Fighting Bureaucracy, One Hotel Reservation at a Time
After selling their company for big bucks to Barry Diller, the founders of Hotels.com have grand plans for their newest venture, Getaroom.com.
Getaroom.com may look a lot like its predecessor Hotels.com, but don’t get the two hotel-booking services confused. “Each business operates in a different time and a different environment,” says David S. Litman, Getaroom’s co-founder and CEO. In 1991, when Litman and Getaroom co-founder Bob Diener launched Dallas-based Hotels.com—it was then called Hotel Reservations Network—the World Wide Web was still in its infancy.
According to SEC filings, Diener and Litman sold 80 percent of Hotels.com to Barry Diller’s IAC/InterActive Corp. in 1999 for $150 million. (Hotels.com later went public, reducing IAC’s ownership to 68 percent, the filings say; in 2003, IAC paid another $1.1 billion for the remainder of the company it didn’t already own.)
Dallas-based Getaroom.com, just over a year old, is already operating in 30 U.S. cities and seven European markets, and could hit as much as $100 million in sales this year. It’s also preparing for its next phase of growth by expanding in Europe and adding Asia, the Caribbean, and South America to the mix.
Admittedly, it has a long way to go. The ultimate goal is to secure as much as 1 percent of the $500 billion global travel industry. That would eclipse Hotels.com, which had an estimated two-thirds of one percent while he was there, Litman says.
Getaroom.com uses several innovative ways to attract customers, such as making the best rates available only to customers who call by phone, or limiting some deals to just one hour. The company also offers special online rates on European hotels to U.S. shoppers during daylight hours in the U.S.—a time when most European customers are asleep—to help the hotels avoid cannibalizing their core business. “We think value wins,” Litman says.
Litman met Diener in law school. But in a very unlawyer-like move, the pair have based their now 25-year-old business partnership on nothing more than a handshake. That appears to have been enough; the duo has launched a number of ventures. Most of those companies have been in the travel space, which attracted Litman and Diener because of the industry’s reasonable up-front capital requirements, good cash flow, and high margins. Those attributes helped the would-be moguls in their early years, before Hotels.com. “You can make a lot of mistakes with 40 percent margins—and we did,” says Litman.
One lesson Litman says he’s learned is to “fight bureaucracy at every opportunity.” Success comes from maximizing personal accountability and making “everyone feel like an owner,” he goes on. Litman prefers to hire individuals from growing small and medium-sized companies. People who’ve worked at large companies, he says, “tend to think differently.”