Tralliance is sold; dot-travel domain now privately held

By Dan Luzadder

Tralliance, the company that controls the dot-travel domain, has been taken private, removing its finances and activities from the scrutiny of public markets.

Until now, Tralliance, the official registry of dot-travel addresses, has been a publicly traded subsidiary of TheGlobe.com, which in turn is publicly traded over the counter.

On Feb. 1, TheGlobe.com announced that it had sold Tralliance to the Registry Management Co., a privately held enterprise.

However, the sale did not change the ultimate ownership or control of the company by travel industry entrepreneur Mike Egan, owner and chairman of TheGlobe.com, and his financial partner, Ed Cespedes, the president of Tralliance, who together own RMC. 

"We're doing this for efficiency reasons," Cespedes said of the sale. "Let's face it: It costs a lot of money to keep Tralliance as a public company. It's money that could be spent in promoting the dot-travel domain instead."

The sale came close on the heels of significant policy changes at the start of the year that company executives said would allow them to turn the travel-oriented domain from a little-used online marketplace into a major player in the industry.

That process began last fall when Tralliance fired dot-travel's founder, president and promoter, Ron Andruff, and announced that it would treat the dot-travel domain as a for-profit business, rather than as a service to the travel industry. Andruff, who remains a stockholder and who tried unsuccessfully after his dismissal to buy Tralliance, declined to comment last week.

Bill Maloney, executive vice president of ASTA and a former member of the Travel Partnership Corp., dot-travel's advisory board, said he was unaware of the sale but added that taking Tralliance private raised some questions in his mind.

"What the industry loses, of course, is transparency," Maloney said.

The sale also closely follows a decision last month by Tralliance to initiate so-called bulk sales of dot-travel domain names at discount prices. Under the new sales plan, Cespedes said, anyone buying 25,000 or more names will get a rebate.

But so far, just one such sale has been acknowledged by the company: the purchase of 200,000 destination and service-oriented domain names by Egan and Cespedes themselves.

Cespedes confirmed last week that he and Egan had created a new enterprise named LabiGroup, which in turn acquired 200,000 names to help build working destinations. The dot-travel top-level domain has struggled to find buyers willing to actually build dot-travel Web sites and use them for travel-related businesses. Until the LabiGroup purchase, only about 30,000 names had been sold, and most of them have not been used.

"Rather than keep talking about it, we said, 'We'll put a bulk purchase program in place and talk to guys who will commit money, real money, to dot-travel,' " Cespedes said. "So we are leading by example. We are putting up sites around destinations, around services and around things that we believe people are interested in concerning travel, so that when the millions of people who type in dot-travel every month -- some 8 to 10 million are doing so -- they will find something they're looking for."

Cespedes would not disclose how much LabiGroup paid for those 200,000 names, but even when allowing for pricing discounts, the purchase would have required an estimated $2 million investment. 

The sales agreement values Tralliance at $7.3 million.

Benefits to new ownership

Cespedes told Travel Weekly that the new ownership would be invisible to buyers and owners of dot-travel domain names. He said it would reduce fixed costs for Tralliance as it redoubles efforts to raise the profile of the struggling domain-name business and boosts participation in dot-travel within the global travel industry.

Cespedes said the sale would not bring changes to management, policies or to Tralliance's relationship to TTPC, which was established when the Internet Corporation for Assigned Names and Numbers, better known as ICANN, approved the domain three years ago.

Because TheGlobe.com is publicly traded, Cespedes said he could not comment on details of the transaction beyond what was revealed in the public announcement. But he said TheGlobe.com would offer more details in a regulatory filing with the Securities and Exchange Commission this week.

Terms of the transaction that have been disclosed call for Egan and business affiliates that have invested in Tralliance, primarily other Egan-controlled entities, to waive their interest in convertible promissory notes worth about $4.7 million as well as other fees and debt totaling about $6 million.

An earn-out provision, based on the performance of Tralliance after the sale, could add another $1.3 million to the deal. TheGlobe also will issue 269 million shares of common stock to the Registry Management Co., the company noted.

Cespedes said that under new policies recently approved by TTPC, he and Egan, like other purchasers of dot-travel domain names, have 60 days following the purchase of a dot-travel domain name to open a working Web site for each name.

He said LabiGroup had used a computer program to pick potential names and had then eyeballed each name (e.g. Mississippi.travel, SpringBreak.travel and SpringBreakHotel.travel) to ensure that they were not too long, made sense and were likely to attract travel shoppers.

Meeting the deadline for getting Web sites up and running for each of those 200,000 domain names presents a significant challenge, Cespedes said.

"It's not only a lot to do but exceptionally expensive," he said. "We have to build the sites. That takes time and more money. It is a big risk and a big investment, but we're willing to make it, as we always have been."

In the end, Cespedes said, there is still a lot of room for bulk and individual sales.

Cespedes said Tralliance was planning a marketing campaign later this year that would include magazine and television advertising.

He said the company had also hired a public relations expert to help raise the profile of the dot-travel domain.

To contact reporter Dan Luzadder, send e-mail to dluzadder@evcohs.com.

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