Two key elements of Travelzoo's focus for 2010 are turning red ink into black in Europe, and increasing Fly.com's audience and revenue.
These tacks were revealed as part of a management presentation released in conjunction with Travelzoo's disclosure of its third quarter financial results.
For the three months ending Sept. 30, the deal publisher and media company narrowed its losses to $295,000 from $1.8 million a year earlier.
However, operating income improved in part because Travelzoo's money-losing Asia-Pacific businesses, slated to be sold to companies controlled by Travelzoo Chairman Ralph Bartel by tomorrow, Oct. 31, are now treated as discontinued operations.
So, for the quarter, Travelzoo's operating income from continuing operations increased 15% year-over-year to $2.3 million.
Travelzoo makes money in North America, where it is working on further "monetizing its increased audience," but feels the pain of international expansion in Europe and Asia-Pacific.
Travelzoo's revenue in its European businesses -- in the U.K., Germany, France and Spain -- grew 82% in the third quarter to $4.8 million, but its operating loss in the region was $1.3 million, albeit smaller than the $2.2 million loss of a year earlier.
One bright spot is the U.K, where Travelzoo so far this year has recorded its first positive operating income since it launched there in 2005. With 1.5 million U.K. subsribers and revenue of £4.9 million in the first nine months of 2009, Travelzoo recorded operating income of £300,000 in the U.K. through the first three quarters of the year.
While Travelzoo's operating margin in the U.K. in the third quarter was 5%, its margins in the rest of Europe -- Germany (69%), France (62%) and Spain ((256%) -- were all negative percentages.
These numbers likely are being tracked by a host of companies, from Kayak to Expedia, with international aspirations.
But, Travelzoo points out that revenue in Europe is "growing faster than expenses, bringing us closer to our goal of profitability in each country."
Cynics among us might suggest that Travelzoo spin off its European businesses, as it is doing with its discontinued APAC holdings, to companies controlled by Ralph Bartel, until he can turn them around and make them profitable.
Just kidding about that.
However, after all, with the Asia-Pacific transaction, after removing the drag on earnings, Travelzoo retains the option of buying back the businesses from Ralph Bartel at an opportune moment.
Meanwhile, Travelzoo is pouring money -- $1.6 million in expenses so far in 2009 -- into Fly.com, and believes that leveraging the existing Travelzoo user base and the "attractive economics" of metasearch all will accrue to Fly.com's advantage.
Fly.com debuted in the U.S. eight months ago, launched in the U.K. this month, and should get going in Germany before the end of the year.
The sale of the APAC businesses could boost Fly.com's prospects.
"Although we don’t have specific plans for the cash from the pending sale of the Asia-Pacific business, this does give us the opportunity should we choose in the future to increase our subscriber acquisition spending or increase our spending on trying to grow the fly.com business," Travelzoo CFO Wayne Lee told investors this week.
Fly.com attracted 4 million visitors during the third quarter despite the fact that Travelzoo reduced marketing spend on the air-metasearch site from the second to the third quarter, CEO Holger Bartel told analysts.
Holger Bartel was coy about forecasting Fly.com's revenue for next year, saying "we will really know only at the end of 2010 what the revenues in 2010 will be."
He adds: "As I’ve pointed out, the strategy of leveraging a Travelzoo audience [for Fly.com] has worked very well so far and to some extent, the level of investments we will make in 2010 depends on the success of the business and that will drive the investment level -- if the business evolves very successfully, we will invest more. So it’s really very hard to predict the future there. It’s simply too early."