<SEC-DOCUMENT>0000950138-11-000526.txt : 20120221
<SEC-HEADER>0000950138-11-000526.hdr.sgml : 20120220
<ACCEPTANCE-DATETIME>20111006172209
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950138-11-000526
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20111006

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TRAVELZOO INC
		CENTRAL INDEX KEY:			0001133311
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				364415727
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		590 MADISON AVENUE
		STREET 2:		37TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		2124844900

	MAIL ADDRESS:	
		STREET 1:		590 MADISON AVENUE
		STREET 2:		37TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Glen Ceremony</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">590 Madison Avenue, 37th Floor</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Accounting Branch Chief</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Division of Corporation Finance</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">United States Securities Exchange Commission</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">100 F Street N.E.</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Washington, D.C. 20549-7410</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold">Re:&#160;&#160;Travelzoo Inc.</font></div>

<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold">Form 10-K for the Fiscal Year Ended December 31, 2010</font></div>

<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold">Filed March 16, 2011</font></div>

<div style="TEXT-INDENT: 36pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold">File No. 000-50171</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Dear Mr. Gilmore:</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block">&#160;</div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We are writing in response to the comments we received from you by letter dated September 21, 2011, regarding the above-referenced filings of Travelzoo Inc. (the &#8220;Company&#8221;, &#8220;we&#8221; or &#8220;Travelzoo&#8221;). For ease of reference in this letter, your comments appear in italics directly above the Company&#8217;s responses.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Form 10-K for the Fiscal Year Ended December 31, 2010</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Critical Accounting Estimates</font></font></div>

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<div><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">1.&#160;&#160;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We note your disclosure regarding revenues earned from selling vouchers for deals from local businesses that the company applies a return allowance for potential voucher refunds. Please tell us how you considered disclosing the typical terms of the vouchers that would provide for such a refund or have any other type of performance obligation. In light of the relatively short history of this product offering tell us how you derive your estimate for refunds. In addition, explain why you do not present a roll-forward of the valuation account as prescribed by Rule 12-09 of Regulation S-X.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></div>

<div><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></div>

<div><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 2</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The Company&#8217;s voucher terms allow for refunds to customers for up to 7 days after the voucher purchase. Although we disclosed that the Company applies a return allowance for potential voucher refunds, we did not believe further disclosure of specific terms of refunds was necessary as it was considered insignificant to our financial disclosures; revenues from Local Deals were less than 3% of total revenue for our year ended December 31, 2010, and the amount of revenue subject to refund as of December 31, 2010, was $555,000.</font></font></div>

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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Due to the relatively short refund right of 7 days we were able to obtain multiple cycles of refund history in a relatively short period of time in order to estimate our refunds.&#160;&#160;We considered ASC 650 footnote 55 guidance that indicates that the SEC staff typically would expect two years of experience to be able to make reasonable and reliable estimates. Based upon a more typical return right of 30 days this would equate to approximately 24 return cycles.&#160;&#160;We reviewed the 20 return cycles we had experienced as of December 31, 2010 with our 7 day return right and determined, based upon the number of cycles and relatively consistent pattern of returns, that we had accumulated sufficient history of returns to determine a reasonable and reliable estimate of returns.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We did not present a roll-forward of our returns allowance as it was considered insignificant to our financial disclosures, representing less than 0.1% of current liabilities and less than 0.1% of net income for the year ended December 31, 2010.</font></div>
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<div><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">2.&#160;&#160;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We note in the management presentations for the quarters ended December 31, 2010, March 31, 2011 and June 30, 2011 you disclose annual revenue per subscriber and indicate that increasing revenue per subscriber is a key driver of the company&#8217;s growth strategy. In your discussion of Reach on page 25 you disclose that management evaluates whether the company is able to convert higher Reach into higher revenues. Please tell us how you considered disclosing annual revenue per subscriber metric as a key performance indicator you use in managing your operations, including a discussion of any trends you have experienced in the metric and the underlying reasons for such trends. Refer to Item 303(a) of Regulation S-K and
Section III.B of SEC Release 33-8350.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We do not include disclosure of annual revenue per subscriber metric as a key performance indicator as we do not use this measure to manage our operations. This metric was used in our management presentation to illustrate our monetization of our subscriber base at a point in time, at a macro-level using annualized revenues; however, it is not used to manage our operations as it is too high-level.&#160;&#160;In our discussion of Reach on page 25, we discuss how we monitor our page views and subscriber growth to measure our progress of increasing Reach. </font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 3</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font size="3" style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Once we increase Reach, we evaluate whether and how we will convert this Reach into higher revenues. This conversion into higher revenues may come through existing and new offerings to the wider Reach and our ability to increase our rates based upon this increasing Reach. There is not necessarily a direct correlation between increased Reach and higher revenue because it depends on many factors such as the macro-economy, demographics of our Reach, the quality of the deals we offer and our ability to increase advertising rates. We address our revenues relative to our Reach on pages 26 and 27, in which we describe the changes in revenues relative to subscriber growth including the various advertising service formats that contributed
as well as management&#8217;s approach to advertising rates.</font></div>

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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We note that in your management presentations for the quarters ended March 31, 2011 and June 30, 2011 and in the related conference calls with analysts, you disclose quarterly gross revenues for Local Deals. As you present these revenues in your financial statements net of payments to the businesses, please tell us how you considered separately disclosing the amount of net revenues from Local Deals and any other voucher offerings as reflected in your financial statements to provide investors with greater clarity regarding the relative significance of the company&#8217;s differing revenue streams and
the impact on gross profit margin and overall results of operations. Please tell us the net revenues from Local Deals and other voucher sales for the year ended December 31, 2010 and for the quarters ended March 31, 2011 and June 30, 2011. Refer to Item 303(a)(3)(ii) and (iii) of Regulation S-K and Section III.B of SEC Release No. 33-8350</font>.</font></font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The service we provide is advertising and this advertising is provided in several different formats. For example, some of our formats historically have been Top 20, Newsflash, SuperSearch and Fly.com. We may <font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">internally</font> group some of these formats together either based upon historical views of these formats or the managers interest in summarized information. Local Deals is merely another format of advertising that is emailed out to our subscribers and is available to our subscribers on our website. The gross revenue was used in our strategic section of our management presentation merely to illustrate our effort to continuously innovate new formats of advertising we can deliver to our subscriber base. We did not disaggregate these forms of
advertising as we do not believe they are distinct or significant enough to provide any greater clarity on our ability to monetize our subscriber base. This different format of the same service is illustrated by the fact that some advertisers have shifted from one format of advertising such as Top 20 to Local Deals treating it as more of a format shift to ultimately achieve the same purpose, for example, to fill empty hotel rooms.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 4</font></font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Disaggregating the impact of these formats on gross profit and operating profits would not be meaningful, and in certain cases we believe could be misleading, as there are many common costs between our different forms of advertising such as subscriber acquisition spending, marketing, technology and administrative costs. Further information on common costs is included in our response to your comment number 6.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We have provided you on a supplemental basis the net revenues for our Local Deal voucher-based sales for the year ended December 31, 2010, and for the quarters ended March 31, 2011 and June 30, 2011.</font></div>
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<div><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">4.&#160;&#160;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Similarly, we note in your management presentations for the quarters ended December 31, 2010, March 31, 2011 and June 30, 2011 that one of management&#8217;s focus for 2011 is to bring Fly.com to profitability and to build on SuperSearch profitability. We further note that in your discussion and analysis you separately quantify in the amount of the increase in revenues attributable to search products, the increase in the amount of fees paid related to user searches on Fly.com, and the increase in marketing expenses for Fly.com. Please tell us how you considered separately disclosing the amount of revenues and related expense line items related to Fly.com and/or attributable to search products to provide investors with
greater clarity regarding the relative significance of the company&#8217;s differing revenue streams and the impact on gross profit margin and overall results of operations. Please provide us with this information on a supplemental basis for the year ended December 31, 2010 and for the quarters ended March 31, 2011 and June 30, 2011.Refer to Item 303(a)(3)(ii) and (iii) of Regulation S-K and Section III.B of SEC Release No. 33-8350.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We separately disclosed on page 26 the dollar amount of fluctuation in revenues due to our search products as this assisted in providing some level of distinction to the change in advertising revenues. Similarly, we separately disclosed certain identifiable expenses associated with our search products and/or Fly.com if it contributed to an explanation of the fluctuation of an expense category.&#160;&#160;We believe we are achieving our objective of the discussions in MD&amp;A, to explain the fluctuations and trends, by highlighting changes in format revenue when relevant and we believe that disclosing total revenue by format would not enhance the fluctuation or trend discussion further.&#160;&#160;In addition, we have not disclosed our search products total revenue as we view these revenues as merely
another form of the same overall advertising service.&#160;&#160;To further illustrate the similarity of revenue between formats, our search product revenue for example is click-based revenue meaning advertisers pay us for clicks delivered to their websites; however, we also earn revenues on a click basis for other forms of our advertising on&#160;our website&#160;in addition to search products.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Disaggregating the impact of these formats on gross profit and operating profits would not be meaningful, and in certain cases we believe could be misleading, as there are many common costs between our different forms of advertising such as subscriber acquisition spending, marketing, technology and administrative costs.&#160;&#160;Further information on common costs is included in our response to your comment number 6.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We have provided you on a supplemental basis the net revenues for our search product sales for the year ended December 31, 2010, and for the quarters ended March 31, 2011 and June 30, 2011.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Notes to Consolidated Financial Statements</font></font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Note (3) Commitments and Contingencies, page 50</font></font></div>

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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We note your disclosure on page 51 regarding the unclaimed property review conducted by the State of Delaware that the company is unable to predict the outcome of the unclaimed property review. We further note your disclosure on page 19 indicating that the company is not currently aware of any legal proceedings or claims pending or threatened that you believe will have, individually or in the aggregate, a material adverse effect on the company&#8217;s financial condition or results of operations. In light of the April 21, 2011 $20 million settlement with the State of Delaware, please describe for us how your Form 10-K disclosures complied with ASC 450 and Items 103 and 303 of Regulation S-K. In this regard, tell us
the following:</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Describe for us the timing of discussions with the State of Delaware during this review through the April 2011 agreement;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">How you applied the loss contingency accrual criteria in ASC 450-20-25-2, including your assessment regarding probability and estimate of probable losses;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">How you considered ASC 450-20-50-1 and the need to disclose the amount, if any, accrued;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">How you considered the disclosure requirement of ASC 450-20-50-4 with respect to reasonably possible losses in excess of amounts accrued;</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">How you considered the disclosure requirements in Item 103 of Regulation S-K; and</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">How you considered the need to disclose known uncertainties that could significantly impact the company&#8217;s liquidity and results of operations as required by Item 303(a) of Regulation S-K.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Travelzoo is the successor, by merger, to Travelzoo.com Corporation, a Bahamas corporation.&#160;&#160;The merger became effective on April 25, 2002.&#160;&#160;The merger agreement provided that </font></div>

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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">shareholders of the Bahamas corporation had a two-year period during which they were eligible to receive shares in Travelzoo in exchange for shares of the predecessor.&#160;&#160;There were a total of 4,155,532 shares of Travelzoo which were not claimed by the deadline.&#160;&#160;These were part of the 5,155,874 shares which were subscribed to, for no cash consideration, to persons who signed up for accounts on the website of the predecessor during a specified period in 2008.&#160;&#160;There were conditions to the issuance of those shares, and management believes that a large number of subscribers did not satisfy the conditions and were therefore not eligible to receive shares of Travelzoo in the merger.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The time period for receiving shares in the merger expired in April of 2002.&#160;&#160;Commencing with Travelzoo&#8217;s Quarterly Report on Form 10-Q filed August 13, 2004, and in each quarterly and annual report of the company thereafter through its Annual Report on 10-K for 2010, the company provided disclosure concerning the risk of claims being asserted in respect of the unissued shares.&#160;&#160;The 2002 Form 10-K included the following, under "Risk Factors - Risks Related to the Market for our Shares - Claims may be asserted against us relating to shares not issued in our recent merger,&#8221; which is typical of the ongoing disclosures:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">It is possible that claims may be asserted against us in the future by former stockholders of Travelzoo.com Corporation seeking to receive our shares, &#8230;. In addition, one or more jurisdictions, including the Bahamas or the State of Delaware, may assert rights to unclaimed shares under escheat statutes. If such escheat claims are asserted, we intend to challenge the applicability of escheat rights, among other reasons, in that the identity, residency and eligibility of the holders in question cannot be determined. There were certain conditions applicable to the issuance of shares to the Netsurfer stockholders, &#8230;. The Netsurfer stockholders were required to confirm their compliance with these conditions, and were
advised that failure to comply could result in cancellation of their shares in Travelzoo.com Corporation&#8230;. If claims are asserted by persons claiming to be former stockholders of Travelzoo.com Corporation, we intend to assert that their rights to receive their shares expired two years following the effective date of the merger, as provided in the merger agreement. We also expect to take the position, if escheat or similar claims are asserted in respect of the unissued shares in the future, that we are not required to issue such shares. Further, even if it were established that unissued shares were subject to escheat claims, we would assert that the claimant must establish that the original Netsurfer stockholders complied with the conditions to issuance of their shares. We are not able to predict the outcome of any future claims which might be asserted relating to the unissued
shares. If such claims were asserted, and were fully successful, that could result in us being required to issue up to an additional 4,115,532 shares of common stock for no additional payment, which would result in substantial dilution of the ownership interests of the other stockholders, and in the our earnings per share, which could adversely affect the market price of the </font></div>

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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">common stock.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Similar disclosure was included in Note 2 to the financial statements in the 10-K, under &#8220;Commitments and Contingencies.&#8221;</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">In the first quarter of 2010, Travelzoo received a letter from the State of Delaware, dated January 15, 2010, indicating that the Unclaimed Property office intended to conduct an examination, through a third party, ACS Unclaimed Property Clearinghouse (&#8220;ACS&#8221;), of Travelzoo&#8217;s compliance with Delaware&#8217;s escheat laws.&#160;&#160;The letter made no reference to the unclaimed shares from the merger.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The initial conference call with ACS was held on March 16, 2010, and the company began providing information in response to inquiries from ACS.&#160;&#160;Based on the status of the review at that time, Travelzoo included updated information concerning the unclaimed shares beginning with its Quarterly Report on Form 10-Q for the third quarter of 2010, including the following under Note 1 to the company&#8217;s condensed consolidated financial statements:</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">As indicated below, the Company is currently the subject of an unclaimed property review by representatives of the State of Delaware. If such escheat claims are asserted, whether as a result of such unclaimed property review or otherwise, the Company intends to challenge the applicability of escheat rights, in that, among other reasons, the identity, residency, and eligibility of the holders in question cannot be determined&#8230;. The Company is not able to predict the outcome of any future claims which might be asserted relating to the unissued shares. If such claims were asserted, and were fully successful, that could result in the Company being required to issue up to an additional approximately 4,067,000 shares of
common stock for no additional payment.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Representatives of the State of Delaware are currently conducting an unclaimed property review of the Company. In response to information requests in this review, the Company has provided information concerning uncashed checks and other unclaimed property which may be in the custody of the Company. It is the Company&#8217;s understanding that, if it holds unclaimed property of third parties whose addresses are unknown (and, in the case of the unclaimed shares referred to above, if it is established that the subscribers were entitled to such shares), that property may be subject to escheat to the State of Delaware, because it is the jurisdiction of incorporation of the Company. In the review, the Company has also been
requested to provide, and has provided, information concerning the unissued shares referred to above. No escheat claims have been asserted in respect of any such unissued shares, but it is possible that such claims may be asserted as a result of the review. The Company is unable to predict the outcome of the unclaimed property review.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">On April 12, 2011, Travelzoo received, by email, &#8220;Preliminary Findings&#8221; from ACS under the escheat review, which showed, among other things, that 3,011,794 unclaimed shares were &#8220;demandable&#8221; by the State of Delaware.&#160;&#160;No prior communications from ACS or the State of Delaware relating to the escheat review had asserted such a claim.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Following internal discussions among the board of directors, management and outside counsel relating to the escheat examination and the preliminary findings, a conference call was held on April 14 among the chief financial officer of Travelzoo, outside counsel to Travelzoo and the Delaware Office of Unclaimed Property.&#160;&#160;During the call, the representative of the State of Delaware advised the company that the preliminary findings did not represent a demand for payment and that the State of Delaware had not issued any findings relating to the escheat review.&#160;&#160;Representatives of Travelzoo described the company&#8217;s position relating to the unclaimed shares and its reasons for taking the position that the
shares in question were not subject to escheat.&#160;&#160;The Delaware official indicated that any claims which might be made would be subject to negotiation, and that he had the authority to settle issues relating to the escheat review.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">During subsequent board discussions, the directors determined that it would be in the best interests of the company and its shareholders if the Delaware escheat issues could be settled promptly, on reasonable terms, rather than dealing with the uncertainty of an unresolved potential claim relating to over 3 million shares, which had a market value at the time of over $230 million.&#160;&#160;Following discussion of the risks involved, the procedures which would be involved in contesting any claim by the State of Delaware and the length of time that there would remain uncertainty as to any potential liability by the company, the board authorized management and outside counsel to make an offer of settlement to the State of
Delaware.&#160;&#160;There followed a series of telephone calls between representatives of the company and the State of Delaware, resulting in an agreement in principle, on April 15, 2011, to settle all issues relating to the escheat review for a cash payment to Delaware by Travelzoo of $20 million.&#160;&#160;The formal settlement and release agreement was signed on April 21, and Travelzoo announced the settlement on that day as a part of its quarterly earnings announcement.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">As indicated above, Travelzoo has provided ongoing disclosure concerning the unissued shares and the Delaware review, as well as the uncertainty as to any claims that might be asserted relating to the unissued shares.&#160;&#160;&#160;&#160;&#160;Until receipt of the preliminary findings on April 12, 2011, Travelzoo had no basis to estimate the probability or amount of any loss contingency and, therefore, did not accrue for any liability prior to the first quarter of 2011 in accordance with ASC 450-20-25-2. Travelzoo believes the disclosure of both the nature of the contingency and maximum shares subject to this contingency was in accordance with
<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">ASC 450-20-50-4. </font>In addition, Travelzoo considered the escheat audit as a routine audit, the lack of any findings from </font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">the State of Delaware prior to April 12, 2011 as well as the continued disclosure of the contingency in financial statements, when assessing the adequacy of disclosure provided in Item 103 of Regulation S-K and<font style="FONT-STYLE: italic; DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;</font>Item 303(a) of Regulation S-K.&#160;&#160;Within a matter of days following receipt of those preliminary findings, Travelzoo was able to finally resolve and settle the potential liability, which was disclosed in its press release the day the settlement was signed, and was reflected in the subsequent Quarterly Report on Form 10-Q filed on May 10, 2011 under Note 1 to the company&#8217;s condensed consolidated financial
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Response</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Overview</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We believe it is important to highlight the primary nature of our business that we manage when considering the manner in which we manage it.&#160;&#160;As summarized in our business section on Page </font></div>

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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 10</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">3, we are a global Internet media company that informs our millions of subscribers worldwide about the best travel and entertainment deals available from thousands of companies. Our revenues are generated from advertising fees. We generate these advertising fees in several different ways, or formats; however, the service provided to our subscribers worldwide remains the same regardless of format; the service is to present subscribers with really interesting high quality travel and entertainment deals. Likewise, the service provided to our advertisers remains the same regardless of format, to provide them with the opportunity to reach high quality users of their travel and entertainment services for which they pay us an
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We manage this advertising business by geography; North America and Europe. We began our business originally in North America and thereafter expanded to Europe, and therefore our historic management structure is based on this geographic structure and this is the ultimate manner in which we allocate resources, communicate to our Board and communicate to our shareholders. We have found over time that the differences both in advertising markets between these geographies and management as well as the inter-relationships of our advertising formats by geography, all lend itself to management of resources at the geographic level. There are, however, some formats (i.e. similar to product lines) of our advertising that we
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">Segment Reporting</font></font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">In accordance with ASC 280-10-50, we determined that our Chief Operating Decision Maker (CODM) is our Chief Executive Officer (CEO) and that we have two operating segments (North America and Europe segments) as resources are allocated based at this level of operating performance.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The CODM receives financial information for both North America and Europe segments, including information that further disaggregates the segment revenue into certain advertising formats including Publications, Local Deals, SuperSearch and Fly.com. In addition, certain direct expenses are broken out for these formats as well. The CODM does not rely upon the disaggregated information within each segment to allocate resources as there are significant shared costs and some aspects of shared format revenue which render this sub-segment information incomplete for proper resource allocation decisions between these formats.</font></div>

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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 11</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">There are certain aspects of the expense by format that do not allow the CODM to rely upon the disaggregated information within North America and Europe segments; for example:</font></div>

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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Spending that is required to continue the growth of our subscriber base, which is significant each quarter, is maintained as expenses in our Publications format; however, all the other formats benefit from the subscriber spending as it is our subscribers generating the activities in each format. For example, our Local Deals format is delivered to our subscriber base and close to half of our traffic that we get on our Fly.com and SuperSearch formats is coming from our subscribers, or general visitors to our website that result from subscriber spending.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Technology costs and majority of product development costs are maintained separately and only allocated to our existing geographic segments.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Facilities costs for all the formats including Local Deals, Fly.com and SuperSearch are maintained as an expense under the Publications format.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Marketing expense such as broad advertising campaign expenses are included in our Publications format; however all the other formats benefit from these campaigns.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our Publications sales staff sells Local Deals in the form of Getaways; however, the expense is maintained in our Publications format.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our production staff that assist in producing content to display our deals are regularly shared between our Publications and Local Deals formats; however, the expense is maintained in our Publications format.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We are leveraging existing advertiser relationships maintained by the Publications format to generate Local Deals revenue; however, no cost is reflected for the use&#160;of these existing relationships in our Local Deals format.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our finance and human resources costs are not allocated to the individual formats as expense.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">There are certain aspects of the revenue by format that do not allow the CODM to rely upon the disaggregated information within North America and Europe segments; for example:</font></div>

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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Revenues in one period from advertisers could be reflected in our Publications format and then shift to Local Deals in the next period, which depends on the format chosen by the advertiser or presented by the sales person.&#160;&#160;When we are looking at the needs of the advertiser and how we apply resources to solving those needs we are not concerned with separate resources available between formats. Our primary focus is to maximize return overall for the segment while solving the advertiser&#8217;s problem and delighting the customer with a great deal. Given this, the CODM is not making resource allocations based on format information within the segment.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The SuperSearch and Fly.com formats exist to provide each segment (North America and Europe) the level of traffic to continue to be a highly visited travel site. This allows for either rate increases or increased interest in advertisers to advertise using Publications and/or Local Deals formats and ultimately increasing revenue. This illustrates that the existence of these search formats is intended to benefit the entire segment.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">There are inter-format activities that occur in our effort to promote our different formats that essentially would result in inter-format revenues and expenses; these are not all reflected in the format breakdown of format revenues, which therefore make it difficult to assess each individual formats performance.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The amount of subscriber spending, which is captured as a sub-segment expense in the Publications format, regularly is impacted by the overall performance of the geographic operating segment. This greatly impacts the individual results of the Publications format and it is primarily driven by the overall operating segment results.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The rate of hiring in one format is impacted more by the overall performance of the geographic operating segment than the performance, or rather the displayed performance, of the individual format.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our management decisions on certain formats such SuperSearch and Fly.com are often made to enhance the operating segment and not necessarily these individual formats. For example, if we increase direct spending on these formats we likely will increase revenues; however, based on the level of expense required this could appear to be an unprofitable decision for these formats individually. We often make this decision based upon the overall operating segment benefits we are seeking such as increased awareness and branding.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our decision to offer Local Deals format to our existing Publications format advertisers is a decision that could potentially increase overall revenues for the segment; however, in several cases it has lowered revenue for our Publications format.</font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">In consideration of all these factors that incorporate the manner in which our CODM allocates resources, we concluded our operating segments should be designated as North America and Europe and that these segments would be appropriately defined as reportable segment under ASC 280-10-50 due to their quantitative significance.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The specific information you requested is addressed or referenced below:</font></div>

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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 13</font></font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Our management reporting process summarizes North America and Europe segments and, as previously discussed, including certain formats disaggregated such as revenues and certain expenses displayed for Publications, Local Deals, SuperSearch and Fly.com. This information is prepared primarily by the Finance group for the quarter and provided to the CODM.&#160;&#160;The CODM does not rely on the format split information for resource allocation due to the many inter-relationships between formats and the shared costs between disaggregated format information that are not reflected.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The organizational structure is as follows: CEO direct reports are President of North America (NA), head of NA Local Deals, head of NA SuperSearch, head of NA Fly.com, Photo Director, Senior Vice President of Europe (EU), head of Local Deals EU, head of Fly.com EU, heads of Technology and Product Development, head of Human Resources and CFO.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">There are many inter-relationships in the manner in which even the direct reports work on various aspects of the geographic segments. For example, the head of NA SuperSearch was leading the development of a version of our Local Deals format called Getaways that is included in our NA Publications, as well as working on distribution of our content from both Local Deals and Publications to other website networks and this revenue is maintained by NA Publications. The Product Development head works on the various formats within in a segment without directly charging the inter-segment formats.&#160;&#160;&#160;In addition, it is important to note that two of the most senior CEO direct report business managers are at the North America and Europe level and the CEO works with them in this capacity from a
market and overall business management standpoint, regardless of the reporting lines of the others in the those regions.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;Segment Manager</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The CEO/CODM is the operating segment manager for the North America segment as well as the Europe operating segment. Until July 2010, the current CEO was the segment manager for Europe; upon taking the CEO role in July 2010 he maintained this role as he was very familiar with this business having built it over the previous 5 year period. Upon taking on the CEO role in July 2010, the CEO also took on the role of segment manager of North America. His focus on resource allocation is based upon the performance at the North America and Europe level due to previously discussed inter-relationships among the sub-segment formats.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 14</font></font></div>
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<div style="TEXT-ALIGN: left; TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">As previously discussed, the CODM allocates resource based upon performance of at the North America and Europe Level due to the inter-relationships among the sub-segment formats.</font><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;</font></div>

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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Previously, we summarized the level of detailed financial information available to the CODM and the level of reliance on this information for resource allocation, which is ultimately made at the North America and Europe level.</font></div>
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<div style="TEXT-INDENT: 0pt; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;Operating and Reportable Segments</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">As previously discussed, we believe that the North America and Europe businesses meet the definition of an operating segment as the CODM allocates resources at this level and there is complete discrete financial information at this level. We believe our operating segments meet the definition of reportable segments based upon the quantitative thresholds.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We have provided to you, on a supplemental basis, an illustrative copy of our internal management reports and illustrative copy of our results that are provided to our Board.</font></div>
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<div align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">We have considered the disclosure of product and service revenues as required by ASC 280-10-50-40. As we previously discussed in the overview section of our response to your comment number 6, we provide one service, this is an advertising service. We provide this service to highlight high-quality travel and entertainment deals that will continue to delight our subscriber base. Although the form of advertising may vary, it fulfills a very consistent need for the advertisers; to sell their hotel rooms, restaurant meals, airline flights, spa treatments etc. Since we provide one service, which is an advertising service, we believe we meet the disclosure requirements of ASC 280-10-50-40.</font></div>
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<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Mr. Patrick Gilmore</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">October 6, 2011</font></font></div>

<div><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 8pt"><font style="FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Page 15</font></font></div>
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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">&#160;</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">The Company hereby acknowledges that: (1) it is responsible for the adequacy and accuracy of the disclosure in the filings; (2) Staff comments or changes to disclosure in response to comments do not foreclose the Commission from taking any action with respect to the filings; and (3) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Please contact me at (650) 943-2409 or by email <font color="blue" style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt; TEXT-DECORATION: underline">gceremony@travelzoo.com</font>&#160;&#160;with any questions or further comments regarding our responses to the Staff&#8217;s comments.</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Sincerely,</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">/s/ Glen Ceremony</font></div>

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<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Glen Ceremony</font></div>

<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Calibri; FONT-SIZE: 11pt">Chief Financial Officer</font></div>

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