Preview Travel Inc. plans to use most of the $25 million it raised in last year’s initial public stock offering to lure new travelers to its booking services in a new winner-take-all, America Online-style marketing offensive, company officials said.
“Expect to see a major branding and customer acquisition program,” said Preview president and CEO Ken Orton. “We’re using most of our funds to build our database of customers and sell them more travel. That’s our primary mission right now.”
In one of his first interviews after the quiet period imposed by the Securities and Exchange Commission following Preview’s $11-a-share IPO on Nov. 20, Orton revealed new details of a strategy announced when the company filed to go public.
Part of the cash generated by the stock offering will fuel the launch of an advertising blitz designed to win new customers as quickly as possible. Although this turn of events hardly comes as a surprise to observers of the online travel services company, the level of intensity might raise more than a few eyebrows in the business.
“Within a year, we will dominate our competitors,” Orton predicted. Preview’s multi-million dollar infusion comes at a bad time for its two biggest rivals, Microsoft’s Expedia and Sabre’s Travelocity. The decision to shut down Mungo Park suggests that Microsoft is “still trying to decide who it is going to be,” Orton said.
Meanwhile, Sabre is poised to become a victim of its own success as the industry asks itself “if it wants a CRS to be distributing travel online at the same time,” he added.
Those are harsh words from a company valued at about $125 million that hasn’t turned a profit since going into online travel. But consider its role model: The underdog-turned-superstar of the online world, AOL. Travel services sold through AOL represented 92 percent of Preview Travel’s online revenues for the first three months of 1997 and 79 percent for the second three months, according to its preliminary prospectus to investors. After the stock offering, which sold just less than a quarter of the company to investors, AOL remains its largest single shareholder.
“AOL is our inspiration, and we’ve learned a lot from them,” says Orton. “We made our bet on AOL when they were the third-largest commercial online service, behind CompuServe and Prodigy. They took on Microsoft and beat them back into submission.”
As Orton sees it, Preview is now in a similar three-way “horse race for market dominance.” Winning will depend on Microsoft and Sabre continuing to have problems, and Preview solving some of its own.
Topping the list of Preview’s troubles is its lack of profitability. Any hopes that the company might end the year in the black were dashed by the recent airline commission cuts. Orton said that analysts were concerned with Preview’s performance, but he said his plans to show a better return soon were warmly received by the investment community during his presentations.
Another big question is how successful Preview’s marketing and dealmaking moves will be. Although he would not elaborate on how the IPO money would be spent-except to say that the company was testing a series of television spots-Orton seemed to imply that he might rely on a scattershot, AOL-style “disk in every mailbox” approach to attracting new clients.
It remains to be seen how receptive travelers would be to that kind of strategy. Investors are treading water in the meantime, which in itself is a problem for the company’s morale. Preview’s stock didn’t have the customary aftermarket bounce of several points that follows an initial public offering, and its share price has held steady at or below its offering price since it went on sale.
But Orton is shrugging off those concerns for now. “We’re not watching our stock price from day to day,” he said. “We’re extremely aggressive, extremely flexible, and I really like our competitive position.”
✓ Get the latest travel news, tips and commentary from Elliott’s E-Mail, the subversive newsletter from industry gadfly Christopher Elliott. You’ll travel like a pro. Sign up here. It’s free.
Sign up for my 
