The Deal Experts. Over 27 Million Subscribers Worldwide.

First Quarter 2014 Performance and Growth Strategy Overview

April 17, 2014
Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Important Notice
Please read this management presentation together with the Companys press release issued earlier today announcing the Companys first quarter 2014 financial results and in conjunction with the Companys recent Annual Report and Quarterly Results as filed with the Securities and Exchange Commission (SEC). Certain statements contained in this presentation that are not historical facts may be forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These forward looking statements may include, but are not limited to, statements about our plans, objectives, expectations, prospects, expected future financial guidance and intentions, markets in which we participate and other statements contained in this presentation that are not historical facts. When used in this presentation, the words "expect," "predict," "project," "anticipate," "believe," "estimate," "intend," "plan," "seek" and similar expressions are generally intended to identify forward looking statements. Because these forward looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements, including changes in our plans, objectives, expectations, prospects and intentions and other factors discussed in our filings with the SEC. We cannot guarantee any future levels of activity, performance or achievements. Travelzoo Inc. undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this presentation.

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Part 1: First Quarter 2014 Performance

Part 2: Growth Strategy Overview

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Subscriber growth continues yet total revenue and earnings per share are impacted by lower Search and Local revenue.
Q1 2014 Financial Performance

Revenue $ millions

EPS $ per share

Subscribers Millions

42.2

40.2 $0.36 $0.31

22.9

23.6

Q1 2013

Q1 2014

Q1 2013

Q1 2014

Q1 2013

Q1 2014

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Europe revenue growth is offset by decline in North America revenue.

Quarterly Revenue by Segment
North America $ millions Q1 2012 2013 28.6
+5%

Europe $ millions 10.8

+14%

Europe (local currency) millions 6.9

+14%

29.9

12.3

7.9

Q2

2012 2013

28.7
+5%

10.6
+4%

6.7
+7%

30.2

11.1

7.2

Q3

2012 2013

25.1
+4%

10.7
+7%

6.7
+9%

26.2

11.0

7.1

Q4

2012 2013

26.4
-3%

10.7
+12%

6.6
+11%

25.6

11.9

7.3

Q1

2013 2014

29.9
-12%

12.3
+13%

7.9
+6%

26.4

13.8

8.4

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

North America revenue is down year-over-year due to a planned reduction of Search marketing spend and lower voucher sales.
North America Revenue by Type
$ millions

Highlights
29.9 6.7 5.7 25.6 6.8 3.8 26.4 5.3 3.9 Y/Y % Change (22%) (32%) Q/Q % Change (23%) Travel Q/Q 15% seasonal increase; Y/Y 1% decrease driven by lower Getaways revenue and lower spending by certain online booking engines and international airlines. Search Q/Q flat; Y/Y 32% decrease due to reduced marketing spend and user migrations to mobile devices, which currently monetizes lower than website visits. Local Q/Q 23% decline; Y/Y 22% decrease driven by weak voucher sales.

17.5

14.9

17.2

(1%)

15%

Q1 2013
Local Search Travel

Q4 2013

Q1 2014

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Europe revenue growth is driven by a 20% year-over-year increase in Travel revenue.

Europe Revenue by Type
$ millions

13.8 12.3 2.1 0.9 11.9 2.3 0.7 1.7 1.0

Y/Y % Change (21%) 12%

Q/Q % Change (27%) 35%

Highlights
Travel Q/Q 26% increase due to seasonality. Y/Y 20% increase driven by increased advertising by travel agencies, booking engines and vacation packagers and growing Getaways revenue. Search Q/Q 35% increase; Y/Y 12% increase due to expansion of advertiser base to Search. Local Q/Q 27% decrease; Y/Y 21% decrease, both due to declining voucher sales.

11.2 9.3 8.9

20%

26%

Q1 2013
Local Search Travel

Q4 2013

Q1 2014

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

North America and Europe segments maintained profitability despite lower revenues and continued investments.
Year-over-Year Comparisons

7.0 2.4 Q1 2014 ($ millions) 4.6

0.1 (2.5) 4.6

Comparison: Q1 2013 ($ millions)

5.5 Operating income North America

2.5 Operating income Europe

8.0 Operating income

0.1 Other income

(2.5) Income taxes

5.6 Net income

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Cost of revenue year-over-year increase is due to syndicated deal costs, customer service and refund costs. Operating margin is seasonally higher than prior quarter.
Cost of Revenue
as percentage of revenue

Operating Margin
as percentage of revenue

12.5%

11.9%
Subscriber refunds Customer service Local Credit card processing

9.4%

19.1% 17.4% 11.9

Other

Q1 2013

Q4 2013

Q1 2014

Q1 2013

Q4 2013

Q1 2014

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Reduction in North America operating expense is due primarily to a planned reduction of Search marketing spend and lower bonus compensation.
Operating Expenses
$ millions and as percentage of revenue

71% General & Administrative

21.3 18.3 70% 10.1 75% 9.2 3.7 26% 3.2 27% 73%

25%

7.6 6.9 26%

Sales & Marketing

46%

13.7 11.5

44%

49%

6.0

6.4

46%

Q1 2013

Q1 2014

Q1 2013

Q1 2014

North America business segment

Europe business segment

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Selective headcount additions in Europe.

Headcount and Average Annualized Revenue per Employee
448 162

407 Headcount Europe 360 130 374 144 151

417 157

425 153

444 160

436 155

444 163

256 North America 230 230

260

272

284

286

281

281

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Average annualized revenue per employee ($ thousands)

$437

$420

$348

$356

$397

$372

$333

$344

$362

Q1 2014 Performance and Growth Strategy Overview

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Cash position decreases due to stock repurchases*, while collections remained solid.
DSO and Cash Balances
DSO (Days Sales Outstanding) # of days Cash Balance at End of Quarter** $ millions

65.1 35 36

66.3 61.0

34

Q1 2013

Q4 2013

Q1 2014

Q1 2013

Q4 2013

Q1 2014

* Stock repurchases during Q1 2014 amounted to $5.6 million. ** Includes cash and cash equivalents
Q1 2014 Performance and Growth Strategy Overview

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First Quarter 2014 Performance Summary

Solid revenue growth in Europe Travel offset by lower Search and Local revenue in North America. Investments continue in product, including hotel booking capability. Cash position decreases due to stock repurchases, while collections remained solid.

Q1 2014 Performance and Growth Strategy Overview

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Part 1: First Quarter 2014 Performance

Part 2: Growth Strategy Overview

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

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We remain confident in our business model and long term opportunity, as we are making investments to drive future growth.
Long-term growth in our business is driven by people, our audience, and products.

Annual revenue per subscriber* US$ per subscriber

Strategic Elements:
1. Audience: Grow subscribers, but also mobile users, Facebook fans, and Twitter followers. 2. Products: Enhance our products to enable users to search what, where and when, particularly on mobile and for hotels.

$6.91*

Travelzoo

23.6 million

Number of subscribers**

* Defined as year to date revenue divided by the number of subscribers at beginning of year. ** North America and Europe only. Asia Pacific operated by a licensee.
Q1 2014 Performance and Growth Strategy Overview

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Strategic Element 1: Audience Grow and actively engage audience across all media.
Travelzoos past has shown that subscriber growth drives overall revenue growth
Beginning of Year Subscribers 8.1 million 9.7 million 10.9 million 12.4 million 13.5 million 16.8 million 18.9 million 21.5 million 22.5 million 23.3 million**

We are changing the way we communicate with our audience as media consumption shifts to mobile & social
3+ million mobile app downloads

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q1 2014

Revenue per Subscriber $6.23 $7.19 $7.25 $6.56 $6.96 $6.69 $7.85 $7.04 $7.05 $6.91*

Revenue $51 million $69 million $79 million $81 million $94 million $113 million $148 million $151 million $158 million $161 million***

Mobile app downloads

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

2 million social media followers

Future Opportunity 30 million 35 million $7.00 $7.00 $210 million $245 million

Facebook & Twitter Fans

Q1 2013 Q2 3013 Q3 3013 Q4 3013 Q1 2014

* Defined as year to date revenue divided by the number of subscribers at the beginning of year ** Quarter-end subscribers *** Revenue per subscriber multiplied by quarter-end subscribers.
Q1 2014 Performance and Growth Strategy Overview

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Strategic Element 2: Products We initiated a performance review of our Search business.

Search revenue has been declining
(includes SuperSearch and Fly.com) $29.1 $27.3 $24.0 Travelzoo Search is an important element of our strategy, we will continue to offer a Search product, to drive Revenue Profit Subscriber growth Airfare deals content 2011 2012 2013 Interest in more profitable, non-Search content, such as hotels Mobile is an increasingly important aspect of our business, we do not offer SuperSearch on mobile. Bidding for traffic has become very competitive. As we look to improve profitability by reducing bids, we expect our revenue to decrease by $1.5 million to $2.0 million in Q2 year-over-year.

Observations from our review so far

Recent trends affecting SuperSearch Challenging and more competitive traffic acquisition on search engines Consumers move increasingly to mobile devices, where SuperSearch is not present and monetization is currently lower than desktop Deteriorating economics in flight comparison; hotel search remains more profitable

Q1 2014 Performance and Growth Strategy Overview

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Strategic Element 2: Products We are investing in a hotel booking platform.

Investment thesis
Consumer view on current state Consumers can only do business with Travelzoo if we have a deal where and when they want to go. Loyal Travelzoo subscribers book full price hotel stays on other websites because Travelzoo does not offer such a service. Many subscribers do not want the hassle of booking a voucher. Booking deals via mobile phones on third-party sites remains difficult. Hotel view on current state Hotels only offer off-season deals on Travelzoo one to four weeks per year, for very limited dates. Many hotels do not work with Travelzoo because we do not offer a commission model or we do not help with full price business. A large number hotels are not able, or do not want, to work with voucher formats.
Q1 2014 Performance and Growth Strategy Overview

Travelzoo view on current state We do not currently participate in the upside of peak season, e.g. Off-Peak hotel booking [Illustrative] $100 x 15% = $15 Peak hotel booking [Illustrative] $200 x 15% = $30 Hotels limit their activity with Travelzoo because advertising budgets are fixed. Smaller hotels do not have mobile booking capability.

www.travelzoo.com

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Strategic Element 2: Products What we have seen in our beta test period.
Beta test highlights
Consumer data points from beta test Approximately 200,000 select subscribers have now accessed the booking engine. Among those subscribers who booked in our onemonth beta test period: 84% did not book a Getaway in the past two years. Average hotel revenue was 300% greater during the one-month beta test period, when compared to their average full-year hotel revenue in 2012 and 2013. Total hotel revenue from subscribers who booked
60 50 40 30 20 10 0

Hotel data points from beta test 46% of bookings were at full price, the rest were deals. 56% of participating hotels have not run a deal on Travelzoo in 2 or more years because they cannot participate in the voucher or advertising model. Renewed hotel relationships e.g. The Boulders, a Waldorf Astoria Hotel has not run on Travelzoo since 2011; achieved over 350 bookings in beta test. e.g. Hilton, New York Midtown ran one week on Travelzoo since 2004; achieved over 300 bookings in beta test.

$54

$14

$13

2012

2013

Mar-14

Total hotel revenue per subscriber includes Getaways, hotel advertising clicks and booking engine commissions among those subscribers who booked in hotel booking engine during beta test period.
Q1 2014 Performance and Growth Strategy Overview

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Strategic Element 2: Products We have begun user testing and will ramp through 2014.
Q1 2014
Fine-tune UX for web and mobile Ramp up hotel contracts/develop hotel content Expand hotel connectors to add more hotels Begin beta testing

Q2 2014
Continue to enhance UX and connectors Enhance rates and selection Message deals & any time bookings to broader audience Learn from subscribers and hotels, update as necessary

Q3 Q4 2014
Roll-out new platform across the board and all devices Aggressively ramp up: Any time booking message Number of hotels Number of deals Booking revenues*, particularly from mobile users.

Q1 impact on expenses was ~$800,000 or ~$0.04 EPS impact with no significant revenue benefit

Q2 impact on expenses expected to be ~$1.1 million or ~$0.05 EPS impact with no significant revenue benefit*

* Revenues for hotel bookings made with Travelzoo will be recognized after the hotel stay is completed. Currently, we see an average 60 70 day time lag between booking and stay.
Q1 2014 Performance and Growth Strategy Overview

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Bookings on our hotel platform generate revenues later than voucher sales, as Travelzoo acts as an agent and collects commissions after the actual stay.
Hotel Voucher and Advertising Formats (Getaways)

User purchases voucher. Credit card charged by Travelzoo.

User redeems voucher at hotel.

Booking made & Revenue recognition (minus allowance for refunds)

Hotel Booking Platform (Agent Model)

User books hotel on Travelzoo website.

Average of 60-70 days
Q1 2014 Performance and Growth Strategy Overview

User pays for hotel stay at check-out. Hotel pays Travelzoo a commission. Guest stays & Revenue recognition

www.travelzoo.com

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We continue to believe that deal quality drives subscriber loyalty and that our quality-leadership positions us well for long-term success.
High-Quality Local Deals
Highly rated restaurants, luxe spas, top shows and exciting local adventures.

Outstanding Travel Deals

We feature deals at Travel + Leisure's World's Best 500 and Conde Nast Traveler's Gold List.

Top 20 list
This week's most outstanding travel, entertainment and local deals, researched and tested.

Q1 2014 Performance and Growth Strategy Overview

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Management Focus for 2014

Maintain our quality leadership position by publishing high-quality deals and tightening brand control. Resume top-line revenue growth by investing in: Audience growth and engagement, across email, web, social and mobile. Products that simplify and improve our business, particularly our online booking capability for hotels and our mobile products. Continue to increase sales force productivity. Invest for future growth while remaining profitable.

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

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APPENDIX

Q1 2014 Performance and Growth Strategy Overview

www.travelzoo.com

Travelzoo Inc. Revenue by Segment and Type - Quarterly and Year to Date (in thousands except for percentages) North America Travel Q/Q growth rate Y/Y growth rate Search Q/Q growth rate Y/Y growth rate Local Q/Q growth rate Y/Y growth rate Total North America Revenues Q/Q growth rate Y/Y growth rate Europe Travel Q/Q growth rate Y/Y growth rate Search Q/Q growth rate Y/Y growth rate Local Q/Q growth rate Y/Y growth rate Total Europe Revenues Q/Q growth rate Y/Y growth rate Total Consolidated Revenues Q/Q growth rate Y/Y growth rate Consolidated Travel Q/Q growth rate Y/Y growth rate Search Q/Q growth rate Y/Y growth rate Local Q/Q growth rate Y/Y growth rate Total Consolidated Revenues Q/Q growth rate Y/Y growth rate (1) (2) (3) Q1 12 15,546 8% -4% 6,005 29% 1% 7,005 8% 30% 28,556 12% 4% Q1 12 7,393 20% 1% 1,290 13% 35% 2,094 -11% 82% 10,777 12% 14% 39,333 12% 6% Q1 12 22,939 12% -2% 7,295 26% 6% 9,099 3% 39% 39,333 12% 6% Q2 12 14,591 -6% 3% 5,985 0% -6% 8,136 16% 15% 28,712 1% 4% Q2 12 7,543 2% 8% 1,012 -22% -24% 2,093 0% 28% 10,648 -1% 7% 39,360 0% 5% Q2 12 22,134 -4% 5% 6,997 -4% -9% 10,230 12% 17% 39,360 0% 5% Q3 12 12,606 -14% -4% 5,737 -4% -18% 6,804 -16% -13% 25,147 -12% -10% Q3 12 7,368 -2% 6% 1,026 1% -38% 1,906 -9% -10% 10,300 -3% -4% 35,447 -10% -8% Q3 12 19,974 -10% -1% 6,763 -3% -22% 8,710 -15% -12% 35,447 -10% -8% Q4 12 13,894 10% -3% 5,374 -6% 15% 7,105 4% 9% 26,373 5% 3% Q4 12 7,540 2% 23% 821 -20% -28% 2,295 20% -3% 10,655 3% 10% 37,028 4% 5% Q4 12 21,433 7% 5% 6,195 -8% 7% 9,400 8% 6% 37,028 4% 5% Q1 13 17,491 26% 13% 5,703 6% -5% 6,718 -5% -4% 29,911 13% 5% Q1 13 9,292 23% 26% 870 6% -33% 2,104 -8% 0% 12,266 15% 14% 42,177 14% 7% Q1 13 26,783 25% 17% 6,573 6% -10% 8,822 -6% -3% 42,177 14% 7% Q2 13 16,463 -6% 13% 5,980 5% 0% 7,806 16% -4% 30,249 1% 5% Q2 13 8,182 -12% 8% 840 -3% -17% 2,055 -2% -2% 11,078 -10% 4% 41,327 -2% 5% Q2 13 24,645 -8% 11% 6,821 4% -3% 9,861 12% -4% 41,327 -2% 5% Q3 13 14,939 -9% 19% 5,173 -14% -10% 6,096 -22% -10% 26,208 -13% 4% Q3 13 8,298 1% 13% 828 -1% -19% 1,921 -7% 1% 11,047 0% 7% 37,256 -10% 5% Q3 13 23,238 -6% 16% 6,001 -12% -11% 8,017 -19% -8% 37,256 -10% 5% Q4 13 14,919 0% 7% 3,849 -26% -28% 6,818 12% -4% 25,586 -2% -3% Q4 13 8,863 7% 18% 725 -12% -12% 2,300 20% 0% 11,889 8% 12% 37,475 1% 1% Q4 13 23,782 2% 11% 4,574 -24% -26% 9,119 14% -3% 37,475 1% 1% Q1 14 17,229 15% -1% 3,854 0% -32% 5,270 -23% -22% 26,353 3% -12% Q1 14 11,193 26% 20% 979 35% 12% 1,670 -27% -21% 13,842 16% 13% 40,195 7% -5% Q1 14 28,423 20% 6% 4,833 6% -26% 6,940 -24% -21% 40,195 7% -5%

Travel includes travel publications (Top 20, Website, Newsflash, Network) and Getaway vouchers Search includes SuperSearch and Fly.com Local includes Local Deals vouchers and Entertainment non-vouchers

Q1 2014 Performance and Growth Strategy Overview

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