Sector Snap: Travelzoo warning hits competitors

Shares of online travel companies fell Friday after Travelzoo Inc. warned investors that its third-quarter profit would likely shrink 40 percent from the prior year.

Online travel companies such as Travelzoo, Expedia Inc. and Inc. are in intense competition for customers, who remain somewhat cautious about their spending. These companies offer online deals on flights, hotels and vacation packages.

Travelzoo said it expects to earn 20 to 22 cents per share for the period ended Sept. 30 _ which included the travel-heavy summer months _ with revenue of $35 million to $35.5 million. A year ago, it earned 36 cents per share on revenue of $38.7 million.

The company also said it is changing its hotel business because neither customers nor hotels liked the current structure. It is in talks to buy a hotel booking website.

The news sent Travelzoo's shares down $3.15, more than 13 percent, to $20.35 in afternoon trading. Earlier in the session the shares hit $19.34, their lowest point since September 2010.

The news pressured competitors' stocks, though none fell as dramatically.

Orbitz Worldwide Inc. gave up 19 cents, or 7.7 percent, to $2.27. Priceline's shares lost $3.30 to $594.84, and earlier traded as low as $588.90.

Shares of Kayak Software Corp., which runs the Kayak website, fell 13 cents to $30.97, regaining about 35 cents from its session low.

After trading as low as $53.31, Expedia's shares rebounded in afternoon trading to turn positive, gaining 8 cents to $54.55.