Travelzoo ramps up sales force, shrinking profit

NEW YORK (AP) -- Travelzoo's profit shrank in its most recent quarter, despite higher revenue, as the travel deals website hired more salespeople and spent more on marketing.

That appeared to please investors, who sent Travelzoo's shares up $3, or 16 percent, to $22.21 in morning trading. Shares dropped 24 percent in 2012, hitting a two-year low in November, as investors worried about the company's difficulty getting several initiatives, such as its hotel search function, to appeal to consumers as well as a slow and uneven economic recovery.

Travelzoo offers deals on flights, hotels and vacation packages through email newsletters and its website. Its revenue comes from advertising and from taking a cut of some deals consumers buy.

In the quarter ended Dec. 31, net income was $3.8 million, or 24 cents per share, down 42 percent from $6.4 million, or 40 cents per share, in the same three months in 2011. Revenue rose 5 percent, to $37 million from $35.2 million, as business trends improved in Europe and North America.

But the company spent more to build up its sales force and on marketing to lure those travelers. Subscribers grew 5 percent to 22.5 million in North America and Europe.

Operating expenses rose 23 percent to $28.6 million.

For the year, Travelzoo posted a profit of $18.2 million on revenue of $151.2 million. In 2011, net income came to $3.3 million, with revenue of $148.3 million.