“DALLAS, TX, MARCH 7, 1996. The world’s leading hotel chains today launched TravelWeb, the first Internet Web site from which hotel rooms can be selected and reserved directly from a personal computer.”
Four years and an Internet lifetime ago, John Davis III issued a now-quaint press release to stake his claim to a footnote in online history: the first real-time hotel booking in cyberspace. And not a minute too soon, since a mere five days later Fort Worth’s Travelocity would go live with full capability to book not only hotels but also airlines and rental cars, backed by the firepower of American Airlines’ Sabre reservation system.
Undeterred, Davis patiently built TravelWeb and its parent company, Pegasus Systems, into a powerful, nearly invisible backbone of the world’s network of electronic hotel re-servations. By embracing the glamour-free dirty work of transactions processing, building user interfaces, and collecting and paying reservations-agent commissions, he has maneuvered himself into the enviable position of collecting fees of up to 5 percent on the majority of all online hotel bookings—a situation that’s likely to improve, thanks to Pegasus’ recent acquisition of REZsolutions. The hotel-services company had been among the world’s most powerful reservations facilitators; in a single stroke, Davis increased his workforce from 150 to 2,100 and his number of offices from 2 to 50, and he quadrupled his annual revenues. He also gained the tools necessary for global expansion: access to international hotel markets, contracts with major non-chain hotels, and a network of reservations offices around the world. The hidden gem of the deal is REZsolutions’ NetRes technology, which makes possible Web-based communications between hotels and their customers and vendors.
The acquisition comes at a good time. The online travel industry is booming for the simple reason that the travel marketplace is ideally suited for the Internet. The product sells itself and easily translates to audio and video. There’s nothing to ship or warehouse. And even an online novice can click and buy in a matter of minutes. A leading online travel researcher, PhoCusWright, which is based in Sherman, Connecticut, estimates that e-hotel sales alone generated $1.1 billion in revenues in 1999, with $4 billion projected for 2001. Factoring in airline bookings, rental car reservations, and the like, the e-travel category was worth $7 billion in 1999, with $20.2 billion expected for 2001.
Much of that activity has a Texas tie. Travelocity is the world’s largest online travel service; after buying out the number three e-travel provider, Preview Travel, earlier this year, its projected annual revenues ($1 billion) and number of registered users (17 million) should far surpass those of