Travelzoo shares dropped by around 20% yesterday after it reported a drop in Q2 revenues and warned that the next two quarters would also see declines in revenue and operating income.
The drop in share price means that the business now has a market capitalization of around $180 million.
Topline figures for Q2 show revenue of $34.1 million, down 8% year-over-year in dollar terms and 3% in constant currencies. The operating income of $2.6m compares with $6 million in the same period last year, with this decline partly attributed to a $3.1 million increase in marketing spend and investment in product.
But Travelzoo will continue to invest in member acquisition, marketing and in its product. It has added 950,000 new subscribers in a year, reaching 24.8 million by the end of June. North America was unchanged from end-March with 17.2 million members; Europe up by 1% to 7.6 million.
Europe will be the focus for new member signups in the next quarter, with Travelzoo looking at "testing offline campaigns."
Talking to analysts on the earnings call, Travelzoo executive chairman Holger Bartel informally broke the business down into push and pull. "Push" referred to "inspiring our users with top deals at quality places" whereas "pull" is all about trying to capture business when users want something specific.
"We have been very successful in the past 15 years to inspire our users by telling them about great deals at quality places. We will tell them for example to take a five day trip to Iceland at an amazing price. But when they are simply looking to find a deal for an upcoming weekend getaway in New York, we offer little help."
This desire to "pull" people into booking was behind the introduction of a search-led hotel booking platform, relaunched during the previous quarter to work better on the website and on mobile platforms. It also focussed on six key destinations. The relaunched version led to a 26% quarter-on-quarter increase in revenues for the platform.
The push/pull dynamic is also impacting its local business, with Bartels noting that customers are increasingly buying restaurant, spas, shows and days out "when they need them, rather than in advance." Travelzoo is responding to this shift by sourcing deals which have a longer shelf life and which can be found through alerts and location-based channels.
Click here to access the holding page on Travelzoo's web site where the results and management presentation can be accessed.
NB Tug of war image by Shutterstock