Investments

John Davis III: The Man With The Solutions

Bank Of America Investment Following his attendance at ITB 2002, John Davis III, President and Chief Executive Officer of Pegasus solutions is on a flying visit to London. Un-phased by his busy schedule, `The man with the solutions` is up and ready to talk business, greeting ITN for an early morning breakfast meeting.

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Banc Of America Investment John Davis founded Pegasus 13 years ago. Prior to his appointment as CEO in 2000, he has led numerous strategic initiatives for the company. John`s outstanding contribution to the hospitality industry throughout the years has been widely recognised by many publications. Labelled by the Travel Agent magazine as the hotel industry`s "Person of the Year" and by Business Travel News as one of the "25 Most Influential Executives" 4 years running, as well as one of the "25 Most Influential People in The Meetings Industry" by Meeting News. Appointed "Agent of change" by Computerworld in 1995, Davis certainly lives up to his reputation.

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Banking Investment Charismatic and charming, John`s sense of humour is ever-present along with an insatiable appetite to talk travel - at the expense of breakfast! John reveals his company history, plans for future development, along with some outstanding statistics.

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Investment Solution Strategic "We provide technology services for the hotel industry worldwide," he begins. With their corporate headquarters based in Dallas, Pegasus Solutions has 22 offices in more than 16 countries, including regional hubs in Phoenix, London and Singapore. Pegasus employs approximately 1,500 employees.

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Investment Banking Services In 1989, Davis led the launch of the company`s electronic distribution switch technology, THISCO. This involved helping 15 major hotel companies to develop the switch that would enable agents to easily book properties over the Global Distribution Systems (GDS). Today this connects approximately 42, 000 hotels to the GDSs and alternative distribution channels. "With 75% of the market share," Davis says, "Pegasus only have one small competitor, Wizcom".

Bank Investment Only three years on, and Davis was already on to his next brilliant yet simple idea. "In 1992, I went to the travel agencies and said, what do I do to better the relationship here?" Their answer was merely, "pay us". As a result of this meeting, Pegasus Commission Processing was formed significantly improving the relationship between Pegasus, travel agents and hotels. Agents now receive all their hotel commissions in one cheque, in local currency via Pegasus. Davis is clearly thrilled with this piece of business. This is not surprising considering the profit margin. Last year, this simple yet brilliant service to the Travel Agents processed $600 million and 18% of Pegasus` revenue.

Alternative Investment No stranger to pioneering ideas, under the stewardship of Davis, Pegasus put the first ever hotel on the Internet. "In 1994, we put up 16 hotels on the internet and made them bookable much to the disgust of the travel agents - we were not popular people at that point". Davis refers to what is today known as TravelWeb.com - a consumer site.

Online Investment Services Into the year 2000 and Davis made what he reveals to be the most difficult decision in his career so far - the acquisition of REZsolutions, multiplying Pegasus` market cap nearly six fold. "We went from 300 to 2,300 employees overnight," says Davis, "and for most of my employees, English was a second language - that`s a little different to what I was doing before." Although Davis laughs on reflection at the enormity of the acquisition in hand, his vision was realised. With the purchase of REZsolutions (which was the result of a merger between Utell and Anasazi), Pegasus became the number one hotel consortium representing 5,500 hotels. Utell now provides independent properties and small hotel chains with unparalleled global exposure offering 12 call centres offering representation in 43 countries, distribution through GDSs and thousands of websites.

Accompany Essential Investment Although by his own admission this move was very demanding, Davis does not regret the decision. "I got asked by my board two weeks ago, now that it is all done, would I do it again? My answer was, yeah, I would. I`d do it a little differently - I learnt a whole lot about what not to do, but it was the right move at the time. We had to expand and we had to get in some new products".

Investment Company Davis` desire to learn and improve seems to be a hallmark of his character. He recently launched the PegasusCentral property management system - the first of its kind. The product provides a full-scale enterprise solution that seamlessly integrates property management and central reservation inventories from one database. "We`ve got a property system that`s a browser. You don`t need any equipment, just web-based appliances. There is no license and it takes 8 hours to train on. This recent product is typical of Davis who with his searching mind has a knack for identifying gaps in the market.

Investment Management Solution Now determined to lock horns with Hotel Reservation Network, (HRN, a subsidiary of USA networks,) Davis is convinced that he can provide a superior product that will benefit hotels and consumers, by virtue of its speed of operation and yet be simple to operate. I am referring to Hotel Distribution Systems (HDS), which Pegasus and five leading hotel chains launched last month.

Investment Management Services HDS will market distressed hotel inventory through online sites with real-time rates. If demand increases, then hotels can simply withdraw rooms. "If you look at HRN`s market cap, it`s astounding. They`re worth $4 billion - that`s more than the Hilton. I`m very jealous. I didn`t think of it, but I sure can do it better". Perhaps it is this competitive and yet playful spirit that is the key to John Davis`s success. This man does not accept second place.

Guide Investment Stock Davis plans to develop a consumer website in future, but at present will be providing Orbitz with HDS`s for net rates and exclusive deals. This will be made available later this year. "I really do think this is going to be a great product, creating a huge opportunity", he says.

Investment Manual Solution On a general note, I asked John whether he felt that the travel industry had fully embraced the internet. He gave me his perceptive reply: "5 years ago 95% of airlines` revenue came from travel agents. Who would have had the nerve without the internet to turn around and say, "guess what, we`re not going to pay you guys (the travel agents) anything. We don`t need you. We have other ways of getting to the consumer." It`s an amazing change that`s occurred in 5 years and as far as I`m concerned if you look at the internet as a success story, 28% of all Internet E-Commerce is travel related. The travel industry has embraced it. I think we`re still learning and we`ve got a long way to go on how we can use it".

Investment Stock Davis sees an extremely bright future for Pegasus. Still looking to expand, he sees two challenges that need to be addressed. Firstly, to further develop Utell as a consumer brand on the internet and secondly, to expand usage of the property system, which he describes as "unbelievable" and "without limits". "A combination of those 2 things could potentially turn Pegasus from $180 million, to $6/700 million within the next 3 to 6 years".

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