LV Internet travel pioneer departs as company expansion continues

Kevin Ferguson

Friday, March 16, 2001 | 12:16 p.m.

Travelscape.com founder Tim Poster has departed from the Las Vegas company he spent a decade growing into an attractive target for a Microsoft company, which paid $95.5 million for Travelscape last year.

As part of the acquisition agreement with Microsoft's Bellevue, Wash.-based Expedia Inc., Travelscape executives were to stay on board for a year to ensure a smooth transition, Poster said.

"But, prior to the deal it was pretty much understood, after a year I would step aside," Poster said. "You can't have two chiefs."

Expedia and Travelscape websites offer one-stop travel shopping and reservations service with real-time scheduling, pricing and availability information for U.S. and international airlines, hotels and car rental companies.

Expedia Chief Executive Rich Barton said Poster brought a lot of travel expertise and good ideas to the company and has the entrepenuerial spirit to run other ventures.

"He had done a great job at building this company to where it is, but he is used to being the man in charge," Barton said. "Tim, (Tom) Breitling and I get along very well."

Breitling, 31, who Expedia elevated from chief operating officer to president last fall, helped Poster run the company in the early days.

Breitling, who reports to Barton, acknowledged that a number of business practices are changed when a private company becomes part of a public entity.

One business acquaintance of Travelscape said: "When I first met Tim in November of '98, we did deals on a handshake, and had it (take effect) within 30 days. Now it takes two months to get an appointment with them."

Breitling said business decisions in a public company are made much more carefully.

"Tim would be an incredible leader for Travelscape if it was still our own company," Breitling said.

Poster started the Las Vegas travel company in 1990 by himself, keeping track of hotel reservations made over the phone by sticking golf tees on a peg board.

"I kept dates and rates down one column and hotels down the other, and when one sold out, I stuck a tee in the board," Poster said.

Poster said he received the seed investment to launch the company from Station Casinos Inc. Chairman Frank Fertitta III, whose son Lorenzo was Poster's high school pal.

Poster said he is occupying most of his time now wiring a Park Towers luxury condominium with the latest technology gadgets. He plans to move in next month.

Breitling, who Poster hired in 1993, said he has no plans to follow Poster out the door.

"I love this company and the business needs a strong passionate leader. I'm sticking around," Breitling said.

Poster relinquished his president title with Travelscape when the March 17, 2000, Expedia acquisition was completed, but he remained chairman until his departure last month.

Travelscape has 305 employees and is set to move into a 75,000-square-foot building in Summerlin in early April. That move to 10190 Covington Cross Dr. will be the company's 12th in 11 years.

Travelscape executives declined to give specific numbers of anticipated employee growth in the coming year. However, the company told the Nevada Commission on Economic Development in February that it plans to grow its staff by 103 in the next year.

Expedia, with last year's acquisition of Travelscape and Seattle-based VacationSpot.com, is the second largest Internet travel wholesaler behind travelocity.com, based on gross bookings and unique users.

Breitling said there are no plans to drop the Travelscape brand name and just use Expedia.

"We feel there is room in the market for both brands. They both have a very active following," Breitling said.

A report by New York investment banking firm Bear Stearns & Co. says Expedia and Travelocity are positioned well to dominate the market in the coming years. Bear Stearns analyst Robert LaFleur said Travelocity has a stronger hold on the market because of its strategic relationship with AOL and dominant search engine Yahoo!

These partnerships are set up so that their websites channel mutual traffic to each other.

Expedia's strengths include its partnerships with msn.com, the Hotmail e-mail service and WebTV, all three of which are owned by Microsoft.

Expedia was formed as a subsidiary of Microsoft in 1994, but was spun out as a separate company in 1999. Microsoft still owns 69.3 percent of the company.

Aside from Travelocity, other Expedia competitors include, priceline.com, Hotel Reservations Network, Cheap Tickets Inc. and Las Vegas-based Lowestfare.com.

Expedia and Travelscape generate revenues from commissions, fees and direct merchant sales related to transactions on their websites.

Expedia's net loss widened by 9 percent in the last quarter ending Dec. 31 to $25.3 million, but the loss per share fell 17 percent from the year-ago quarter because of an increase in shares outstanding.

Cash flow results improved during the quarter. When non-cash charges are factored out, Expedia loss just $2.6 million, or 6 cents per share, compared to a loss of $5.9 million, or 16 cents a share in the year-ago quarter.

Revenues increased 347 percent to $79.7 million. The heavy increases were partly due to the acquisitions of Travelscape and VacationSpot com.

Expedia's Barton said the company is on schedule to reach profitability by June 2002.

Barton said the bulk of Expedia's revenue comes from commissions from hotels and land/air packages.

Southwest Airline's recent decision to yank its inventory from independent e-booking agents and solely offer its online ticket information on its own website will likely have little effect on companies like Expedia, Travelscape and Travelocity, one analyst said.

"Southwest has always been an exception to the rule," Bartels of Giga said. "I don't see other airlines following suit. Corporate travelers heavily rely on travel agents and online booking agents and Southwest hasn't catered much to the corporate traveler.