Act One: Seeing the Light Once upon a time in 1995, there was a Christmas party in the Boston suburb of Cohasset. A man named Bob Motley approached a man named Brian Layton, a neighbor and acquaintance, with an idea for an Internet reservation service for bed-and-breakfasts. After 26 years in hotel sales, marketing, and management, the 51-year-old Motley was looking for an entrepreneurial opportunity, and something kept telling him that the Internet was the place to be. It was time to line up a partner.
Layton headed his own promotional marketing firm, Integrated Marketing. A seasoned marketer and incentive planner, he had implemented incentive marketing programs for clients like Barcardi-Martini USA and the Dr Pepper Company. The 35-year-old Layton had been exploring the Internet as a way for clients to share incentive performance data with their sales teams. Back then, a mere four years ago, "CompuServe was the only game in town for getting on the Internet--and they charged by the minute. I spent a fortune!" Layton recalls. "Not many people were paying attention to the Internet. Bob and I were looking for an opportunity when our paths crossed."
But after four months of market research, Motley and Layton realized they had to refocus the bed-and-breakfast reservation idea. For one thing, there were already some big players in the leisure travel arena. For another, they weren't keen on building a travel Web site, promoting it, and hoping customers would come by and make a reservation. That seemed like a weak business model, one that would demand million-dollar promotion budgets, Layton explains.
Motley recalls that at that time, the White Paper on Convention Housing produced by the Professional Convention Management Association "had just crossed my desk." There was also much press about CHRS (Centralized Convention Housing Reservation System), which was backed by the International Association of Convention and Visitors Bureaus, but had nonetheless lived a short life as the industry's best hope for standardizing convention housing services and procedures. Clearly, the industry was struggling to come up with a flexible, affordable communication tool to link all the parties in the convention housing game.
Motley and Layton saw the light.
"We didn't want to use the Internet as a billboard or yellow pages as a lot of other people were doing at the time. That wasn't a new paradigm," Layton states. "It made sense to use the Internet as a communications continuum, an opportunity to connect all the convention housing players. "
The business model they came up with entailed a "reservation engine" on a central server, accessible via the Internet to the meeting planner, participating hotels, and the contracted housing bureau--whether a third-party vendor or a CVB. They didn't want to get into the business of managing room inventory, says Layton. Serving as a "utility" to third-party vendors or CVBs would maximize the number of reservations their company could process, which it would need to do to keep cost per reservation low. (Lack of volume business was part of the reason CHRS failed three years ago.)
Motley and Layton knew too, that they had to avoid another CHRS pitfall: The system needed to be adaptable to each group's needs when it came to service levels, deposits, cancellations, and hotel descriptions. Where their model went beyond anything that had been tried in the marketplace was its plan to generate real-time inventory status reports--and have them accessible to participating hotels, the housing bureau, and the meeting planner 24 hours a day. No more waiting for batched reports to be faxed.
Act Two: If They Want It, You Can Build It Motley and Layton kicked off Passkey Systems in May 1996-- basically with a vision and a strategy. "We just assumed the system could be built to do what we said it could do," Layton says. Neither he nor Motley were programmers, although Layton taught himself enough HTML code to put together a Passkey Reservation System demo for PCMA's 1997 annual meeting in January and for METCON (Meeting and Exhibition Technology Conference) a few months later. Those meetings proved to be the sustaining impetus for the young company and its two founders.
"The validation we received from every corner of the industry was the real turning point for us," recalls Layton. "Meeting planners were telling us they needed this system yesterday, and so were hotels and convention bureaus. On the plane ride home afterward, Bob and I just looked at each other and said 'If we can keep the wheels on it, this is going to be huge."
To get the initial system built they contracted a database development firm. Months later, that relationship "went south," Layton says, when the development company wanted a big of a chunk of Layton and Motley's equity. Layton and Motley walked out. That was Passkey's "darkest hour," Motley says. The two would have to start all over again with another company. Layton credits Motley's "perennial optimism" for moving them forward. Motley says simply: "If we had known all the challenges we would face-- but we had no idea. We forged ahead."
Self-funding up until that point through friends and family, they needed to tap some real financing. A small group of investors from Boston's South Shore spent time with the proposed new development firm "and trusted that the firm would deliver the software application that Passkey needed," Layton says. In February 1997, the investors kicked in $1 million.
Act Three: Lift-Off Motley and Layton never let up in their sell to the meetings industry, and as awareness of Passkey's possibilities began to grow, they realized they needed to hire some top-tier software development professionals to maximize Passkey's potential. In July 1997, they hired Arnold Kraft to help manage daily operations. Kraft had grown Bachman Information Systems from a start-up to $36 million in revenues, as well as managing the turnaround of Alden Electronics. To oversee Passkey's "mission-critical, nonstop database systems," Kraft helped hire Paul Martin as vice president of engineering. Martin had most recently managed the production database function at the Federal Reserve Bank in Boston.
In the course of six months, Passkey moved twice, leaving its one room basement office in Cohasset and settling in downtown Quincy, Mass. The company had grown to 26 people, including 11 software engineers. Fueling this growth was a second round of venture capital financing--this time for $4.5 million.
Passkey's first "live" meeting was a 900-person, single hotel, meeting for Sheraton Corp. in New Orleans in January 1998. Soon afterwards the Orlando Convention and Visitors Bureau signed Passkey Systems to handle the reservations for the June meeting of the American Physical Therapy Association (see sidebar below). The housing arm of the association management firm Smith Bucklin and Associates signed Passkey for SIGGRAPH, also in Orlando. SIGGRAPH involves 38 participating hotels and 35,000 attendees.
Meanwhile, Housing On-Line, a major third-party housing services vendor, agreed to test Passkey. And at press time, Passkey learned it would be handling the reservations for four meetings in October for the Greater Boston Convention and Visitors Bureau: the National Funeral Directors Association, the American Society of Plastic and Reconstructive Surgeons, the American Academy of Periodontology, and the Yankee Dental Congress.
Layton says the company is assessing event registration and air and travel components as "added functionalities in future releases." Clearly, Passkey's founders have even greater ambitions for their two-year-old enterprise.
"We're building a world-class customer service operation that can handle all the business that's out there," Layton says. "This is only the beginning of our story."
Epilogue: "Passkey has the potential to bring the management of citywide inventory to a new level," remarks Leslie Mathieu Hogan, vice president of sales, the Greater Boston CVB. Because reservation data is so accessible to all the parties in the housing process, problems can be headed off and trends are easier to track, she notes.
An early proponent of Passkey Systems, Bill Peeper, president of the Orlando CVB, says service from Passkey on the APTA meeting has been "delightful," while on the commerce side the system had smoothly handled the transfer of credit card deposits back to the hotels. He adds, "I hope they are wildly successful because their system helps control, and gives meeting planners both flexibility and consistency of service from year to year as they take their meeting from one destination to the next. The meeting planner comes out a winner."
Individual hotels using the Passkey program do not need special software or hardware, just an Internet browser and an Internet service provider, and several hours of training by Passkey staff. Nonetheless, for Passkey to live up to its full potential, Peeper believes that the system will need the support of hotel companies at the corporate level, who can then sell the concept "down" to the individual properties.
Peeper was also an early proponent of the IACVB-backed CHRS. "The [Passkey] concept is similar [to CHRS], but the technology just wasn't there at the time to make CHRS work, and neither was the support from hotels," he says. "The industry learned a lot from the failure of CHRS. But you know, the Wright brothers were not the first to fly."*
FLEXIBILITY, EASY ACCESS PLEASES PLANNER "I love accessing our housing information whenever I need it, and in whatever format I need it--charts, text reports, sorted by categories or by hotels," remarks Rita Pierson, housing/travel manager for the American Physical Therapy Association (APTA), Alexandria, Va. The APTA is one of the first associations to use Passkey Systems for a citywide meeting. Hotel reservations for APTA's June 5 to 8 meeting in Orlando opened in March with eight participating hotels. At press time, Pierson reports the system has worked without a hitch.
Prior to the Orlando meeting, APTA attendees never had the option of booking accommodations via the Internet. This year Internet reservations accounted for about 20 percent of reservations, Pierson estimates. "Ideally, all reservations would come in via phone or Internet and we would get rid of all paper; that's where a lot of error can come in," she says.
Because APTA has a high number of multiple occupancies, Pierson finds another great Passkey feature is that rooms can be listed under each person's name, and rates can be split. Other features of the Passkey Systems that Pierson likes: the instantaneous reporting capability allows her to track trends in reservations at various points in the cycle, and thus better predict (and support) room block needs in the future. She also likes being able to customize confirmation letters, adding information on shuttle buses or registration hours. Easier, faster access to reservation data means more marketing potential, too. For instance, at various points in the reservation period, she can print out a roster of everyone who has made a reservation so far, and send a broadcast fax to exhibitors with updated information and opportunities.
"At the end of the meeting, we can pull a list of everyone who booked a hotel room, and market to them for next year," she says, eliminating the need to bug hotels for this kind of information or to get it from them in a format that is not so easily usable. "It's our people and our information," she says, "and we should be able to access it at any time."
HOW PASSKEY WORKS Passkey Systems, available only through a convention bureau housing department or a housing services company, provides a central online reservation database that is accessible via password to the event organizer, participating hotels, and the contracted housing-services agency. Using the Internet, each can obtain real-time status reports on housing blocks.
Planners can get 24-hour reporting on room pickup, and can make instantaneous changes in allotments, moving rooms from the attendee block to the exhibitor block or vice versa, for example, during the reservation period. In the event setup phase, planners can choose information to include about hotels (specific amenities or services), define unlimited sub-blocks, and spell out the commerce rules for such things as deposits, cancellations, and credit card processing.
Attendees are able to make a hotel reservation via fax, phone (using Passkey's call center or the call center of the bureau or other housing vendor), or by Internet, where they can view detailed hotel information (including a picture of the property), book at the negotiated rate, and receive instant confirmation.
After the cutoff date, management of remaining inventory reverts to individual hotels, however the Passkey system provides hotels the option of keeping all or some of their remaining rooms on the Passkey database--and to change the room rate of rooms left in the block. If they choose to keep their inventory in the database after cutoff, hotels gain by not having to process calls by attendees after the cutoff date; the planner wins by getting credit for reservations coming in after the cutoff date.
"The system doesn't go away when you need it the most--the last 30 days before the meeting," says Brian Layton, Passkey's executive vice president. Passkey charges CVBs and housing bureaus between $6 to $9 per "consumed" reservation, depending on services provided. What they then charge their clients for housing services, "is up to them,"Layton says.