Two decades of Virtuoso

By
|

Virtuoso Timeline, Part 1

1951
Sixteen travel agencies found Allied Travel International and open in New York.

1972
Walter Jost joins Allied's staff.

1974
Walter Jost named president of Allied.

1980
The Upchurch Corp. launches Upchurch Travel.

1986-1989
• Percival Tours buys Allied, renames it Allied Percival International and names Matthew Upchurch managing principal.
• Upchurch requires that all API members get fax machines.
• Upchurch asks all members to trust him with their customer lists. Travel Mart is born. Kristi Jones proposes creation of a custom magazine to be distributed to clients on behalf of members; she joins the API staff.
• Upchurch Travel is sold and its tour operations shut down. The Voyage custom magazine is launched.

1991
API's FIT and group tour operations are shut down.

1994
API collaborates with David Kalt and his Third Party Solutions to create a custom version of ClientBase. Using API ClientBase becomes a requirement.

The year was 1988. Nancy Strong and several other members of the group known as API were meeting with its leader, a young man named Matthew Upchurch, "knee to knee over coffee" in a North Dallas hotel.

Virtuoso2-UPCHURCHUpchurch "had all these ideas," including a magazine to be distributed to clients, Strong recalled recently. "I thought: Is he crazy? I was against spending that money to have the same magazine on the coffee tables of all clients of all members" in Dallas where she does business.

Finally, she agreed to give Upchurch six months to prove his plan. The first magazine, Voyage, launched in 1989, and in the years since, she admits to having "eaten my words."

At the time of that knee-to-knee session 20 years ago, the mission and philosophy that would eventually transform API into Virtuoso and earn the consortium the respect it enjoys today was just beginning to emerge. In that watershed year, 1988, the group launched its Travel Mart conference and began collecting member databases for targeted marketing. It was also the year Upchurch hired Kristi Jones, who is now Virtuoso's president.

Suddenly, an organization that only two years earlier had come close to vanishing was navigating a seismic shift into uncharted territory and away from roots that stretched back to 1951.

Foundation laid in 1951

Walter Jost, who has been associated with various incarnations of Virtuoso since 1972, traces its beginnings to a handful of agents who hatched an idea en route to the ASTA Congress in Paris in 1951: They would create a joint office to handle FITs. They could share the cost of technology, which at the time meant a Telex, and locating the office in New York would provide convenient access to suppliers.

Just as important, by pooling their business, they could get credit with overseas providers, issue travel vouchers and pay suppliers based on post-trip invoices.

Sixteen founders, mostly from the Midwest, launched the business, called Allied Travel International, as a cooperative. Out of concern that a local member would have unfair access to the shared facilities, the incorporation terms provided that there would be no member in New York.

Initially, Allied primarily handled travel to Europe, starting with FITs. Later, it added groups and other destinations. Earnings were distributed annually to the agencies based on productivity. For years, there were only two preferred suppliers: Caravan Tours and Royal Viking Line.

Bancroft Travel Consulting of Hartford, Wis., joined in 1955. Its owner, Dale Bancroft, recently recalled that members sent "skeleton itineraries" to the Allied staff, who would request services, after which "we'd present the final itinerary to the clients."

West Oehmig, chairman and CEO of Tennessee Valley Travel in Chattanooga, Tenn., was introduced to Allied in 1977 when his family bought the agency, an Allied member, from the estate of Hal Hall, whose widow "insisted that I, at age 25, go to an Allied meeting in Bermuda."

Nine years later, Oehmig was elected to Allied's board. At the time, he recalls, "we were broke."

The year was 1986, and the group's 65 member-shareholders were doing $8 million to $10 million in sales through Allied. The New York staff numbered about 30.

Terrorism in Europe and President Reagan's bombing of Libya in April 1986 kicked the slats from under the operation. After the Libya bombing, Jost said, 80% of Allied's business for the whole year canceled within two weeks.

"I told the owners we had three options," he recalled. The first two were to pay the bills and shut down, or to try to survive on "minimal reserves."

The third choice was finding a partner, and they found the Upchurches: Jesse Upchurch, who owned Percival Tours, and his 20-something son Matthew. At the time, Percival was only handling FITs and specialty groups, so the idea was that the two similar businesses would benefit from a merger.

Former member Bob Jackson recalled that Allied's shares "weren't really worth any money," so other than a couple of years' worth of free dues, then $300 a year, there was no monetary consideration for Percival Tours' acquisition of Allied. Even so, he said, it "saved the organization."

Young man in a hurry

Roland Largay, chairman of Largay Travel in Southbury, Conn., joined Allied in 1986. "I had a dear friend who had wanted me to join for years," he recalled recently. "Then, she called and said, 'A wonderful young man is in charge.' She said if I did not join, she would send in the check for me and charge me exorbitant interest. So I joined. It was the best business decision I ever made."

The young man was, of course, Matthew Upchurch, who in 1986 became managing principal of the renamed Allied Percival International.

Though only in his mid-20s, he had long been interested in distribution. When his family lived in Mexico, he recalled, at age 6 or 7, making Creepy Crawlers, the rubbery, insect-like creatures made from a liquid goo that came packaged as a toy factory. At first, "I went door to door to sell them," he recalled. But then he got the inspiration to create "a consignment sales force. ... Dad was the mule. He brought the goo from the U.S."

At 17, Matthew was selling for a parcel shipping service called Perci-Pak that he founded with a cousin. Watching the teenager pitch the U.S. Tour Operators Association for a centralized distribution service for brochures, Larry Pimentel, now chairman and CEO of the SeaDream Yacht Club, found the experience "mind-boggling and amazing."

Although the USTOA didn't buy, "Dad was happy to see me being productive," Upchurch said.

Matthew also worked at Percival Tours and Upchurch Travel, which provided insights into the difficulties suppliers and retailers encountered matching promotional materials to customers, and it would drive much of his later thinking.

When Jesse Upchurch invested in the money-losing Allied, Matthew rolled up his sleeves.

A turning point

Matthew Upchurch became CEO of the trade group in 2001. Actually, he says in retrospect, he could as easily have been called CDO -- chief destruction officer -- for his willingness to lay waste to the old business model to make way for the new. It was he who ended his family's involvement in tour operations and consumer retailing, out of a conviction that API should not be both a supplier and a retailer network.

"It took time to figure out a way to survive," said Jost, who was API/Virtuoso's president until 2001. "We were shutting down 90% of our income and going with the other 10%." (Upchurch Travel was sold in 1989, and its tour operations ended; API's FIT and group tour operations were shut down in 1991.)

But the groundwork had already been laid as far back as 1987, when the younger Upchurch made a presentation to members, "some of whom had been in business longer than I had been alive."

He showed them the Travel Information Productivity System, or TIPS, a customer relationship program developed for Upchurch Travel. In addition, "I said I wanted to stick satellite dishes on their agencies to beam down communications. I practically lost them with that. Then I said I would require that they all have fax machines. Only 20% had them." Within three months, all the members had a fax.

(TIPS was a harbinger of things to come. In the mid-'90s, better customer relationship management, or CRM, software became available, and API switched to ClientBase, a solution developed by David Kalt, whose family operates Bee Kalt Travel in Royal Oak, Mich., a Virtuoso member. API was ClientBase's first customer. It worked with Kalt to create a custom version, API ClientBase, and made it a requirement of membership.)

In 1988, over lunch with Kristi Jones, an Upchurch Travel client, Upchurch fretted about the challenge of distributing product information to consumers. His idea was to combine parts of different suppliers' brochures into a single document for clients.

But, he said, Jones proposed packaging supplier products with editorial content to give API's aggregated "brochure" some shelf life. Upchurch hired her to launch what was essentially a custom magazine. She would become president of Virtuoso 13 years later.

Upchurch took his boldest leap at a 1988 API meeting aboard a Princess ship, when he told members, "You need to trust me with your mailing lists."

Their reaction, he later recalled, was stunned silence: "You could hear a pin drop." Finally, the late Anna Gay Melroy of Melroy World Travel in Salt Lake City announced, "You can sign me up, and the rest of you are all fools if you don't do the same."

Once their resistance broke down, the real work began, starting with getting names into computers. Upchurch recalls that Margie Purnell, who operated Travel Time Advisors in Dallas (and sells for Precision Travel there today) had "an amazing database" on paper. She put her 20-year-old Rolodex in a shoebox, secured it with rubber bands and sent it by courier to API in Fort Worth, Texas, where Upchurch's secretary keyed in the data.

API printed out customer names, Upchurch said, and shipped them back to members with a list of 27 possible codes that could be applied to each customer.

Angela Turen, president of the Churchill & Turen agency in Naperville, Ill., remembers working nights and weekends "because we knew the clients, and we had to do the coding."

Despite all the work, Oehmig said, "it made a lot of sense to gain mastery of our client base."

Today, the group distributes the Virtuoso Life magazine to 250,000 of the members' most valuable clients and to MasterCard World Elite cardholders. It also delivers Virtuoso Insights, a newsletter, to 125,000 qualified prospects.

Largay described the publications as "great image builders. ... They get people thinking about what to do," while Oehmig called them "great tools to keep our names in front of clients."

While the publications draw criticism occasionally for being pretty but lacking substance, Virtuoso says it judges them by the business they drive and their effectiveness at positioning members as quality service providers.

While Virtuoso was a pioneer in the computerized customer relationship management, the group was also defined by its Travel Mart, a kind of CRM plan for the agent-supplier relationship. The first Travel Mart, at the Brazilian Court in Palm Beach, Fla., attracted 97 participants; some 3,200 attended the 21st event last summer in Las Vegas.

Much later, Virtuoso also partnered with creators of the annual International Leisure Travel Market, held in Nice, France, since 2002. ILTM planners allot about 200 slots for U.S. agencies and 30 for Canada; Virtuoso fills about 100 of the U.S. and 10 of the Canadian slots, said ILTM's Peter Conway.

The name game

In the 1990s, "everyone said the agency was going away," Upchurch said recently. For API, the real problem was "that all agents were lumped together." Keith Waldon, now vice president for alliances and travel clubs, was hired in the late '90s to connect the group's experts with journalists and thereby change the public perception of travel sellers.

As a result of the effort, for example, when Conde Nast Traveler published its first list of top travel experts in 2000, about 90% were Virtuoso members. Highlighting members' specialities was "a way of tricking baby boomers who wouldn't otherwise look for an agent," Jones said.

Beyond that, Upchurch said, "we needed to recast [API's] value proposition, and we started to look at rebranding."

The new name could not say "travel" because, he insisted, members were in the life experience business, a focus that would enable the group "to build credibility at a time when consumers thought agents were not worth the powder to blow them up."

In 2000, API was rebranded Virtuoso, a name that Upchurch said was "directly connected to the quality of the network." He believes the name has been successful at raising the visibility of the organization and its members while also burnishing the image of all travel professionals.

But member agency names were unaffected. Nancy Strong said that while the Virtuoso name appears on "everything the customer sees," she has no interest in naming her agency Virtuoso. She said she would "never give up the name Strong, [and] Virtuoso will never appear in front of the word Strong."

A total name switch for members was "never discussed," she said, although it "would make sense from [Upchurch's] standpoint."

Walking the talk

Mark Conroy, president of Regent's hotel and cruise operations, said he laughed when Upchurch said he wanted agents to give him their mailing lists.  But these days, Conroy said, Regent's call to action in mailings to past customers directs recipients, when possible, to the individual booking agent. "That's an idea we stole from Virtuoso" and other consortia.

Virtuoso also was one inspiration for the CRM program launched in 1996 by the Giants cooperative (now Ensemble), according to Sue Shapiro, who was Giants' president at the time.

With its CRM program, Giants attracted some Virtuoso agents, partly because it was less expensive for targeted marketing, she said. "We all looked to good practices. We looked to several consortia. If something fit for us, we put our twist on it."

CONTINUED…

Comments
JDS Travel News JDS Viewpoints JDS Africa/MI