Traveling Man

Traveling Man

By David Wexler

Associate Editor

Lawrence Hutson admits he was a bit skeptical when he was solicited 10 years ago to lead the design and software development of Travelocty, one of the world's first online travel booking systems. While he had extensive knowledge of technology and the Internet, he knew little about the travel business or where it was headed.

"They said they were going to sell tickets on the Internet," Huston says, "and we were like, 'OK, we'll build it for you. Maybe it'll work, maybe it won't, who knows?' We had no idea whether people were ever going to buy one single ticket on the Internet."

The rest is history, of course. The online travel industry has exploded - and continues to expand. In 2004, more than 30 million U.S. English-speaking Internet households spent more than $50 billion purchasing travel online, according to Forrester Research in a recent report. By 2009, Forrester predicts, the number of U.S. households buying vacation packages online will reach 46.4 million, with a total spending of nearly $111 billion.

"Travel, it just so happened, was the most perfect product for the Internet," Hutson says. "It was just a question of if we were going to be a part of it."

At the forefront of that revolution a decade ago, Hutson, 47, is hoping to be at the forefront again. After developing the revenue-management system for Travelworm, a small travel site in Las Vegas, Hutson returned to Sarasota last year to begin work on his newest venture: Nexgen Travel Distribution Inc.

Hutson, who runs the company from a small office in a rented Sarasota home, expects to launch the company in early 2006. Hutson has already secured $1 million in funding and hopes to raise another $2 million in the second round of financing. Hutson funded the company himself until October 2004 through his share of the funds from the sale of Travelworm.

Nexgen will provide the integration, packaging and merchandising for online travel products - everything from air, hotel, cruise, packages, tours, rail to vacations and event tickets - through an innovative revenue-sharing program.

Nexgen, Hutson says, will be a one-stop shop for consumers looking for up-to-date destination information and travel product offerings. Customers will be able to make their travel reservations and view their destinations online without having to browse and hop to different Web sites. Say you go to ResortQuest.com to look for a ski home in Aspen, you'd be able to make your airline reservations without having to go to Expedia or one of the other branded sites. But all the while, you'd be using Nexgen's back-end software (see "How Nexgen Works").

Learning the game

Hutson emerged in the online travel industry in 1995 as chief technology architect of Travelocity, responsible for the architecture, design and development of Travelocity. The site was launched March 12, 1996, by SABRE Interactive, a division of AMR Corp., which at the time owned the SABRE Reservations System and American Airlines.

Before Travelocity, the industry was centralized and bureaucratic. Travel distribution was mainly done throgh travel agents hooked into five main global distribution systems, including SABRE. About 250,000 travel agents were hooked into the SABRE system.

"All the airlines would pump their inventory into it, and the travel agents would use screens to view that inventory and book flights through the airlines," Hutson says of the pre-Travelocity days. "It seemed American Airlines flights would always come to the top first, so the other airlines decided they would pursue developing their own and form alliances."

Then along came Travelocity, which became one of the world's first Internet resources for the do-it-yourself traveler. The site opened up booking to 18 million potential English-speaking customers.

"Travelocity connected directly into SABRE, and it bypassed all of these travel agents," Hutson says. "Overnight, the SABRE system went from addressing 250,000 people to over 18 million potential users in one day. That was the day the whole world kind of shook in the travel industry."

Airlines soon began to cut commissions to travel agents. Between 1995 and 2004, 75% of all travel agents in the United States went out business, a trend that can now be seen in Europe and Asia, according to Hutson.

Travelocity used the software and hardware systems developed by Hutson's team for 10 years, finally going off it in Febuary 2005.

Shortly after the launch of Travelocity, several major airlines approached Hutson to help them bypass the global distribution systems. The average global distribution system price to an airline for booking a ticket is $13, Hutson says. He served as principle e-commerce consultant and architect for Air China, Singapore Airlines, British Airways, Swissair, Quantas Airways and Walt Disney Travel.

Between 2002 and 2004, travel Web sites began integrating airline fares with products such as hotels and rental cars.

"The market was growing so fast," Hutson says. "It was just about getting consumers to your Web site. There were so many people wanting to buy."

Today, Hutson says, legacy technologies, integration complexities and existing consumer-direct business models limit travel product integration. The large travel conglomerates - such as Cendant, which owns Orbitz.com, CheapTickets and Lodging, and Interactive Corp., which owns Expedia, HotWire and eLong - have not integrated products between their own brands.

With Nexgen, Hutson hopes to bring product integration to the next level, or "next generation."

The next generation

While Hutson described himself as a "technology guy," it's hard to tell at first glance.

"Usually companies want all the engineers in the back room because they don't have the personality to meet people and sell, market, talk to people," says Jeff Wilson, a Longboat Key resident who has invested in Nexgen. "They're more introverted. Lawrence isn't that way. His personality is what drew me to him - the fact that he can describe what he's doing and get people excited. But he can also actually do the sit-down technical work."

Wilson met Hutson last October and has been helping set up the capitalization structure of the company.

"The first thing that really interested me about Lawrence was what he did with Travelocity," Wilson says. "Having 10 years of Internet travel experience, he's come up with the Nexgen concept that fixes all the things that he would have liked to fix before. Now, by starting from the ground up, he's able to take all that knowledge and fix all these areas that other travel sites didn't address because of their legacy systems and make it better for the consumer."

Hutson, dressed in a long-sleeve, un-tucked button-down shirt and blue jeans, prefers to talk about a recent fishing trip with fellow Nexgen associates than his software-development credentials.

His resume includes developing Internet protocols for GTE/Verizon, designing an Intranet/Internet e-commerce solution for The International Organization for Migration based in Sweden and heading Sarasota-based Freedom Link Communications Inc. from 1998 to 1999.

"I put my first company on the Internet in 1988, before the Internet was known publicly," says Hutson, referring to Oklahoma City-based Academy Computing Corp., which he joined after receiving his master's degree in computer science from the University of North Texas.

Hutson first thought about starting his own company in 2003, while working with Travelworm Inc., a small travel site that focused on Las Vegas. With no offline advertisement, the Web site produced more than 1 million unique visitors a month in 2003. It was clear to Hutson that the online travel industry had rebounded from the events of 9/11 and remained stronger than ever.

"That's when we knew this thing was not stopping and that people preferred to purchase their travel that way," Hutson says. "People just didn't know how big and how explosive it was. We had so much success with (Travelworm), and we knew the direction. That's when we said, 'We're going to do this project.'"

In December 2003, the owners of Travelworm sold the company. Two months later - Feb. 15, 2004 - Hutson began laying the groundwork for Nexgen. By April, Hutson and his wife of 27 years had relocated from Las Vegas to Sarasota. During the past year, he has been busy raising capital, developing software and focusing on business development. The firm currently supports more than 120,000 hotels, airlines, car rental companies and tours. Nexgen has signed up such companies as Europcar.com, Pegasus and Golden Tulip Hotels.

Model for success

Staffed with five full-time employees in its Sarasota headquarters and two full-time employees in its Germany office, most of Nexgen's operations are outsourced.

"We're in the business of managing contracts, not people," says Hutson.

Hutson and his staff spend several hours a day communicating with clients, contractors and partners in various parts of Europe through Voice-over-IP technology. "I'm a technologist, so the heart of what we're doing is technology," Hutson says. "We leverage technology in every single possible way. Our software development shop is a 24/7 shop. We have different parts of the world operating in the day and different parts operating at night - and both parts interact with one another. It's like a manufacturing plant that operates 24 hours a day. It's an incredible, efficient system. It's almost scary in terms of efficiency versus the way we used to do things."

The old way - when he was working for various airlines in England, Singapore, Australia, Sweden and Switzerland - involved constant travel. "I physically had to fly to one team, spend the day with them, then fly to another team the next day," Hutson recalls. "We had to be there physically to manage the people. Now, we don't manage people, we manage contracts."

Within the next two years, Hutson hopes to bring his technology to the European and Asian markets. The company plans to build the infrastructure for Germany first, followed by China and Latin America.

"There are 10% more Internet users in Europe than there are in the U.S.," he says, "and 25% more Internet users in Asia than there are in the United States," he says. "These markets are virtually untapped. We're providing all of our products in their localized languages for booking and content, and we'll accept over 100 different currencies."

Travel agents will also play an important role in the success of Nexgen. Through the Nexgen Booking System, the company will re-direct all of its calls to travel agents, who will use the system to service customers.

"The original model (for Travelocity) was to bypass the travel agent," Hutson says. "We don't see it that way. About 15% of all people who go online for travel find their product and want to call somebody. Instead of maintaining large call centers that cost millions of dollars a year to operate with very big overhead, we're going to empower the travel agent to do our sales calls and customer-service calls through our system."

Ahead of the pack

Hutson likes to tell the story of two friends who, on a camping trip one weekend, found themselves face to face with a huge grizzly bear. One of the men immediately sat down on the ground and pulled a pair of running shoes out of his backpack. The other camper stared at him in amazement and asked, "What are you doing? You'll never be able to outrun a bear." The other man retorts, "I don't have to outrun the bear, I have to outrun YOU!"

Hutson says he plans to go head-to-head with some of the biggest names in the online travel industry - Expedia, Travelocity, Orbitz - and to win, he knows "you have to stay one step ahead of your competition."

"We want to be the leaders," Hutson says. "We want to have integrated more products than anybody and provide the customer at the point of purchase the choice of more travel products at the best possible price than anyone else can provide, along with the deepest destination content available online for travel. We want to have more unique visitors who have purchased travel from one of our pages than any other travel site."

HOW NEXGEN WORKS

Set to launch in early 2006, the Nexgen system will provide customers with a one-stop shop that will enable consumers to receive destination content, view multimedia and purchase a variety of products.

"We're integrating all different kinds of hotel products: bed and breakfasts, wholesalers, hotels, vacation rentals," Hutson says. "We're building the infrastructure to integrate all these products from different vendors and different companies."

Here's how it works: Let's say you're interested in taking a surfing trip to Costa Rica with your buddies. By visiting online surfing magazine Surfline.com, for example, with a click of a button, you can watch a live Webcam of the Costa Rica waves, tour the beaches, check out the best restaurants and cheapest hotels and purchase airline tickets - without ever leaving the Surfline.com Web site.

"We're building the largest multimedia travel content database in the world," Hutson says. "We are integrating this travel content with all the travel products we sell. The first time real tours are going to be sold on the Internet is through our system."

What's key is the consumer will never know Nexgen is behind the transaction. For example, if you were to take the travel link on Surfline.com, it will take you to a site managed and built by Nexgen, but you will not be re-directed to Nexgen's Web site.

"One of the differences between us is that we're not brand focused," Hutson said. "If you click this button on their Web site, you never leave their Web site. Once someone books the travel, the information and revenue is recorded on our server. They sell you the ticket, and we share the net revenue with all of our Web portal partners. The old generation was really about consumer brand, consumer direct."

The "old generation" - specifically companies such as Orbit, Travelocity and Expedia - spent millions of dollars trying to promote their brands. In 2004, Expedia spent $300 million in U.S. advertising marketing, while Orbit spent $140 million and Travelocity spent about $100 million, Hutson says.

"The old generation was about building brands and fighting over brand awareness," Hutson says. "The problem with their methodology is they are using offline branding, trying to convince somebody on a TV show or a radio program to come to their Web site. It's way overspending."

The new generation, Hutson says, is "not focused on brand, but on distribution and providing all of the thousands of Web sites out there with the ability to be able to provide service for their customer at no cost to the Web site."

"We handle all the ugliness of travel in the background - all the direct connect to airlines or whatever the site is about – golf, a particular destination," Hutson says.