First things first: Hats off to Ed
Jackson. His decision to shut down Runaway Tours in a manner that
showed consideration towards his clients, vendors, employees and
even competitors was extraordinary.
His openness was
reassuring at a time when people wanted to know what was going on.
And almost everyone in the industry could, to some degree,
empathize as he cited the market conditions that led to his
decision to shut down: The rise of the Internet, airline
bankruptcies in Hawaii, hurricanes in Mexico, timeshares
One would hope that
nobody concludes from the final chapter of Runaway that nice guys
finish last. If such a thought occurred to you, think back on some
of the more spectacular tour operator meltdowns.
In their final
weeks of operation, the leadership of some of those companies
proved that they were not nice guys at all. Im inclined to believe
that Eds straightforward character extended the life of his company
rather than shortened it.
But there is a
conclusion one could draw from events at Runaway that is not very
comforting: Midsize companies finish last.
When I first heard
that Runaway, which specialized in Hawaii and Mexico, was shutting
down, I recalled a conversation I had with Ron Letterman in
of Hawaii specialist Classic Vacations (then called Classic Custom
Vacations) and senior vice president of its parent, Expedia,
outlined what he felt were Expedias advantages in the marketplace.
Do we want to be the biggest player in Hawaii? he asked. Of course
we do. There will be a culling of the tour operator sector, and the
companies with superior technology and superior resources will have
real advantages in the marketplace.
Expedia, whose womb
was Microsoft, never had to worry about superior resources. When
Rich Barton, Expedias founding president, addressed a Travel Weekly
conference in 1997, he described all of the technological,
marketing and promotional efforts his firm had invested in and then
said that sales had reached $10 million in just a year. Barton
cited this fast growth as a proof point of Expedias bright
moderator, Jeffrey Hoffman, looked to the audience and said, I
wonder how many of you could have built a $10 million agency in a
year, spending only $100 million?
The line got a
laugh, but Expedia got the last laugh. That $100 million was, of
course, money well spent. Barton understood the power of volume and
how it translates into pricing leverage. Last week, Bob Whitley,
president of the USTOA, underscored the importance of that leverage
when he said, Consumers will switch from one tour operator to
another to save $2.
In the wake of
Runaways announcement, a number of industry notables told Travel
Weekly that conditions were tough for small- and midsize tour
operators, but Im not so sure that the small face quite the same
difficulties as the midsize. In the space it was playing in, lack
of scale alone doomed Runaway. Hurricanes, airline bankruptcies and
timeshares may have sped the companys demise, but the challenges
Jackson faced as a midsize operator with a mass-market product
condemned him long before he shut his doors.
The same is not
necessarily true of small operations, especially if they develop
expertise in a niche. The big operators cant cater to consumers who
are true niche enthusiasts, nor can they establish a personal
rapport with clients the way that small operators can. And,
importantly for the niche operator, the Internet is friend, not
Ed Jackson, musing
about the future, said, Im too young to retire. He appears to have
taken the lessons he learned at Runaway to heart, and Im very
curious to see what path hell choose next. And -- especially if he
stays in tour operations -- I wonder: Will he go big or will he go
small? The middle ground is no longer an option; for the time
being, its a no-mans land.