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
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
"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
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
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
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
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
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
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
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
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
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
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
(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
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
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.)