Mike Kistner
It would be hard to imagine a tougher year than the one following Mike Kistner's May 2008 promotion to Pegasus Solutions CEO. The former Pegasus COO recently spoke with Management.travelabout how he and the economic environment have changed the company, the latest on the company's total pricing initiative and what else is in the works. An excerpt follows.
What changes have you made as CEO?
At the end of 2008, we implemented a strategic business plan to revitalize the culture of Pegasus over the course of probably the next 18 to 24 months. As we all know, we started to see the recession really become apparent and then we saw the January numbers and everyone went, "Oh, my God." We saw for the first time drop-offs in revenue across our customer set in the 20 percent, 30 percent or 40 percent ranges, so we were looking at a significant decrease. We pulled the executive management team together ... and said if it doesn't drive value for our customers, we are not going to do it. Just because an idea is a good idea, if the customers don't believe it's a good idea and don't want to implement it, why would I spend any time developing it?
What have you been working on the most recently?
We have been working on our next-generation central reservations system platform, the distribution network and [price and inventory] caching solutions. We also have implemented a very tight relationship with [market intelligence provider] Rubicon for the only truly forward-looking trend reports in the [hotel] industry. A lot of people have said, "I can show you how you looked in the past and I can show you how you look today," but because of the unique position that we sit in the industry with our switch [for facilitating bookings between hotels and global distribution systems] and all the forward-looking bookings, our Market Vision product for the first time lets people look forward at how they are doing at their property, in their market, against their competitive set, etc. We are going to start deploying a Pegasus hotel booking trends report, which will give meaningful tidbits to the industry. For example, June 2009 is the first month this year where net reservations exceeded 2008. Hotel bookings in North America grew by 15 percent in June this year over last year. We are excited about this tool and what it represents for the industry. Regarding commission processing, Pegasus has now implemented rules-based processing. [Historically, tracking the various negotiated commission rates] was done by peripheral systems because the core legacy systems that dealt with that, even ours, said it's a flat commission rate and we have to deal with all of this stuff on an exception basis. Now we support probably hundreds of rules, where people will say, "If commission will come from this source and it's booked under this program, the commission rate is this, and if it happens to be this particular circumstance nested on top of that circumstance, then the commission to be paid is that. Or if it's this other circumstance, there is no commission to be paid." That can now be defined by the parties involved in the transaction, so [our commission processing capabilities] offer much more control over how to pay commissions and to whom.
As first reported by The Beat, Pegasus had set a July deadlineby which all hotels listing through the company's Online Distribution Database must provide a breakout of taxes, fees and other service charges. What is the status?
We have extended the deadline until Nov. 1. We aren't doing it to be onerous to the industry; it's to meet the demand of customers and guests who want complete information on their bookings. You have to establish a deadline so that the various parties can say, "We need to take this seriously; we need to get our work done, and we need to be able to respond to the requests for information." We have made very good progress: We have a significant number of brands and hotel companies that have conformed and are passing down the right information. There are some major players that have some major systems implementations that are underway, which aren't going to wrap up until later in the year, so on their behalf we are extending the deadline. I anticipate that there are going to be a few stragglers even after that, but the point is that we will have significantly achieved greater than probably 80 percent to 90 percent of the effective information in by that time. Then, peer pressure and the requests for information will force the balance to come into compliance.
What are some of the challenges with implementing this?
It's a matter of working with all the customers, explaining what the interface requirements are going to be, what kind of information we are going to be looking for, the fields that need to be populated. The beauty of it is that the downstream [distributors] that are looking for the information were right there with us, saying, "We really need this information. We are unable to present the complete story to the guest." In some cases, travel departments are saying, "Unless I have total pricing, I am not going to be able to use you to book anymore," so it becomes a revenue retention as well as a revenue enhancing opportunity. [For those who don't comply after the deadline], in a lot of cases we won't turn them off but we'll tell them they are going to be un-bookable--not be returned as a viable option when someone requests information, because they don't have the complete set of information. The demand side is saying, "I don't want to see properties for brands that haven't supplied the complete information that I am looking for." It will become self-policing; you'll have self-deselected by not providing the information.
What new services are you offering?
We are really focused on central reservation systems technology, managing the content associated with that, driving the transactions through to our customers and helping them capture their commissions based on those transactions that are flowing. We think we have plenty of work to do as it relates to business intelligence, as it relates to content management, online marketing and search engine optimization--presenting the best image you can on the Internet and things of that nature. We are really focused on that core set of services around hospitality technology and driving revenue for our customers. We are listening to our customers, who are listening to their customers telling them what kind of information they need to be presented for them to make their purchasing decisions and how their experiences can be improved. When we listen to them and deliver what they need to fulfill their ultimate customer, they are more successful, which make us more successful, as opposed to guessing what the customer wants at the end. One of the prime examples--and we are doing it because everyone else is doing it--is we are going to be deploying one of the first iPhone apps for booking capabilities. There are others that say they have an iPhone booking capability, but it's really more of a simulated browser experience. We are creating a true iPhone app, which we are going to make available to our customers and allow people to book through. Only 3 percent of the mobile smart phones are iPhones, but everyone is rushing to create an iPhone app. We will make it available to our other customers and [Pegasus'] Utell Hotels & Resorts properties, as well.