Dotcom that does the business


27 Nov 2003

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Ray Nolan, co-founder and CEO of Web Reservations International (WRI), can afford a wry laugh when I ask him if his company is that rare beast – a dotcom venture that actually turns a profit. “The difference is that we watch the numbers,” says Nolan. “It’s not a dotcom as people came to envisage it but rather what it was supposed to be.”

WRI provides online booking and management technology for hostels and budget hotels. It defines its market as the budget, independent and youth travel sector and between its various online brands such as Hostels.com, Hostelworld.com and Trav.com. It books over 10,000 beds a night from over 6,500 accommodation providers. The company makes its money by taking a small commission on each booking and also provides backpackers the ability to book activities and tours through a range of complementary websites such as Things2do.com and a wide selection of affiliates.

“We don’t charge people to be listed on any of our sites,” explains Nolan. “That means we have to get the volume because it’s only a small percentage we charge – it’s just single dollars per booking.”

The company has offices in Dublin and Sydney, Australia but has signed up accommodation providers in almost 150 countries worldwide. It has done this without having a massive staff on the road – it has local representatives in key markets such as China and staff are sent on occasional field trips to locations such as South America and Eastern Europe. Although there was a lot of travel in the early days of the business, which was established in 1999, Nolan believes that WRI now has enough of a reputation in the sector that hostel owners come and seek them out.

“The hostels are getting huge marketing coverage for a very cheap marketing dollar,” says Nolan. “We power 95pc of hostel booking sites whether that’s apparent or not – if you go to Lonely Planet, Lets Go, Rough Guides or E-Bookers and book a hostel, that’s us. We’re listed on the guts of a thousand sites – that’s huge coverage for very little spend and the results are measurable.”

The sell to the consumer is that if they arrive in Guatemala at three o’clock in the morning they can bypass the army of local touts, secure in the knowledge that they’ve got a definite booking. The target demographic of backpackers and independent travellers are also comfortable using the web to buy products and services.

WRI recently appointed Goldman Sachs as advisors sparking speculation that the business might be up for sale, but Nolan insists that he sees at least another five years of strong growth for the company. He expects triple-digit growth this year and points out that the annual global spend on hostel accommodation alone is US$5m that leaves plenty of room for expansion. He stresses that Goldman Sachs is merely acting as strategic a advisor and will help the company evaluate the various offers of investment it continuously receives.

WRI hit the headlines early this year when it acquired US company Hostels.com for a reported €6m. Nolan says WRI is always looking at possible acquisitions and has one or two likely targets in its sights at the moment. It’s most likely that any acquisition would be of a complementary company rather than someone who is currently competing with WRI in the hostels market. “We wouldn’t want to buy something to compete against ourselves, so it’s not likely to be a hostel company,” says Nolan. The remaining independent hostel operations are what he describes as tier two players and Nolan believes it is better to have these companies in WRI’s affiliate programme rather than investing in them.

Although big players in the online travel business such as Expedia and Travelocity are starting to target the budget sector, Nolan does not expect them to have much success. “They’ll find it hard to make a profit on budget hotels,” he says. “They operate big call centres and if a customer spends half an hour talking to an agent about a US$40 room booking, no one is making any money on that. We tackle the US$10 a night and up market, and we can move up to the budget hotel market from there, easier than they can move down.”

Nolan met up with co-founder Tom Kennedy when his IT company, Coretime, developed a front of house reservation and management system for Kennedy’s Dublin hostel, Avalon House. “Myself and Tom have been self-employed for many years and this business is run the same way. We’ve been focused on profit since day one and in the early days that meant we had to be tight on expenditure,” Nolan says, before adding modestly, “it helped that we hit the right market on the right day.”

By John Collins

Barry Fitzsimons, chairman of Equity Networks, InterTradeIreland ; Ray Nolan, director of Web Reservations International; David O’Flanagan, partner, Deloitte; and Tom Keenan, partner, Deloitte