Travel Zoo

It’s feeding time at Travelzoo

Chris Loughlin is one of the youngest bosses of a listed American firm – and he’s British. But can he take on Groupon and Google, and win?

We meet in Soho but it’s too noisy in the coffee bar. “Right,” says Chris Loughlin, bristling with purpose, “back to our office on Shaftesbury Avenue.” And he marches me off at a pace — no surprises that his father was a major in the army, and an Ulsterman at that.

But sandy-haired Loughlin, 37, is something else entirely, an e-business boss who is one of the youngest to head a Nasdaq-listed firm. His business, Travelzoo, saw its shares rocket this year after it posted record first-quarter growth figures. The New York-based firm is now valued at $1.2 billion (£783m), despite 2010 revenues of only $113m.

Could it be the new Groupon? Or could it get swallowed by a bigger fish like Google? Maybe it will just be overwhelmed by the deluge of competition. Travelzoo puts together discount deals in travel and entertainment for its 23m subscribers worldwide — and it has no shortage of online rivals, from Groupon, Expedia and Lastminute to a host of smaller firms.

The sector is booming and Travelzoo has been building its customer base for a decade with free subscriptions, sending out its Top 20 Deals list every Wednesday. In the process it has morphed from a travel firm to a deal business, and its recent shift into local deals, linked to subscribers’ postcodes, has accelerated that growth.

For Loughlin, one of the tech world’s rising stars, the patient approach is paying off. “This is all a tremendous opportunity for us. Either you spend £100m on buying awareness or you build step by step and eventually you are known for top quality.”

This month sees the American launch of Travelzoo’s longawaited local deal smartphone app, which will allow subscribers to walk down a virtual street and see what restaurants and hotels are offering. A British version will follow before September.

Loughlin pitches a scenario where you could fly into a city and pull the best deals for hotels, restaurants and trips off your phone as you leave the airport. He describes it as a game-changer, radically altering consumer behaviour and allowing hospitality and tour businesses to practise proper yield management. “It is a fundamental shift — local managements have the chance to fix their own deals. But it all depends on whether you trust the source.”

Stocky and determined, Loughlin talks rapidly in a transatlantic accent, the product of living in America for more than a decade. He apologises for his jet lag — he flew into London three hours earlier — but brims with confidence about his business.

Travelzoo, with 2.3m subscribers in Britain, is certainly quirky. Founded in California 13 years ago by Ralph Bartel, a German media executive, it makes its money by charging businesses to feature in its deals, and draws its staff from publishing, newspapers and television to package and test the offers. That, says Loughlin, gives it a different ethos from the pile ’em high approach of Groupon, which simply shifts unwanted stock or services.

It also attracts a more affluent and loyal subscriber base. Loughlin cites Travelzoo’s recent offer for a £48 “dining experience” at Gordon Ramsay’s Maze restaurant in London. More than 2,900 covers were sold. Another offer for St David’s Hotel and Spa in Cardiff attracted 2,100 buyers.

But how does that stack up against the sheer scale of Groupon and the new Google Offers? Groupon is launching an app that looks very similar to Travelzoo’s. Little wonder that Travelzoo’s share price has yoyoed since its April peak of $101.

“Look,” counters Loughlin, “the market is very large, it’s worth double-digit billions, and there is constant disruption. I think the entry of Groupon and Google Offers very much validates it.”

As for the Groupon Now app, he is not worried. “Go to our US site, click on local deals and look at the establishments and deals. Then do the same for their deals. Now imagine landing in New York or Las Vegas — which deals do you want?”

Look also at Travelzoo’s roots as a travel business, he adds. That brings an audience with a higher disposable income, who Groupon takes a 40% cut of transactions, Travelzoo is not simply selling, it is guiding choice.

“It’s the same as what you do. These people are not going to read about stuff unless you choose to write about it. And at least 75% of our revenue will come regardless of whether they buy. We book these deals in as advertisers.”

So wouldn’t Travelzoo be better off inside a larger media empire? No, says Loughlin, and anyway, the business is protected by the 51% stake still held by Bartel, its 47-year-old founder. He now lives in Switzerland while his younger brother, Holger, 45, a former McKinsey executive, sits as chairman. Holger headed the company for two years before Loughlin took the top slot last year.

These European roots are another quirk of the business. Loughlin was born in Germany — his father’s regiment was based there — although he is British by nationality. He has been married twice to Americans and credits his ability to settle anywhere to a nomadic childhood spent in army camps across Europe.

He met Bartel in America after the German bought his early start-up, Bartel says he hired and promoted Loughlin because he was one of the few not to be daunted by the tasks he was set. “He just did not seem worried by my high expectations about quality content and financial targets,” says Bartel.

Loughlin says he simply has an Ulster work ethic imbibed from both parents. His father was Protestant, his mother Catholic, which meant the family did not settle in the province during the Troubles. Loughlin was sent to boarding school in Wales before studying technology management at Staffordshire Polytechnic. Later he joined Marks & Spencer as a graduate trainee. He was involved in the retailer’s first online project but left in 1998 because he found the big company environment “very political and incredibly frustrating”.

The final straw was when a senior executive claimed credit for the project when he hadn’t even been involved.

Loughlin launched his own dotcom with a schoolmate of Martha Lane Fox, the Lastminute founder, moving to America to raise funds. That start-up, Escapecity, a travel-break site, became, and was snapped up by Bartel when it hit financial problems after September 11.

Loughlin says he learnt valuable lessons. “If I could write a book it would be about all the things not to do in starting a business — we did them all. In the end we sold to Travelzoo just to raise cash for investors, but Ralph told me to keep in touch.”

Two months later Bartel offered him a job. “I was employee number 18,” smiles Loughlin. Travelzoo had one office in Silicon Valley rented from Regus.

Four years later Loughlin returned to London to launch Travelzoo here. The next year Bartel stepped aside for his brother Holger, clearing the way for Loughlin’s ascent. The older Bartel will not say why he drew back, beyond hinting that he did not enjoy the spotlight that comes with running a listed business.

But Bartel’s vision of establishing Travelzoo as a trusted publisher of travel and entertainment deals in a cluttered internet market remains at its core. Loughlin also pinpoints a distinctly German tendency towards longerterm planning. “Germans are successful because they really think about quality and the long term, and I’m not sure if the rest of the world thinks like that.”

However, with new businesses like Groupon making a land grab, the danger is that Travelzoo will get left behind, regardless of quality. It’s still not a well-known brand here, despite six years of promotion. Two years ago it licensed out its Asian subsidiary to a separate company in an attempt to focus its funds. The fact that this company was controlled by Bartel raised some investors’ eyebrows.

Is it slipping behind? No, says Loughlin. “Rather than drag on group earnings for years to come, we sold the Asia Pacific business with an option to buy it back. As a private company, the new entity can invest harder and faster than we might have been able to, and there is no difference to our subscriber base.”

And it is the subscriber experience that is key, he says. “People who use our service get why it’s different. Go to Google and type ‘I hate Travelzoo’, then type in ‘I hate ...’ other brands. There is no hate around our brand, though I think the second mention is probably me making this point.”

He laughs and apologises. Colleagues say that detail is typical Loughlin — he is ambitious and determined, with an impetuous streak, but always with an eye on minutiae. “He lives, sleeps and breathes the business,” says Stephen Dunk, Travelzoo’s European operations director, who previously worked at Teletext. “And he is totally committed.”

That goes down well in America, where Loughlin says being British can be an advantage. “People do think you are smarter than you are,” he grins.

Will he ever return here for good? He is not sure. His wife and children are American, his elder sister lives in Arizona. “I grew up with a great passion for America. We were based at the Supreme Headquarters Allied Powers Europe, near Brussels, and we saw what they had.”

Those around him note that Loughlin is here quite a lot anyway, as his hands-on style keeps him close to the detail. He also has to ensure the message is clear: he just wants people to give Travelzoo a try.

“If you haven’t seen what opportunities there are, you are really missing out. It’s free and useful and, actually, our demographic is a little like yours, it’s mature…”

Is he calling my readers old? “No, no, I’m a big reader. I read every page…” He’s still protesting when I leave.