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ANALYSIS for NYSE : TZOO JANUARY 29, 2012
$430 M MKT CAP
$498.2 M MKT CAP
See the Full Analysis for Travelzoo on Trefis
— CORPORATE SNAPSHOT —
Travelzoo is a global internet media company. The firm currently has a subscriber base of over 23 million and has operations in North America, Europe and the Asian Pacific region. Travelzoo provides travel and entertainment companies as well as small businesses the ability to efficiently reach out to consumers to sell their services and products. Apart from the main Travelzoo websites, the company also has several publications and newsletters across the globe which help it connect with its subscribers. It also operates Fly.com, a travel search engine that provides users the ability to find the best prices on flights from airlines and travel agencies. In August, 2010 the firm ventured into the social commerce space by launching a local deals service which enables customers to purchase vouchers for local businesses such as spas and restaurants.
— VALUATION HIGHLIGHTS —
1. Advertising constitutes 65% of the Trefis price estimate for Travelzoo's stock. 2. Local Deals constitute 22% of the Trefis price estimate for Travelzoo's stock. 3. Supersearch and Fly.com constitutes 9% of the Trefis price estimate for Travelzoo's stock.
See the Interactive Valuation Breakdown on Trefis Our share price estimate and the overall company value is derived by summing-up the values of individual divisions/businesses in a sum-of-the-parts analysis. The value of each division is calculated using a discounted cash flow (DCF) methodology. We forecast fundamental drivers like pricing, market share, and profit margins for different businesses in estimating the division’s value within the DCF framework. The analysis below primarily focuses on those important forecasts that drive our share price and value estimate. Our complete analysis, including sources of historical data, underlying equations and additional discussion are available on www.trefis.com.
— POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE —
The number is expected to more than double in 2011 to one deal per week and steadily increase to 3.estimate for Travelzoo: Advertising • Advertising Revenues per Subscriber: Travelzoo saw its Advertising Revenues per Subscriber fall from $5. This helps Travelzoo compete with deal giants like Groupon at an early stage compared to other competitors. However.com by leveraging Travelzoo’s existing hotel relationships and offering higher-end deals. As the reach of Travezoo’s publications increased. Revenue synergies with other Travelzoo businesses to drive volumes for local deals Travelzoo can package local deals with placements in the Travelzoo Top 20 newsletter. the marketing organization for Sysco (the largest food distributor in North America). Although. the company’s core product. Living Social and AOL’s Wow. This helps Travelzoo's local deals compete with larger competitors like Groupon right at an early stage. the firm raised its advertising rates on Jan 1st 2011 and 2010.4 by the end of our forecast period. there could be an upside of about 11% to the Trefis price estimate for Travelzoo's stock. there could be a 12% decline to the price estimate of Travelzoo's stock. If Travelzoo is able to expand its deal offerings to about 5 deals per week per market by the end of our forecast period. Coupled with lack of user stickiness. this can adversely impact the rate at which Travelzoo plans to launch new deals. The firm aims to increase advertising rates atleast once a year in each market that it operates in. As competition in the online advertising space intensifies and weak macroeconomic data lead to curtailed advertising budgets. Travelzoo also increased its advertising rates on select listings in Euope on four occasions between Jan 1st 2010 and mid 2011. there could be a 10% upside to the Trefis price estimate for Travelzoo's stock.5 in 2010 due to increasing competition in the online advertising space. there could be a 10% downside to the Trefis price estimate for Travelzoo. thereby driving higher local deal volumes. The local deals business derives advantages from Travelzoo’s subscriber base for other products like the Top 20 Newsletter by providing it access to big mailing lists as well as serving as a great fit given its trained sales force who have prior experience in selling local offers. If Travelzoo can maintain its Advertising Revenues per Subscriber at current levels by the end of our forecast period. This will help Travelzoo expand its reach. However.7 in 2007 to $4. The company is also entering into new partnerships like the one forged with with iCare. if Advertising Revenues per Subscriber declines at a much faster rate of 7% per year instead of the currently assumed rate of 3%. TREFIS ANALYSIS for TRAVELZOO CONTENT@TREFIS. If Travelzoo is able to offer only 2 deals per week per market by 2018.41 deals per week on an average over the Aug . Local Deals • Average Number of Deals per Market: Travelzoo managed to sell 0. The local deals business derives advantages from Travelzoo’s subscriber base for other products like the Top 20 Newsletter by providing it access to big mailing lists as well as serving as a great fit given its trained salesforce who have prior experience in selling local offers. there can be an upside to the current Trefis estimate for Travelzoo.Dec 10 time frame.COM + 1 617 394 8763 •2 . often for hotel spa's and hotel restaurants. low barriers to entry and minimal start up costs have given rise to a number of competitors in the deals space. if Travelzoo is able to increase the advertising rates charged from merchants by continuously expanding the reach of its publications. we expect Advertising Revenues per Subscriber to steadily decline to $3.5 by 2018. — SOURCES OF VALUE — Differentiation and prior local offers experience acts as a competitive advantage Travelzoo is differentiating itself from group-buying sites like Groupon.
detailed amenity checklists. In November of 2011. Germany. After entering the search criteria. which directs customers to ticket booking sites. The survey indicated that the online advertisement market grew at a 15.com. France. and the U. Although Fly. can generate traffic for local deals based on the idea that people also look for things to do upon arrival at a destination. hotel. Another key feature for travelers is extensive hotel detail pages that include virtual tours.8 billion in 2010 on advertising.S. travel companies in the US spent around $2. flexible and cost effective manner. Estimates from BIA Advisory Services and Kelsey Group have indicated that US local advertising revenues will reach $144. Germany. There were 25 million odd subscribers in North America compared to 9 million in Europe. Supersearch and fly. Italy and Spain respectively. Europe online advertising growth to provide momentum The company has more opportunities for subscriber growth and ad rate increases in Europe as the business in the European region is less developed than that of North America. and abroad. The annual AdEx survey.com. Comparison of fares available over different online travel agencies becomes very important and this is where fly. thereby enabling it to leverage the online advertising growth in Europe through a presence in the most attractive markets in the region. amenities and type of property (resort. Launch of hotel search to power search volumes growth for fly.com offers value to consumers in terms of convenience.4 billion by 2013. Travelzoo European operations include its businesses in France. • The internet is widely becoming the preferred source of information • Inherent benefits with online advertising (real time updates and performance tracking) vs traditional media approaches • The internet allows advertisers to advertise their sales and specials in a fast. Travelzoo’s business model is TREFIS ANALYSIS for TRAVELZOO CONTENT@TREFIS.Travelzoo's search engines. Fly.COM + 1 617 394 8763 •3 . results can be filtered in several different ways to best fit travelers needs which include pricing.5% in 2009. B&B or even hostel). Spain. The biggest online markets by ad spend are the UK.com Until recently. which have seen a considerable decline in ad spending over the past years. users are encouraged to compare rates using the check boxes to find the best deal. Economic weakness to weigh on advertising budgets The advertisement business is also highly sensitive to economic downturns and the demand for online advertising may be linked to the level of economic activity and employment in the U. Netherlands. location. Together.K. conducted with the support of IHS Screen Digest. hotel reservations require the travelers to conduct extensive search for best fares.3% growth rate in 2010 compared to 4. star-rating. • Suppliers are selling directly to consumers from their websites rather than through travel agents. The deals business can provide interesting entertainment and dining options.com searches many hotel and online travel agency websites. — KEY TRENDS — Increasing online advertising spend According to Kantar Media. Travelzoo officially launched a hotel and car rental search functionality on fly. There are several reasons why spending on online advertising is increasing. This presents an opportunity to leverage the expansion of search businesses by increasing the number of deals offered. The growing presence of online advertising has impacted traditional media outlets such as TV and newspaper. the top six account for almost three quarters (74 per cent) of the total market.com was only an airfare search engine enabling users to find and compare flight options and realtime fares from hundreds of airlines and major travel websites. was released at IAB Europe's Interact Congress. hotel policies and honest user reviews. Unlike air ticket bookings.
future economic headwinds may impact ad spending by companies.COM + 1 617 394 8763 •4 . for merchants it enables them to promote their products and services quickly and efficiently to a mass audience. See the Full Analysis for Travelzoo on Trefis TREFIS ANALYSIS for TRAVELZOO CONTENT@TREFIS.12 billion in 2010 and was expected to have reached $2.67 billion in 2011 according to the Local Offer Network. travel and entertainment within their local cities. Approximately 63. entertainment and other small businesses. On the other hand. Since consumer spending on discretionary items is highly influenced by the state of the economy.000 during the first quarter of 2011.highly dependent on online advertisements through travel. Growth in social commerce The social commerce space is one that has demonstrated immense growth in the past few years. Group buying revenue totaled approximately $1.000 deals were published in 2010 in the US alone and 40. For customers it provides them different options for restaurants.
Learn more about the Trefis story Read the Trefis FAQ TREFIS ANALYSIS for TRAVELZOO CONTENT@TREFIS.com. what happens to the value of the company?" Trefis analysts spend weeks evaluating each stock that we cover and utilize commonly used valuation methodologies to determine a Trefis price for each company.COM + 1 617 394 8763 •5 . Coca Cola. We present you with not only our synthesized view but also every single step within the valuation process used to determine the Trefis price which you can see via our interactive analysis on Trefis. We move beyond the qualitative notion "if you love the coffee at Dunkin’ Donuts. The Trefis platform uses extensive data to show in a single snapshot what drives the value of a company's business.com was founded by MIT engineers and former Wall Street analysts who realized that most people do not understand the seemingly familiar companies around them including well known companies like Apple. you may also want to see the Trefis coverage for companies such as: eBay Google Yahoo Amazon Akamai VeriSign See the list of all companies covered by Trefis — 2 Week Free Trial of Trefis Pro — Liked this report? Get access to even more comprehensive reports along with interactive analyses with Trefis Pro Try Trefis Pro for 2 weeks — About Trefis — Trefis.Learn More — Related Trefis Coverage — If you're interested in Travelzoo. Google." to answer quantitative questions like "If their coffee sales are up 10% next year but doughnut sales are down 5%. GE. you should think about buying the stock. Ford and Gap to name a few.
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