The cofounders of Global Travel International rejected traditional travel-industry business models by designing their company to respond to change and opportunity at a moment's notice.
Forget strategic planning.
Forget market research.
To grow, you need a company that can respond to change and opportunity at a moment's notice
It is 10 o'clock on a steamy September morning, and as Florida braces for yet another hurricane Global Travel International's 12 team leaders squeeze into the conference room, gather around a table that just barely accommodates them all, and turn their attention to quite a different force of nature.
Michael Gross is on a roll. "I get asked all the time, 'Did you expect your company to become what it is today?' Well, it's a stupid question," rants the charismatic 30-year-old cofounder of GTI, in Maitland, Fla. "Of course we did--we wouldn't have started it otherwise."
If Gross and his partner, Randy Warren, have their way, you will utter the name of their fledgling travel company in the same breath as Microsoft and Coca-Cola. That's how they envisioned their company when they started it, five years ago. And that's how they think of it today. GTI, debt-free and profitable from day one, books $100 million worth of travel annually, which brought its revenues to $10 million in 1998. Such growth generally evokes a number of assumptions: the founders had a great strategic plan, deep pockets, industry connections. Think again. Gross and Warren had none of those. Moreover, one could argue that those resources, had they been available, might well have put GTI on the same path as so many of its competitors, which are going out of business at a rate of about 176 agencies a month. Whether by necessity or sheer foolhardiness, they grew their business by the seat of their pants, unwittingly creating the kind of company that will be the hallmark of the new economy: one not fashioned in anticipation of the future, which is unknowable, but built to recognize and respond to change and opportunity at a moment's notice. As a result, GTI resembles the travel agency next to your local grocery store about as much as Saint-Tropez resembles Coney Island. That much, at least, was deliberate.
Reject Traditional Business Models
Gross and Warren learned about the travel business--and the limitations of traditional agencies--back in 1986, when they were roommates at American University. Warren was a whiz at on-line travel bookings, and he routinely nailed down great fares for his buddies, their parents, and his professors, and then ticketed the reservations through his father's travel agent in Boca Raton. He also took full advantage of those early post-deregulation days, when a savvy travel agent could exploit the flaws in a still-evolving reservations system. One day he stumbled upon the Eastern Airlines convention department, which offered deep discounts to various businesses and professional groups. "I thought it was such a great deal that I booked a few people through that desk," recalls Warren a bit sheepishly. "Then one day a lady from Eastern called me and said, 'You really shouldn't be doing this.' It opened my eyes to the industry--that on the surface they operated one way, but there are lots of things that can be negotiated."
Warren was, essentially, an independent agent, earning commissions and agent discounts from the Boca Raton agency. That, in itself, isn't unusual--travel agencies often use a handful of outside independent agents to generate sales without increasing overhead. But a radically different concept was percolating in Warren's mind. Three years after he and Gross had graduated, he called his friend with an idea that he just couldn't get out of his head. "Remember what we did in college?" he asked. "Well, what if there were 10 of me, or 100 of me, all getting the great benefits we got when we were in school?" But instead of conventional agents, who spend most of their time dispensing information, then coordinating the niggling details of travel reservations, Warren envisioned a cadre of independent agents whose sole responsibility would be to refer their friends and business associates to a central office that would then book travel for them. "We didn't want the agents dealing with the minutia," says Gross, who abandoned a less-than-satisfying legal career to throw in his lot with Warren. "We wanted them to make our phones ring."
The structure, which had been tried before with limited success and amidst bitter protest from "real" travel agents, would allow a company to overcome most of the disadvantages that plague most agencies. Overhead would be vastly reduced, since there would be no high-rent storefront to attract walk-in traffic; advertising costs would be slashed because the company would rely on agents to generate new business; and volume would create economies of scale and eventually influence market share for suppliers. Warren and Gross would charge their independent agents $495 to cover their administrative costs--a fee that was set just under the $500 threshold that triggers state and federal franchise laws. In exchange, members would get the privilege of calling themselves travel agents plus half the commission on all travel they referred to the central office. The fee, plus a $99 annual renewal charge, would ensure a nationwide base of referrals. Members would also be encouraged to recruit more agents. "We looked at what MCI was doing with their Friends & Family program," says Warren, "giving people discounts when they helped sign on more customers. We modified that and decided to give people $100 whenever they recruited a new agent." Ultimately, says Gross, their goal was to become "a membership organization wrapped around a travel agency. But there was no model," he adds. "So we had to make it up as we went along."
Invent Yourself on the Fly
The partners' first sleight of hand was the company's name: Global Travel International. It sounded generic, it sounded big, and it sounded familiar. "We'd call hotels and ask for deals, and they'd say, 'Oh, yeah, we've heard of you guys," recalls Gross. And before the first member was signed up, there was a GTI members' newsletter, a product of Gross's obsession with communication and, as it turned out, a highly effective marketing tool. It was filled with information on the company, on commissions, and on deals that Warren and Gross had negotiated with suppliers by sounding, well, bigger than they were. "We had no clout back then," says Gross, "so we'd negotiate a good deal with, say, a hotel chain, then we'd subtract all our commission out of it and sell it through the newsletter. We wouldn't make a dime on it, but it would make our phones ring, and people would book other travel that we did make money on."
