Fighting For Profitability - 2001-01-29

<B>Fighting For Profitability</B>
<I>Online Mtg. Portals Tread Murky Water</I>

By Chris Davis

The roster of bankrupt and defunct Internet businesses increases daily, but the meeting industry's online purveyors so far have avoided becoming casualties in the massive dot-com shakeout. However, 18 months after finding themselves awash in venture capital, the online meeting portals have made several moves to draw corporate meeting buyer attention to their Web sites, including introducing new pricing models and products and laying off employees, while fighting for profitability and solvency.

There are questions, even among the portals themselves, as to whether there are too many suppliers for the market and whether buyer interest will increase enough to support all of their bottomlines before consolidation--or shutting their doors--is necessary.

"Is the market over-provided? Are there too many choices?" asked PlanSoft president Ed Tromczynski. "You know, before all of the settlers of the western United States landed, there were a lot of wagon trains that ran out of gas first. Will StarCite, EventSource and PlanSoft be able to get to the West Coast? It's not easy to do, and it's easy not to do."

The portals are in a difficult position: Their only method of generating revenue, save for banner advertising on their Web sites, is derived from buyers submitting requests for proposals through their sites and receiving money, either through a commission or a flat fee, from subsequent bookings. While buyers have shown high interest in using them as destination and property research tools, the look-to-book ratio is low, which gives the portals many site hits and page views but no revenue.

"We look at the portals all the time, and some planners have done registration through a dot-com," said Barbara Cummins, Florham Park, N.J.-based associate director of meeting management services at PricewaterhouseCoopers. "But we already have a Lotus Notes-based system and database that works. We can already handle vendor consolidation and break out any type of report through it. I find dot-coms too association-focused and not very flexible. They all have something to bring to the table. I wish there was a way to take a little from one and some more from others."

That, in a nutshell, is the portals' problem, said Glenn Bingham, vice president of meetings solutions at GetThere. Bingham sold his AllMeetings portal to GetThere in July, as the Internet market showed its first signs of downturn. With money behind it from GetThere and its new owner Sabre, GetThere DirectMeetings looks safe. "We expected planners to switch to online tools more quickly. Now, there's layoffs, and everyone's trying to drive revenue-producing business. The only thing the market offered was the ability to send RFPs a little faster, which leveraged planners' time," Bingham said. "While most planners think that makes sense sometimes, they mostly used it as a research tool. The savings was not as compelling."

That was echoed by buyers. "I've been doing meetings for a lot of years, and I know a lot of facilities in the major cities, so I'd rather work with our travel agency to book the appropriate site," said Dan Lauterwasser, travel and meeting manager at The Hon Co. of Muscatine, Iowa.

Over the past few months, the portals have implemented changes in how their businesses are operated. PlanSoft, for example, has laid off about 29 support-staff employees. "We've had to cut expenses and focus," Tromczynski said.

The portals also have changed the way they charge for services, with both PlanSoft and GetThere DirectMeetings moving away from commission-based rates. PlanSoft will charge a flat fee per room night, as StarCite does, and the former AllMeetings will charge a flat fee based on the meeting as a whole.

The portals also have shifted their focuses to the corporate market, introducing data consolidation tools and registration capabilities. "The early adopters of technology are corporate users, and we see the value of penetrating the corporate market," Tromczynski said. "Our target is the Fortune 500, the top 100 independent planners and firms and the 300 to 500 largest associations. To get there, we need to use our existing relationships with Conferon and Rosenbluth and hotel chains."

EventSource.com has introduced Compass, another suite of data consolidation tools designed to attract the corporate buyer, and co-founder and vice president of business development Brian Langer hopes the corporate purchasing environment will evolve to the point where its usage is mandated by travel policy. But Langer disputes the notion that the portals are at a crossroads, or, at least, that EventSource is: "Like everyone else, we've been frustrated at what the market's doing in this space," Langer said. "But we are on track with our organizational goals. Our business is consistently satisfied with the levels of growth we're going through. Our plans have not changed. We have not lifted our foot off the gas."

These new products offer hope for the future, since it seems data consolidation is near the top of the list of meeting buyers' wants. "One year ago, nobody worried about data integration," Bingham said. "Now, the ability to track data is a major part of what companies want."

None of this is to say there is no interest or usage of the portals themselves; quite the opposite, in fact. But usage doesn't automatically translate into profitability. "We have between 3,000 and 5,000 visitors to our site daily, about 100,000 monthly and between 60,000 and 70,000 searches of hotels performed every month," Tromczynski said. "Adoption of all Internet-based products is less than everyone anticipated, but we did not expect profitability in 2000 or 2001. We will look to be profitable on a month-by-month basis this year."

And there are meeting buyers who have found value--profitable value, from the portals' perspectives--in online services. Annette Morris, manager of meeting and travel services at St. Louis-based Ralston Purina, and her company's planners use EventSource and StarCite to not only search for properties but send RFPs and book events. "It's a time saver and I like the human intervention from EventSource," Morris said. "There is a cost to the time planners spend, and time is money, so it has been a worthwhile addition. We have never supported the use of third parties in any form in the past, but the demand on our planners from internal clients to arrange more meetings quickly led us to look for new ways to meet the challenges."

However, other buyers who book meetings through the Web sites seem unlikely to support the number of suppliers vying for their business. As such, there is a likelihood that, similar to GetThere's purchase of AllMeetings, there may be some consolidation that leaves fewer portals operating as their own businesses. "Some companies will consider alternatives," Tromczynski said. "They will look to be acquired. There will be consolidation, and the lights will go out on some. That is unfortunate, because these are the guys that brought this to market. We're big to be acquired."

Some Internet meeting business models seem to have fared somewhat better: Attendee registration businesses, for example, have a sturdier base of revenue. "This space has been validated," said Peggy Lee, CEO of B-there.com. "This was the year that Corporate America woke up and looked at the impact of meetings on revenue and return on investment. I had no idea that corporations would flock to us like they have. If I did, I would have only sold to the corporate market." Lee said attendee management functions are more attractive to the corporate planner than site search and selection capabilities. "That's where the impact is," she said. "It leads to attendee satisfaction, and that makes the planner look good."

Still, B-there isn't profitable yet either, though Lee said 2000 revenues increased "by many thousands of multiples." B-there has moved up its schedule for profitability to 2001, barring a recession.

Madsearch, a site selection Web site that charges properties to be listed, makes no pretense of impartiality in selection but already turns an annual profit, said president and CEO Madeline Daryadal. "Some companies and alliances just thought the bank would never dry up. When it went, they didn't know what to do," she said.

Madsearch, in addition to its site selection capabilities, e-mails a weekly advertising-laden industry newsletter and targeted advertising-only e-mails to about 18,000 people. "We shifted from thinking of ourselves as a dot-com to having the site as a tool to help our company's business, which is an advertising venue to assist hotels," Daryadel said.

"When there was a lot of money pouring in in 1999," said GetThere's Bingham, "our objectives included an IPO and to establish ourselves as a significant player. But the market just died.