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Priceline.com Inc (PCLN), Expedia Inc (EXPE): Where Is the Best Travel Investment Opportunity?

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Priceline.com Inc (NASDAQ:PCLN)The business of online travel is thriving, and years of strong stock performance as proof. The undoubted leaders of the space are Priceline.com Inc (NASDAQ:PCLN) and Expedia Inc (NASDAQ:EXPE), but according to investors, Travelzoo Inc. (NASDAQ:TZOO) is also a serious player in the space. So which company is presenting the best investment opportunity?

A Rising Star?

Travelzoo Inc. (NASDAQ:TZOO) has produced gains of 55% in 2013, and prior to last Thursday, those gains were closer to 75%. Travelzoo Inc. (NASDAQ:TZOO) has continued to produce modest growth, which has fueled the stock’s gains.

Quarter/Year Revenue Growth Over Previous Year
Third/2012 ~8%
Fourth/2012 5%
First/2013 7%

You can see that revenue growth for the previous three quarters had accelerated. However, revenue grew just 5% in its (second) quarter announced on Thursday.

Both Expedia Inc (NASDAQ:EXPE) and Priceline.com Inc (NASDAQ:PCLN) continue to produce growth over 20% year-over-year, and control the majority of the online travel space. Priceline.com Inc (NASDAQ:PCLN) has revenue of $5.5 billion and Expedia has recorded $4.23 billion in the last 12 months. Travelzoo Inc. (NASDAQ:TZOO) has revenue of just $155 million in the same period.

Travelzoo continues to lag in an industry with double digit growth. The company has more than 26 million subscribers. Therefore, Travelzoo Inc. (NASDAQ:TZOO) has a large presence to monetize, but simply cannot grow.

What Do These Leaders Do?

Expedia Inc (NASDAQ:EXPE) and Priceline.com Inc (NASDAQ:PCLN) both offer near identical services. A customer visits either site then searches for flights, hotels, cruises, etc. The customer can then purchase the product. Both companies offer some vacation packages that include car, flight, and hotel, but are not reliant upon these vacation packages for fundamental growth.

Travelzoo Inc. (NASDAQ:TZOO) also offers airfare or hotel only products, but operates around its travel, entertainment, and local deals. The company sells packages at a discounted price, but only for certain cities. Travelzoo then has to push its subscribers to competing sites such as Expedia Inc (NASDAQ:EXPE) or Priceline.com Inc (NASDAQ:PCLN) when it does not offer packages for the desired city.

Travelzoo spends most of its resources on creating such vacation packages with its sales team, and also trying to grow its subscriber base. Expedia Inc (NASDAQ:EXPE) and Priceline.com Inc (NASDAQ:PCLN) spend most of their cash on marketing, advertising, commercials, etc. Clearly, growth shows which of these two strategies is most effective.

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