Travelzoo Keeps It Simple in the Daily Deals Jungle

Travelzoo is all about its deals.

The logo of the 12-year-old publicly held company is a block of unevenly placed capital letters. “Travel” is in royal blue and “zoo” is in bright red. The site is equally blah, where the top 20 travel deals keep with the aesthetics and are listed in the same two primary colors.

Travelzoo is a no-frills destination to discover travel deals, which is in steep contrast to today’s dominant trend–established by Groupon, LivingSocial and Gilt Groupe and others that believe in selling an experience with big visuals, beautiful photography and flowery descriptions. In contrast, Travelzoo is more like opening up the classifieds.

Shirley Tafoya, Travelzoo’s president, said it still has a big opportunity in front of it, leveraging loyalty it’s garnered across the relationships it has made over more than a decade, even though the perception is that its much younger competitors have grown up around it.

“We’ve run the business so conservatively and we did that on purpose. In the beginning, we were very methodical on not growing the business too fast and to get the quality of the deals right,” she said. “We want to build loyalty. We don’t want to be the fly by night provider, or just another deal site, and I think that’s what has happened with the competition.”

Still, she admits that it is the competition that has propelled them into new markets. “It’s forced us to make it even more unique, and go into areas that people aren’t addressing. We have continued to raise the bar. We could probably do more quicker, but we don’t feel it’s necessary.”

To be sure, the company has hit a couple of big milestones recently.

In the first quarter, Travelzoo reported record revenue and celebrated its second-best quarter ever of subscriber growth. Today, it hit 23 million subscribers, a third of which are outside of the U.S. And, as of March 30, it delivered its one-millionth deal. Just last week, Travelzoo’s stock skyrocketed to $101 a share, before tumbling back to earth. Today, the stock was trading up 37 cents at $75.40 a share.

But despite its obvious comparisons to Groupon and LivingSocial–and a host of other daily deals sites, which are also getting into the travel business–its market capitalization is a mere $1.3 billion, a far cry from Groupon’s rumored IPO value of $25 billion.

Encouraged by what they were seeing in the local commerce space, Travelzoo launched two new products over the past year. Last quarter, it rolled out a new travel service, which promotes deals within driving distance of a user’s hometown. Last July, the company rolled out local deals, such as discounts to restaurants and spas.

Those businesses are modeled after the Groupons of the world, where consumers must purchase vouchers, and Travelzoo shares the revenue with the merchant. However, its main travel business operates much differently. It’s an advertising model, where the provider pays to get its special offer in front of all–or a portion of–Travelzoo’s 23 million subscribers.

So far, so good. The company is already seeing huge growth from its local deals business.

Its local deals revenues have doubled in the past three months, and it’s already publishing a weekly deal in 48 markets. In the first quarter, gross revenues from daily deals totaled $16.2 million, or roughly $34,000 per deal. It’s ramping up its local sales team quickly, and is forecasting $312 million in annual revenue if it can grow to two deals a week in 100 markets with 20 million subscribers.

As for the decision to keep things plain and simple and not add a lot of flashy photography, she said that’s what consumers prefer.

“We’ve done a lot of focus groups. They like the pictures, but the facts are more important. What is it? What’s the value? Why should I travel now? They know where to go to see the pictures. What’s most important for them is the facts. Our top 20 is text based, and that’s been on purpose.”

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