Why does Travelzoo have a big China problem?
02/19/2019|10:46:21 AM|Skift

Travelzoo is setting investors at ease with a jump in profits, even as global trade tensions aggravate business in Asia.

Gains in North America and Europe in the fourth quarter drove an increase in the stock price of the deals marketer on February 6, but ongoing losses in the Asia Pacific region dragged overall revenue down. In particular, the vacation package site suffered a nearly 30% loss in revenue in China, due in part to staffing issues and the ongoing U.S.-China trade war. The region has been a source of losses for the company for over three years.

“I would say the only area where we see a significant decrease in travel is in China, consistent with what we have heard from other companies,” said Travelzoo CEO Holger Bartel during an earnings call on Wednesday. “We have to move in step with the Chinese consumer who is hesitating to spend, but that might change at some point in time when the trade war between the U.S. and China is coming to a conclusion.”

Four years ago, the company reacquired its business in Asia Pacific from Travelzoo founder, Ralph Bartel, the brother of CEO Holger Bartel. Travelzoo initially spun off Travelzoo Asia-Pacific in 2009, citing significant losses. However, since the reacquisition, the brand has been unable to turn a profit in the region.

“We understand that the continued losses are not acceptable neither for investors nor for us,” Bartel said. “More efforts are needed from our global organization to assist Asia Pacific with growing revenue to reach profitability.

To this point, he emphasized a company project known internally as Asia Pacific 2020. Bartel said Travelzoo would soon announce an experienced executive to oversee the outline and execution of the project.

He added that the brand was looking into partnerships in China, in order to grow its scale in the country.  A “temporarily smaller sales team” was another reason for the lowered revenue in the Chinese market, he said, promising that Travelzoo would build up the team in 2019.

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