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Thursday, July 21, 2011

A bit of Direct Connect History that may have gotten lost - The Formation of THISCO, by John Davis

In light of the current airline/GDS debate and how much the following article reminded me of Jim Davidson of Farelogix and what he is facing on the airline distribution front, I had to reprint this article from John F. Davis III, the original CEO of THISCO (now known as Pegasus Solutions).

Oh, and since Rupert Murdoch is in the news this week, I also found it interesting that Murdoch's Newscorp was actually the original investor behind THISCO (before it sold the travel assets to Reed Elsevier). 

Well, I have to say that John Davis and Jim Davidson don't really look all that much alike, but there are many similarities.  

Now John Davis isn't known for creating a caricature of himself and producing videos about cookies, but he is every bit as plucky an entrepreneur as Mr. Davidson.   

Davis was a pioneer in hospitality.  Davidson in airline distribution.

Both men challenge the status quo and belong in the travel distribution hall of fame.  Both built platforms to directly connect suppliers to the distribution community (including in THISCO's case, the GDS themselves).

Davis' story is being told in retrospect.  Davidson is right in the throes of his, with August 1st looming just around the corner - some call this D-Day for AA and Sabre.  

Pay special attention to what Davis was told by distribution pioneer Max Hopper when Davis told him that he intended to connect his hotel switch to Sabre.   The rest, as they say, is history.




The Formation of THISCO - By John F. Davis III (originally published in 2002 on Hospitality Net)  
It was December 1988, and the most amazing event in the history of the hotel industry had occurred. Sixteen of the largest hotel chains in the world had agreed to contribute $100,000, each in order to fund a start-up company. It would be nice to say that the hoteliers came up with the idea to create and fully fund the new company and technology. The truth is that the majority of the funding and the initial concept was created by a division of Rupert Murdochs' company, News Corp., specifically by a gentleman named John Evans.

It would also be nice to say that News Corp. made the investment for the sole, honorable purpose of helping to further the development of technology for the hotel industry. Again, the truth of the matter was that Murdoch's company (which was acquired shortly thereafter by Reed Travel Group) needed an electronic way to book hotel rooms in order to support the creation of a new CD hotel catalog. Their desire to create the ability to electronically link the GDS's with the hotels' CRS in order to sell CD-ROM's came at exactly the same time as the hotels' desire for a single electronic interface to all seven GDS's. Never before, nor do I believe it will ever happen again, did the desires of a huge corporation align perfectly with the hotel industry. Timing and technology came together at precisely the same time. The stars were aligned. The Hotel Industry Switch Company (THISCO) was born.

There are literally hundreds of great stories in the creation of THISCO, which ultimately became Pegasus Solutions. One of my favorites revolves around the final funding vote by the 16 hoteliers. Each hotel company had to come up with $100,000. At that time, the idea of putting $100,000 of a hotel chain's money into a technology start-up was unheard of. As the debate moved back and forth, John Biggs of Hyatt stood up, looked his peers in the eye and made the following statement, "During this last week alone, we all have probably wasted more money than that ($100,000) on far worse ideas." That's actually not the exact quote; the real quote was a little spicier. But the point was made, followed by complete laughter and a unanimous vote.

During my interview process for the job of president of THISCO, I had been repeatedly assured that all 16 hotel companies and Reed fully supported the concept and that it would be "all for one, and one for all." As you can probably guess, nothing was further from the truth in the early days. I spent the first four months on the job performing "shuttle diplomacy." I flew from the headquarters of one participating hotel company to another, outlining what I thought was the best course for the industry. At each stop, I got a completely different opinion.

There are other great stories, some of which have become such famous folklore, that I would be negligent if I didn't repeat them in this article. One deals with Sabre and Max Hopper. My first meeting with Max, shortly after launching THISCO, produced two classic quotes. After fully explaining to Max how Sabre would connect to the THISCO Switch, and then how the THISCO Switch would connect to the hotel chains' CRS's, Max's response was, "Sabre would connect to THISCO over his dead body." THISCO connected to its first GDS — Sabre — in December 1989, and fortunately, Max is still alive and well. His second great quote came at the end of our meeting as I described the client-server technology we would employ to build the Switch. Coming from a company completely built on huge IBM mainframes and TPF transaction processing, his sarcastic response was, "Oh, so you're building a toy?" Today, that "toy" processes more than 300 million transactions per month.

There are lots of amazing stories, like when I found out that the hotelier in charge of the money contributed by the 16 hotels and Reed had decided the funds were better suited in his bank account than in THISCO's bank account. Essentially, THISCO was broke two months after I accepted the job as its president. The event caused a lot of sleepless nights, but in the end, the man's employer made good on all the funds and THISCO moved forward. I can absolutely assure everyone, it was never dull in the early days. Come to think of it, the past 14 years have been anything but dull.

I take great pride (and have earned a lot of air miles) in saying THISCO never had any vote that was not unanimous. A lot of diplomacy and the hard work and commitment to the hotel industry of 17 forward-thinking pioneers made THISCO. It will always give me a sense of amazement that every month Reed and 16 arch competitors got together in a room, and all agreed on what was best for the industry and best for their baby, THISCO. I'm sorry there is not a Hall of Fame for these 17 founders. What they achieved could only occur once in a lifetime.
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