Travelzoo 2006 Annual Report Download - page 40

• competing products and services that offer increased functionality; and
• changes in travel company and Internet user requirements.
If we are unable to timely and successfully develop and introduce new products and enhancements to existing
products in response to our industry’s changing technological requirements, our business could be materially
adversely affected.
Our business and growth will suffer if we are unable to hire and retain highly skilled personnel.
Our future success depends on our ability to attract, train, motivate and retain highly skilled employees. We
may be unable to retain our skilled employees, or attract, assimilate and retain other highly skilled employees in the
future. We have from time to time in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate qualifications. If we are unable to hire
and retain skilled personnel, our growth may be restricted, which could adversely affect our future success.
We may not be able to effectively manage our expanding operations.
Since the commencement of our operations, we have experienced a period of rapid growth. In order to execute
our business plan, we must continue to grow significantly. As of December 31, 2006, we had 82 employees. We
expect that the number of our employees will continue to increase for the foreseeable future. This growth has
placed, and our anticipated future growth will continue to place, a significant strain on our management, systems
and resources. We expect that we will need to continue to improve our financial and managerial controls and
reporting systems and procedures. We will also need to continue to expand and maintain close coordination among
our sales, production, marketing, IT, and finance departments. We may not succeed in these efforts. Our inability to
expand our operations in an efficient manner could cause our expenses to grow disproportionately to revenues, our
revenues to decline or grow more slowly than expected and could otherwise have a material adverse effect on our
business.
Our international operations are subject to increased risks which could harm our business, operating
results and financial condition.
In May 2005, we began operations in the U.K. In February 2006, we began operations in Germany. In April
2006, we began operations in Canada. Our plan is to expand into other European and Asian countries in 2007. In
addition to uncertainty about our ability to generate net income from our foreign operations and expand our
international market position, there are certain risks inherent in doing business internationally, including:
• trade barriers and changes in trade regulations;
• difficulties in developing, staffing and simultaneously managing foreign operations as a result of distance,
language and cultural differences;
• stringent local labor laws and regulations;
• currency exchange rate fluctuations;
• risks related to government regulation; and
• potentially adverse tax consequences.
Intense competition may adversely affect our ability to achieve or maintain market share and operate
profitably.
We compete for advertising dollars with large Internet portal sites, such as America Online, MSN and Yahoo!,
that offer listings or other advertising opportunities for travel companies. These companies have significantly
greater financial, technical, marketing and other resources and larger client bases. We also compete with search
engines like Google and Yahoo! Search that offer pay-per-click listings. In addition, we compete with newspapers,
magazines and other traditional media companies that provide online advertising opportunities. We expect to face
additional competition as other established and emerging companies, including print media companies, enter the
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