired that part of the business not managment.

But yes managment played a huge part in the destruction of the business especially AU, but again this is due to ridiculous recruitment requirements from the owners of Travelzoo.

I'm not an ex employee but I know they don't value them.
This is TZOOs time to shine.. people looking for deals and companies looking to tap into their 30 mln upper middle class users.. done is the Asia drain..... also, 54% of shares owned by bartel bros, another 39% by institutions.. this leaves about 600,000 shares float.. lowing for a 2010 like run up...
Nat Stewart profile picture
Agree. Once we move beyond immediate covid-restriction issues, environment is ideal for their business model - resort hotels will be very eager to fill rooms.
yep. not sure about their long term prospect but at least this year travel industry is eager to offer deals at terms attractive to $TZOO so I don't see how their business cannot go north.
I'd love to see another run up to $100.
Do you think it could happen???
Gust0 profile picture
Appreciate the article and I’m now a follower. I’ve traded this name in the past and recently have been accumulating shares (bought another 10k shares today) to hold longterm as I see this as a very likely takeover target.
Nat Stewart profile picture
Hilarious. In an March press release, they announce that they are shuttering the money-hemoraging Asian business. This will cause (normalized) earnings to skyrocket, yet you didn't mention even it.
Keerthi Prasad profile picture
This is the most important thing going for this company right now and the author didn't even know about it...
Tech and Growth profile picture
it doesn't matter. long term prospect is extremely unattractive. hope for a major turnaround, or better a takeover. -- as it stands both remain unlikely
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