Masters of the domain: The future of dot-travel

By Dan Luzadder

FORT LAUDERDALE -- On a late July morning here, only a breeze off the ocean keeps the heavy air from turning into a sauna. Stepping into the air-conditioned lobby of 110 E. Broward Blvd., headquarters of Tralliance Corp., is like plunging from a rain forest into an icebox.

Ed Cespedes' 15th floor office is a cool and businesslike perch over the city, where Cespedes, the company's CEO and, since July, president, has been busy hammering out a new reality for the company, setting the direction and pace for marketing Tralliance's single asset: the dot-travel (.travel) Internet domain.

It is blue jeans day at Tralliance, and Cespedes, dressed in casual tan slacks and an open-collar shirt, seems relaxed, though he quickly makes the point that he seldom talks to reporters. It's a tradition of practiced silence that he may well have picked up from his mentor and investment partner, Michael Egan, the founder of Alamo Rental Car and majority owner of Tralliance's parent company, TheGlobe.com.

At various times in Egan's and Cespedes' roller-coaster business history, there have been good reasons to keep talk to a minimum. These include the spectacular rise and sale of Alamo, followed by the company's precipitous plunge into bankruptcy; the scorching burnout of TheGlobe.com at the height of the dot-com implosion, which saw the company morph from a Wall Street rocket into a Pink Sheets shadow; and the ill-fated DrKoop.com, which Cespedes and investment partners bought for a bundle and later ushered quietly into bankruptcy.

"We've made some mistakes along the way," Cespedes allows.

While the darker corners of their investment portfolio clearly bear a few financial scars, Cespedes and Egan have made hundreds of millions of dollars over the years, and in the process they have grown used to hardball business practices. Cespedes, a one-time ace on the Columbia University baseball team, doesn't back up in the box.

But on this day, there is good reason to talk. The subject is Tralliance and dot-travel, and things are changing fast for both the company and the domain. That much became evident in early July when news surfaced that Ron Andruff, the public face of Tralliance and the man widely considered the father of the dot-travel effort, was suddenly leaving the company.

His departure has raised questions about the direction Tralliance is taking, while the company's financial condition has raised questions about its stability. At the heart of these concerns is an even larger question: Does dot-travel, long promulgated as the travel industry's home on the Internet, have a legitimate purpose and a viable future?

Cespedes says he knows that skepticism in the industry about dot-travel is widespread, rumors are rampant and the company is perceived as struggling. Such perceptions, he says, are among the challenges the company must overcome, though clearly the chief challenge right now is addressing widespread predictions that dot-travel is headed for an untimely death.

"I really want to lay to rest all this nonsense about dot-travel going out of business," he says. "That isn't going to happen. Dot-travel will never go dark."

As he talks, Cespedes is seated next to Mike Stone, a veteran of Egan's tour company, Certified Vacations, and of the travel industry at large. Stone grew up around his family's travel agency, and his father, the late Joe Stone, was a prominent chairman of ASTA.

Stone, now the marketing and, informally, communications chief at Tralliance, has encouraged Cespedes to talk about where Tralliance is headed and about the optimism that Stone says they both share about the company. Though Stone sits quietly as Cespedes fields questions, the CEO frequently turns to Stone as he speaks, as if addressing his responses to him.

"Our credibility is on the line," Cespedes says. "But I think the industry will give us some more time. We are now willing to spend, where we were not willing to spend before. We need a million domain names or two million names, and if we have two million names, our credibility grows."

But with fewer than 40,000 names assigned so far, Tralliance is barely putting money in the bank. In fact, its financial health has required resuscitation lately in the form of bailouts by Dancing Bear Investments, Egan's and Cespedes' investment company.

What baffles many outsiders, Cespedes acknowledges, is why someone like him, an entrepreneur who sees proposals for multimillion-dollar deals almost every day, is devoting this much time to a company with only about $2 million in revenue.

"Because this isn't a $2 million business," Cespedes insists. "This is a billion-dollar business."

A tortuous history

Dot-travel is less than two years old, but its history dates from the late 1990s, when it was touted as the future first step of any journey for tens of millions of the world's travelers.

It has also been positioned as an industry asset for promoting travel, a money-maker for the myriad travel industry associations that authenticate the bona fides of enterprises applying for dot-travel Internet addresses and a global tool for destination marketing worldwide -- not just for the industry's giants but for small providers, as well.

But dot-travel, by any reasonable assessment, has foundered to date. Financial troubles at TheGlobe.com, the recent management shake-up that ousted Andruff and other concerns have given the domain an aura of instability.

At the same time, industry leaders express concern about what they see as a growing chasm between what dot-travel was promoted to be at its inception and how it seems to be evolving.

In a series of interviews for this report, it became clear that skepticism about the value of the domain and whether it will ever be embraced by the industry continues to grow. In addition, financial documents and other records, plus dozens of conversations with people who played insider roles in dot-travel's history reveal that concerns about maintaining the integrity of the domain as it was conceived are mounting.

Key among those concerns is whether Tralliance will continue to build the dot-travel domain as a reliable industry resource or will look to recoup its investment and turn bigger profits by taking steps that the original nonprofit sponsor of the domain, The Travel Partnership Corp., promised would not be taken.

For example, TTPC promised strict adherence to a policy ensuring that every Web site with a dot-travel suffix was owned and operated by a legitimate travel operator, that so-called "generic" domain names would be kept to a minimum (with some, like cruise.travel, specifically prohibited) and that the domain would not turn into another auction of cyberspace real estate, as happened in the dot-com environment.

Cespedes and Stone insist that management changes at Tralliance herald a new day, backed by an infusion of millions of dollars from Egan, Cespedes and their investors. Much of this investment is earmarked for a consumer advertising campaign on television and in print. They contend the campaign will supercharge the effort to bring dot-travel to full flower.

That kind of investment, they say, was being inhibited under previous management by "small thinking" when what was needed was a full swing for the fence.

Sources close to both sides say -- and Andruff does not dispute -- that there was a strong difference of opinion about how dot-travel should be built going forward, and that the struggle for control of dot-travel's direction resulted in Andruff being pushed out.

Though the finer points of that disagreement are not being discussed, Cespedes doesn't pull punches.

"Ron's vision for dot-travel has always been a lot smaller than mine," he says. "He may be proven to be in the right. But we have a greater vision than making a few bucks a year on a couple of hundred thousand domain names. You can see changes under way at Tralliance and at dot-travel. We have already gone from signing up 100 new domains a month to signing up 1,000 per month. This is a viable business. We believe in it or we wouldn't be here. And it will be successful."

Sources in the travel industry's Internet community told Travel Weekly that despite his departure, Andruff, still a Tralliance stockholder, did not intend to give up on dot-travel and had in fact already made a "generous" bid to acquire Tralliance from TheGlobe.com.

Andruff declines to comment when asked if he is trying to acquire Tralliance. Cespedes, citing SEC regulations (TheGlobe is a publicly traded company), says he cannot confirm, deny or comment on any potential offer for Tralliance.

But Cespedes also says that TheGlobe has a fiduciary responsibility to stockholders to review any serious acquisition proposal.

"As a public company, we would entertain any viable offer" he says. "We would be compelled to. But let me put it this way: We don't believe that anyone we know can currently afford what this company is worth."

(Editor's note: At press time, Andruff confirmed to Travel Weekly his offer to buy Tralliance, but he said that Egan had "declined the offer as undervaluing Tralliance."

 

"It was an offer almost equivalent to the share price for the TheGlobe, the full public company, just for the subsidiary," Andruff said. "It seems incongruous to me that he would reject this as undervaluing the company when, according to the [quarterly earnings reports], Mr. Egan himself is putting money into TheGlobe at a discount of 60% of the share price, or at one cent per share. That's far under the value of our offer [for just the Tralliance subsidiary]."

 

TheGlobe's stock traded last week at about 2.6 cents per share. SEC records show that Dancing Bear Investments, controlled by Egan and Cespedes, made cash infusions this summer into the financially struggling TheGlobe in exchange for stock warrants valued at one cent per share. While declining to offer details, Andruff said his offer would have been equivalent to 2.5 cents per share of TheGlobe, or somewhere around $3.5 million.

 

Andruff told Travel Weekly he had responded to Egan and TheGlobe's board by letter, offering to negotiate, and that he was awaiting a reply.)

CONTINUED...

This page is protected by Copyright laws. Do Not Copy. Purchase Reprint
blog comments powered by Disqus

View Comment Guidelines

Please upgrade your Flash Player.
Please upgrade your Flash Player.

Travel Weekly Poll

Voices

  • Consumer media discover that travel agents do exist

    "Contrary to some thoughts, travel agents do exist ... We are usually able to get clients better prices, and we know we can see that clients have better experiences. And as our personal motto is: Our Service Travels With You."

    More»

TW Index: Most Active Stocks

Latest Top News:
Caribbean
Europe
Travel Weekly is on Facebook
Viewpoints For Travel Agents
Travel Weekly Topics