The travel and tourism industry, which started regaining its footing after nearly two years of devastation wrought by the COVID-19 pandemic, is being rattled again as governments impose new travel restrictions to contain the spread of the COVID-19 omicron variant. However, the Biden administration plans to ease travel restrictions imposed last month on eight southern African nations because U.S. public health authorities are confident that an omicron-specific vaccination is not required, and that current vaccines and booster shots are highly effective against it.

According to the United States Travel Association, domestic leisure travel in the United States has rebounded to pre-pandemic levels. Furthermore, it is anticipated that domestic leisure travel will continue to drive the recovery of the U.S. travel sector in the near term and will regain pre-pandemic levels in 2022. The travel and tourism industry is expected to reach $924.28 billion by 2025, registering a CAGR of 24.5%.

Given this backdrop, we think it could be wise to scoop up quality small-cap travel stocks Trivago N.V. (TRVG) and Travelzoo (TZOO).

Trivago N.V. (TRVG)

With a market capitalization of $763.07 million, Düsseldorf, Germany-based TRVG, with its subsidiaries, provides a hotel and lodging search platform in the United States, Germany, the United Kingdom, Brazil, and internationally. It provides a hotel meta-search engine for online travel companies, hotel chains, and independent hotels. The platform is accessible via 54 localized websites and applications in 32 languages.

In October, TRVG and HUAWEI, one of the world's largest information and communications technology infrastructure and smart devices providers, announced a collaboration to create travel products for use on the HUAWEI Mobile Services platform. A new Trivago app will be available on HUAWEI's AppGallery, allowing users to immediately compare millions of accommodations globally from hundreds of booking sites to discover their ideal picks at a great price. 

TRVG's revenue increased 128.6% year-over-year to €138.64 million ($152.41 million) in the third quarter, ended September 30, 2021. Its operating income came in at €8.54 million ($9.67 million), versus a €1.35 million ($1.53 million) operating loss in the prior-year period. The company reported €5.53 million ($6.26 million) in net income, compared to a net loss of €2.31 million ($2.61 million) in the third quarter of 2020. Its EPS amounted to €0.02 ($0.02), compared to a €0.01 ($0.01) loss per share in the same period last year.

TRVG's EPS is expected to grow 96.3% in its fiscal 2021. Analysts expect TRVG's revenue to increase 38.1% year-over-year to $408.93 million in the current year.

TRVG's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

TRVG is also rated a B for Growth, Sentiment, and Quality. Within the F-rated Internet industry, it is ranked #3 of 77 stocks. To see additional POWR Ratings for Stability, Value, and Momentum for TRVG, click here.

Travelzoo (TZOO)

New York City-based TZOO is an Internet media company that offers travel, entertainment, and local discounts from travel and entertainment corporations and local businesses around the Asia Pacific, Europe, and North America. In addition, the company runs the Travelzoo Network, a network of third-party Websites that advertise the company's published travel deals, and local deals and getaway listings, which allow its users to purchase vouchers for deals from local businesses, such as spas, hotels, and restaurants. The stock has a market capitalization of $124.18 million.

For the third quarter, ended September 30, 2021, TZOO's revenue increased 13.8% from its year-ago value to $15.69 million. Its gross profit grew 16.9% year-over-year to $12.7 million. The company reported $2.82 million in net income, compared to a $1.35 million net loss in the third quarter of 2020. Its EPS amounted to $0.22, compared to a loss per share of $0.12 in the same period last year.

The company's EPS is expected to grow 360% year-over-year to $0.39 in the current year. In addition, its revenue is projected to increase 25.9% in the current year and 30.7% next year. TZOO's stock has gained 9.3% in price over the past year and 7.6% year-to-date.

TZOO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. TZOO also has an A grade for Quality and a B for Growth and Value. The stock is ranked #1 in the Internet industry.

Beyond the POWR Ratings grades I have just highlighted, you can see the TZOO ratings for Sentiment, Stability, and Momentum.

TRVG shares were trading at $2.12 per share on Tuesday morning, down $0.01 (-0.47%). Year-to-date, TRVG has declined -12.40%, versus a 29.57% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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