Packaging success, the site59.com way

When Site59.com launched last May, some of my colleagues mocked the startup as the latest wannabe on an already crowded field of online travel sites.

Then the New York retailer of distressed travel packages signed deals with the likes of Delta Air Lines, American Airlines, Continental Airlines, Bass Hotels & Resorts and Avis. It hired ace publicist Pamela Johnston to raise its profile. And it closed another $10.5 million in financing, adding to the $4 million in first-round funding that it already had secured.

Now there isn’t much to make fun of.

One of the biggest reasons behind Site59′s surprise success could very well be its 28-year-old chief executive, Michelle Pelusio. From her Wall Street office, where she oversees a staff of 50 employees, Pelusio is putting the finishing touches on the “configurator model” project – a new application scheduled to launch in mid-November that will allow travelers to create their own customized packages. This reverse package builder is believed to be the first of its kind in the travel industry.

How did Site59 quietly pull ahead of the pack to attract top suppliers and investors?

Here are some of the ways:

Focus on a good supplier model. Many of Site59′s peers came to suppliers with a hat in hand after their launch, asking for distressed inventory. Not Site59. Because the company traces its ancestry to a consulting firm that had worked with just about every major carrier, Pelusio and her staff knew more about distressed inventory than virtually any other rival dot-com. They were able to address the supplier’s concerns and make a deal more attractive. “I don’t think a lot of Internet companies do that – they focus on the consumer proposition, they don’t focus on the supplier proposition,” she says.

Do one thing well. “We didn’t want to be all things to all people,” explains Pelusio. Potential suitors constantly approach Site59, hoping to help extend its business model to other niches within the online travel universe. But the company has resisted so far. The reason? Site59 wants to get its business model right before branching out. But it’s not easy. Accept a proposition too soon, and your employees could lose focus. Wait too long, and your business can miss an important opportunity.

Make money. While that would seem like an obvious way to become an ‘A’ list travel retailer, it’s often forgotten by other dot-coms – particularly those that build their business on a commission model. “This is not the time to be relying on commissions,” says Pelusio. “By bundling travel and pricing it ourselves, we control our own margins. A typical online travel agent can only make five percent. We can do better.” Investors like that. In fact, it’s a good bet that Site59 couldn’t have snagged its latest round of funding (and received the other offers that are reportedly being entertained) without the promise of generating serious revenue.

Crash? What crash? Site59 debuted at about the same time the NASDAQ went into a freefall, which turned out to be a blessing in disguise. “We benefited in coming after the crash, so the market wasn’t irrational,” says Pelusio. “We didn’t have to live through a market downturn. We hired people for the right reasons — they weren’t the ‘get rich quick’ kinds of people. Instead, they were obsessed with building a business.” Interestingly, this timing has benefited other online travel companies as well. Because they aren’t held up to unreasonable expectations, there’s less pressure on the principals – and more room to experiment and ultimately, succeed.

Don’t limit yourself to the Internet. Site59 may look like a Web site and act like a Web site, but when it comes to distributing its product, it isn’t. Not only is the company listing its packages on other travel Web sites, but it’s also selling its inventory through traditional travel agents (and paying higher commissions, too). “Distribution is really important,” adds Pelusio. “You shouldn’t limit yourself to just online.” These strategies have paid off. In a few days, Site59 takes over another floor of its office building, having already outgrown the 4,200 square feet of space it originally used. And later this month, its employees will celebrate their new funding round as every business achievement should be: with a clambake on Long Island.

Site59 isn’t a household word like Priceline.com or Travelocity yet. But it might soon be.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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