Travelzoo reduced Fly.com marketing to focus on Local DealsNewsBy Dennis Schaal | February 3, 2011Share This article was originally published on Travelzoo is ramping up its Local Deals business full-throttle and consequently reduced marketing spend in the fourth quarter for its Fly.com metasearch business and SuperSearch advertising platform, resulting in decreased revenue in those businesses.CEO Christopher Loughlin, speaking during Travelzoo's fourth quarter 2010 earnings call, explained that Local Deals, which launched in August, wasn't initially in the 2010 budget."We had to pull back somewhere," Loughlin said, referring to Fly.com and SuperSearch.Fly.com, however, remains part of Travelzoo's growth strategy, Loughlin said, explaining that the company still sees great synergies taking place between Fly.com and Travelzoo's Top 20 emails.But, clearly, Local Deals is the shining star, these days.Travelzoo increased its employee numbers from 232 in the third quarter of 2010 to 255 in the fourth quarter, with the majority of the new-hires for the Local Deals business, which now is operational in about 30 U.S., cities, London and its outskirts, and Barcelona.As Local Deals scaled, Travelzoo increased its cash balance on hand from $34.7 million at the end of the third quarter of 2010 to $41.2 million in the fourth quarter, officials said.Loughlin said Local Deals, which enables Travelzoo to get a revenue share from spas and restaurants as they offer vouchers to consumers, exceeded expectations in the fourth quarter and is a pillar of the company's expansion strategy.Travelzoo's growth strategy includes international expansion, increased entertainment content, Local Deals and Fly.com metasearch.By offering Los Angeles email subscribers about two Local Deals per week, Travelzoo saw incremental revenue of $2.34 per Los Angeles subscriber in the fourth quarter, the company said.In the 30 U.S. cities where Local Deals is operational, Travelzoo served about two deals per week and recorded incremental revenue of about $1.90 per subscriber.Travelzoo believes it can increase per-subscriber revenue from Local Deals, and with 13.1 million subscribers in the U.S. -- or 22 million globally -- there is a lot of upside potential.Michael Stitt, general manager of Travelzoo Local Deals in the U.S., says Travelzoo is differentiating itself from group-buying sites like Groupon, Living Social and AOL's Wow.com by leveraging Travelzoo's existing hotel relationships and offering higher-end deals with "value," often for the hotel spa or hotel restaurant.While Groupon may offer teeth-whitening services or $10 worth of desserts for $5 at Maggie Moo's Ice Cream and Treatery in Ridgewood, N.J., Travelzoo's Local Deals tend to be at higher price points.For example, a recent Travelzoo Local Deal at Casa Del Mar Hotel in Santa Monica, Calif., touted a 5-course dinner for two people at $89 [supposedly a $256 value.]Travelzoo also recently sold 4,800 vouchers for the W Hotel Lounge in New York City, offering four cocktails with appetizers for $35 [regularly $108].Local Deals from Travelzoo often sell at higher price points than Groupon's, Stitt says, adding that another differentiator is that 81% of the Travelzoo audience is more than 35 years old. Groupon says 68% of its audience is 18-34.Another differentiator is that Travelzoo can package Local Deals with placements in the Travelzoo Top 20 email, the company's core product.For example, the South Coast Winery Resort & Spa in Temecula, Calif., recently ran Top 20 and Local Deal offers simultaneously, selling more than 2,000 spa vouchers at $199 each and doubling expected results for the Top 20 offer, Travelzoo says.Future plans, including new city and country rollouts for Local Deals?Stitt wouldn't provide specifics, but said plans are "very aggressive compared to where we are today."For the fourth quarter, Travelzoo's net income fell 29% to nearly $3.8 million on revenue of almost $28.5 million, a 19.7% increase.