Travelzoo – Getting wise to new media

Travelzoo wants to become the “largest and most trusted publisher” of travel deals on the Internet. European managing director Chris Loughlin talks to Kevin May about how the company hopes to realise its ambitions and reverse the attitudes of a sceptical industry The Travelzoo e-mail has become quite a talking point in recent months as…

The Travelzoo e-mail has become quite a talking point in recent months as consumers have lapped up its promise of cheap and often unusual travel deals.

In fact, where once Internet users would anxiously await the arrival of the next missive from controversial gossipmongers Popbitch, conversations around the water cooler in the past year have often turned to what is in the weekly bulletin from the rather less salacious Travelzoo.

The popularity of its travel deals bulletin has been nothing short of remarkable in what is an already congested online travel market. The Top 20 deals e-mail, hand-picked by an editorial team from submissions made by travel companies eager to offload often distressed inventory, works in tandem with the website, which carries deals for flights, hotels and package holidays.

In April 2005, Travelzoo picked up its well-groomed and highly successful business model from the US and dumped it on to the UK travel scene – with an immediate impact.

Within a year around 500,000 people had subscribed to the e-mail and, over the supposedly lean summer months, the figure increased by 20% to 600,000. Total subscribers worldwide now top 10 million and average click-through rates are an astonishing 50%.

It is a far cry from the early days of the company’s entry into the UK market when Loughlin met with a string of newspaper groups to discuss potential partnerships. These came to nothing but, ironically, since then the Travelzoo bulletin and the site have become serious contenders for replacing the press route for promoting travel deals.

The financial numbers are also improving after making a loss in its first year in the UK due to launch costs accrued primarily by what European managing director Chris Loughlin calls “subscriber acquisition” – advertising on key sites such as Yahoo! and MSN.

The marketing drive in the UK launch phase appears to be paying off and Loughlin is continuing the company’s expansion across Europe – Germany and Spain now having their own bulletins.

But while Loughlin – who once worked on Marks and Spencer’s digital strategy before quitting in 1997 after the boss said the Internet was “all a bit futuristic” – is passionate about Travelzoo, he is still equally fervent about what he sees as failings in the marketing departments of travel companies.

On a wider scale this equates to the discrepancy between how much advertising spend is pumped towards the Internet – around 12% globally – against studies that suggest the Internet is the preferred method for researching travel products for 51% of consumers.

“There is an inherent power struggle within travel companies in their use of marketing,” Loughlin says. This creates a “silo approach” to online advertising, he suggests, whereby marketers will not shift spend from offline to online to cope with demand or short-term trends.

This ongoing argument, prevalent across other industries, suggests the old guard marketers are still reluctant to let go of what Loughlin calls their “pre-existing bias” towards offline media.

Luckily for Travelzoo, more than 150 advertisers – including big brand names such as Virgin Atlantic, British Airways, Travelocity, Lufthansa, Marriott and Lowcostbeds – have tested the Travelzoo model since it launched. They, Loughlin insists, have realised that there is much to be gained from so-called supply-driven media favoured by Travelzoo.

He points to a recent example, featuring the Starwood-owned Palace Hotel in Madrid, which managed to offload 300 room nights at short notice following an appearance in the Top 20 e-mail in the UK. The most interesting aspect to what was a particularly quick and easy method of distributing a deal, according to Loughlin, was that around 80% of those who paid for a room were completely unknown to Starwood.

In other words, Travelzoo created a group of consumers who, in the course of their normal search for travel products, would perhaps not have considered a few nights in a luxury hotel in the heart of the Spanish capital.

This feeds into what Loughlin says is “one of the travel industry’s biggest problems” – reliance on search marketing.

Obviously he is appealing to travel companies to use the Travelzoo approach to advertising deals, but he is not alone when he suggests that the pay-per-click method poses some fundamental challenges to the industry.

Indeed, many online travel bosses are privately questioning their dependence on PPC and wondering why they are still unable to shift stock. Loughlin speaks for many when he suggests that supply-driven media – such as Travelzoo’s weekly newsletters or, in many cases still, the weekend supplements – have the ability to reach consumers who may not be looking for a particular product.

“There are travel companies out there that only think of search – but search is ultimately demand-driven,” he says.

Loughlin argues that pro-active marketing has to be used alongside PPC. If, he suggests, a travel company needs to fill an aircraft it is unlikely to do so hoping that consumers will click on a sponsored listing on Google or Yahoo! if they haven’t already done so.

The argument is a strong one. It goes some way to explaining why Travelzoo in the US was for a time the darling of an industry desperate to shift stock in the early 2000s and, subsequently, on Wall Street following its flotation on Nasdaq where in 2004 it became the largest gainer over a 12-month period.

But Travelzoo’s success and simplistic business model – companies pay for inclusion on the Top 20, other advertisers use the PPC model on the site – throws up a few intriguing questions: where is the competition and what next?

Earlier this year there was an abortive attempt by US rival Shermans Travel to launch its own Top 25 newsletter in the UK. It lasted just four months.

Price-comparison site Cheapflights has its own newsletter service but operates primarily in the airline category.

What Travelzoo has is an eager public signing up for its weekly newsletter and advertiser numbers that are rising, allowing its editorial teams to keep the Top 20 bulletin fresh and with a vast range of deals.

Loughlin admits that growth is somewhat restricted by the number of people he has on the team in Europe – currently 11 in London, three in Munich and one in Barcelona, out of a total of 100 globally – but there are plans for at least two new “innovative” products in the future.

In the meantime there are services such as its Newsflash tool – a regional bulletin for quick turnarounds on travel deals, which Loughlin claims is the only service of its kind in the UK – to hone and continued attempts to woo more advertisers.

However, such is the popularity of its weekly e-mail that at least one senior industry figure and self-confessed fan suggests that it wouldn’t be a huge surprise if some of the media groups Travelzoo approached nearly two years ago look at resurrecting those abandoned partnership discussions.