<B> Pegasus Lands Rez Co.</B>
By Cheryl Rosen
Pegasus Systems Inc. has extended its hand in the electronic distribution of hotel inventory into the global arena, with an agreement signed late last month to acquire REZsolutions Inc., the Phoenix-based provider of hotel central reservation and marketing services. The $250 million acquisition will bring Pegasus an international customer base of hotels and a global sales force, as well as a business-to-business portal on the Internet.
Most importantly for the corporate market, it also will add the central reservation systems of more than 80 hotel brands and their 25,000 properties to the Pegasus fold--forming a base Pegasus will use to build direct connections between corporate buyers and preferred hotel suppliers. Pegasus president and CEO John Davis told BTN he expects to see such direct links within the next 12 months, as "the natural projection of where the market is going."
At a press conference announcing the acquisition, Davis noted that the two companies together "will provide an end-to-end reservation solution to the CRS, GDSs and Internet transactions." Within three years, he predicted, Pegasus will be handling 20 to 25 percent of all hotel bookings.
Pegasus is a publicly traded company, best known for its THISCO switch, which connects hotel inventory to the GDSs on the travel agent's desk, its TravelWeb online booking site and its commission tracking service for travel agents. But while its stock price doubled after its IPO, "Wall Street wanted a wider and more international customer base" for the long term, said Davis. Pegasus stock, which traded in the $30s through most of the year, has moved above the $50 mark.
Indeed, insiders applauded the combination of Pegasus and REZsolutions. "It's a fascinating development," said John Burns, president of Hospitality Technology Consulting of Scottsdale, Ariz., "and a very astute move on John Davis' part to use his capital for this acquisition. It broadens his business base, adds stability and brings in central reservation, property management system and voice processing technology--and some truly impressive brain power."
REZsolutions, which was formed by the 1997 merger of Reed Elsevier's Utell International unit and Anasazi Inc., "hasn't been effectively taking advantage of its opportunities," Burns said. Reed now will be Pegasus's major shareholder, owning about 10 percent.
Another industry observer said the addition of the REZsolutions business "mitigates the long-term risk" to Pegasus of being an intermediary between agents and hotels "when you aren't sure about the future of travel agencies, the greatest users of the GDSs."
As for Pegasus' intention to build direct links between corporate buyers and hotel suppliers, Davis said that "for some time we've been getting into the meeting booking business, but part of our frustration has been that at the end of the day, hotels have to modify their central res systems to accept group bookings. Now we have access to the systems of 80 brands--and we can do the modifications that hotels heretofore haven't gotten to."
So does he think the industry will see direct links from Pegasus in 2000? "I certainly do," Davis said. "The opportunity now is here, particularly in Europe and especially in Germany." Davis for the past couple of months has been working with Hanna Murphy of Siemens Corp. and Earl Foster of Seagram & Sons, on the direct booking of corporate meetings (<I>BTN</I>, Sept. 20).
Burns said the concept of direct connections "is still cutting-edge, maybe even conceptual, territory, but it's certainly going to happen in the future, and the addition of REZsolutions will make it easier. Hotels still take a huge number of reservations from meeting planners and tour operators and handle them in a very manual manner, and John is trying to find a way to facilitate that. Where before he was viewed maybe as an optional intermediary, now he owns the reservation technology used by big hotel companies like Cendant, Forté and Hilton. He can offer an avenue via the switch or develop a parallel strategy where the company says we can work with meeting planners and develop channels directly into these central res systems. It means he can probably move ahead much more quickly and much more effectively."
Also of interest to Davis was the REZsolutions Internet portal. "The hotel industry is beginning to look at the Internet for business-to-business," he said. "It allows all types of information to go back and forth between properties--to send status and rate change information, and also for payment. The key was getting a portal. Now we have all kinds of opportunities.