Travelzoo 2005 Annual Report Download - page 25

Our Industry
According to the Newspaper Association of America, travel companies spent $1.3 billion in 2004 on
national advertising in newspapers (source: Business Analysis and Research, NAA, 2005). We believe that
newspapers are currently the main medium for travel companies to advertise their oÅers.
We believe that several factors are causing and will continue to cause travel companies to increase their
spending on Internet advertising of oÅers:
The Internet Is Consumers' Preferred Information Source. Market research shows that the Internet has
become consumers' preferred information source for travel (source: Forrester Research, 2002).
BeneÑts of Internet Advertising vs. Print Advertising. Internet advertising provides travel companies
advantages compared to print advertising. These advantages include real-time listings, real-time updates, and
performance tracking. See ""Ì BeneÑts to Travel Companies.''
New Advertising Opportunities. The Internet allows travel companies to advertise their sales and
specials in a fast, Öexible, and cost-eÅective manner that has not been possible before.
Suppliers Selling Directly. We believe that many travel suppliers prefer to sell directly to consumers
through suppliers' Web sites versus selling through travel agents. Internet advertising attracts consumers to
suppliers' Web sites.
Problems Travel Companies Face and Limitations of Newspaper Advertising
We believe that travel companies often face the challenge of being able to eÅectively and quickly market
and sell their excess inventory (i.e. airline seats, hotel rooms, or cruise cabins that are likely to be unÑlled).
The success of marketing excess inventory can have a substantial impact on a travel company's proÑtability.
Almost all costs of travel services are Ñxed. That is, the costs do not vary with sales. A relatively small amount
of unsold inventory can have a signiÑcant impact on the proÑtability of a travel company.
Our management believes that travel companies need a fast, Öexible, and cost-eÅective solution for
marketing excess inventory. The solution must be fast, because travel services are a quickly expiring
commodity. The period between the time when a company realizes that there is excess inventory and the time
when the travel service has become worthless is very short. The solution must be Öexible, because the travel
industry is dynamic and the demand for excess inventory is diÇcult to forecast. It is diÇcult for travel
companies to price excess inventory and to forecast the marketing eÅort needed to sell excess inventory. The
marketing must be cost-eÅective because excess inventory is often sold at highly discounted prices, which
lowers margins.
Our management believes that newspaper advertising, with respect to advertising excess inventory, suÅers
from a number of limitations which do not apply to the Internet:
‚ typically, ads must be submitted 2 to 5 days prior to the publication date, which makes it diÇcult to
advertise last-minute inventory;
‚ once an ad is published, it cannot be updated or deleted when an oÅer is sold out;
‚ once an ad is published, the travel company cannot change a price;
‚ in many markets, the small number of newspapers and other print media reduces competition, resulting
in high rates for newspaper advertising; and
‚ newspaper advertising does not allow for detailed performance tracking.
Our Products and Services
We provide airlines, hotels, cruise lines, vacation packagers, and other travel suppliers with a fast, Öexible,
and cost-eÅective way to advertise their sales and specials to millions of Internet users. Our publications
include the Travelzoo Web sites, the Travelzoo Top 20 e-mail newsletter, and the NewsÖash e-mail alert
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