Travelzoo, which makes virtually all of its money on lead-referrals to advertisers, began to take credit card purchases of local entertainment vouchers on its US website.
Travelzoo has been offering local deals to its newsletter subsribers and website visitors for things such as sporting events and concert tickets for about three years and these products are a key part of its growth strategy.
But, by tapping into the local deals trends as represented by Groupon's success, Travelzoo has taken several steps to advance this business segment.
For example, the travel and entertainment deal-publisher began newsletters devoted to local deals, with the first cities of focus being Des Moines, Iowa, and Minneapolis, Minn.
Users in these cities will get pitched entertainment deals in Travelzoo newsletters and on Travelzoo.com, and can purchase vouchers for these activities on the Travelzoo website for as long as each promotion runs.
This catapults Travelzoo into the transaction business. The vouchers are redeemable at the local establishment.
This development highlights the further hybridization of many travel businesses as it seems there is a great blending of advertising and transactions going on these days.
In addition to Travelzoo beginning to handle voucher transactions, separately a subsidiary of Expedia Inc.'s Smarter Travel Media is expected to soon launch transactions for upscale hotels.
To supports its efforts, Travelzoo created a new subsidiary, Travelzoo Local, to operate and manage all aspects of the Local Deals business. Michael Stitt is vice president and general manager of Travelzoo Local Deals.
Travelzoo also opened local sales offices in Dallas and Denver to oversee the local deals business in Texas, elsewhere in the South, and the Mountain region, the company says.
Stitt says the deal offers will become "more localized and personalized" than before.
One reason the company formed a new subsidiary to handle local deals was because these entertainment offers "are a different market and the company will be working with different kinds of businesses" than is the norm for the rest of Travelzoo's air, hotel vacation and cruise advertising business, Stitt says.
Travelzoo aims to introduce the local deals product to additional U.S. cities later this year, and there are no plans at the moment to internationalize the service, Stitt says.
"With Local Deals, we are able to further our coverage of local entertainment and lifestyle content and make it more relevant for our subscribers," says Travelzoo CEO Chris Loughlin. "For example, we can now cover more local spa and restaurant deals."
One competitor in the deals arena, Sam Shank, the CEO of DealBase, points to some of Travelzoo's advantages in the local deals' arena.
"Travelzoo has been sending local deals to their email lists on a CPC or CPM basis for a long time (event tickets for example)," Shank says. "Groupon figured out how to make a lot more money from these type of offers, which are wildly profitable, and thus attracted a lot of emulators. Companies with existing big email lists that have geographic targeting (like Travelzoo's 21 million subscribers) have a huge advantage in competing with Groupon right out of the gate."
Shank adds: "Travelzoo also has a large sales force that has already been selling local offers, so this seems like a great fit to me. I'm surprised it's taken Travelzoo this long to get started. The challenge for Travelzoo is that they have never processed credit cards for customers before, and their brand does not fit well with many of the types of businesses that work with Groupon (ex. car washes, boot camps, organic dry cleaning)."