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Travelzoo: A Bunch of Payola Animals


Is the popular travel deal site pay-to-play?

For most people, "travel zoo" means JFK the day before Christmas.

For others, it's an online travel aggregator.

Travelzoo (TZOO) distributes a weekly email of their recommended top 20 vacation deals.

Travelzoo had almost 15 million subscribers as of December 31, 2008, up 2 million, or 16%, from December 31, 2007. In North America, subscribers grew year-over-year from 10,996,000 to 11,283,000, or 3%. In Europe, subscribers grew year-over-year from 1,381,000 to 2,223,000, or 61%. In Asia, subscribers grew from 214,000 to 1,108,000, or 418%.

What isn't 100% above-board is Travelzoo's system of "research," "evaluation" and "testing" of its deals. According to the website, "each deal we publish goes through a rigorous editorial and research process before we pass it along to you."

It's not pure marketing double-speak: Travelzoo's "Deal Experts" do vet the travel deals they blast out to customers.

But what isn't widely publicized is that suppliers and travel agents pay Travelzoo to be included in the Top 20. It's a phenomenal business model - listing links to travel deals suppliers are trying to dump from their excess inventory.

The names are instantly recognizable, ranging from JetBlue (JBLU) and Ritz-Carlton to Orbitz (OWW), Expedia (EXPE) and HotWire. One can't actually book a trip on Travelzoo; they make money not from consumers, but from the travel companies who pay for inclusion.

The strategy seems to be working. Travelzoo posted better-than-expected fourth-quarter financial results, with revenue of $19.9 million and a loss of a penny a share; the Street had been looking for $17.45 million and a loss of $0.12. Revenues were up 4% from a year earlier.

Competition is fierce in the online travel industry, and Travelzoo is waging a fierce battle against companies like Priceline (PCLN), Kayak and Travelocity.

Prices still too high for you in this uncertain economic period? There's a way to travel for even less:

With over 700 available couches being offered gratis in people's homes in countries from Cuba to Ireland to Zimbabwe to Australia to Afghanistan, all you're on the hook for is airfare.

Ever been to Bangladesh? Mahmud Hasan Khan has a couch for you!

Interested in checking out Serbia? Milan Stancic'll leave the light on for ya!

Really looking for action? Rwanda's waiting, and Serge Wiclef has a couch where you can rest your weary head.

Safe? Sure. Free? Can't get much freer than this:

"Staying with your host(s) is also always free; it is contrary to the values of CouchSurfing and against our terms of use to charge someone to surf your couch. Many surfers like to bring their hosts gifts or treat them to a meal as a 'Thank you,' but this is not a requirement. There are infinite ways to reciprocate goodwill."

Great concept, but you still have to get to your destination. (Not to mention figuring out what it means to "reciprocate goodwill."

Which means you'll still have to wait for your weekly Travelzoo Top 20 email.
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