Travelzoo (TZOO.O), which offers travel deals on flights, hotels, vacation packages and cruises, said it was in active negotiations to buy a hotel booking website.

"We have found our hotel search offering and the group-buying voucher model (are) not meeting the needs of hotels and users well enough, and therefore plan to adjust our product offering," Chief Executive Chris Loughlin said in a statement.

Plans to buy a hotel booking property implies that their current strategy is not working, Benchmark Co analyst Daniel Kurnos told Reuters.

Most hotel booking properties are owned by online travel agencies such as Expedia Inc (EXPE.O), Priceline.com Inc (PCLN.O) and Orbitz Worldwide Inc (OWW.N), "so getting into that space is going to be very challenging for them," Kurnos added.

Travelzoo recently entered the local deals market, allowing subscribers to purchase vouchers from local businesses such as spas, hotels and restaurants, in competition with online coupon websites such as Groupon Inc (GRPN.O).

The company, due to report results on October 25, said it expected third-quarter profit of 20 cents to 22 cents per share on revenue of $35 million to $35.5 million.

Analysts on average were expecting a profit of 27 cents on revenue of $38.9 million, according to Thomson Reuters I/B/E/S.

Shares of the company fell as low as $19.34 before recovering a little to $20.05 on Friday on the Nasdaq. (Editing by Don Sebastian and Rodney Joyce)

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