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Jet Fueled

Wharton grads jumpstart travel giant Travelocity's growth.

Early on, the women who run Travelocity.com — Wharton grads Tracey Weber and Michelle Peluso — thought they might sell underwear.

Weber and a group of colleagues at Boston Consulting Group were brainstorming ideas for web-based businesses and latched onto deliveries of critical items. "The core concept was the last-minute aspect" of someone needing something badly and not being able to get it, she says. Hence the underwear.

Peluso interrupts: "Remember, these were consultants in New York City who, unlike the rest of America, didn't have washing machines."

Their wacky idea evolved into Site59, a website for last-minute travel deals, which today is part of Travelocity.com. Peluso, who earned her Wharton undergraduate degree in 1993, is Travelocity's CEO and president, while Weber, who graduated from Wharton in 1995 with an MBA, is senior vice president for air, car and last-minute deals.

Since joining Travelocity when it acquired Site 59 three years ago, Peluso and Weber have led a turnaround. Under their leadership, the travel website went from losing $55 million a year in 2003 to making $13 million last year. It's the second most popular travel site and has about 3,000 employees, 1,500 contractors in India and offices stretching from San Francisco to Europe.

Though Peluso is boss, Weber actually recruited her. They had met in the early 1990s while both working at Boston Consulting. Peluso left to become a White House Fellow and to serve as an adviser to the then-U.S. Labor Secretary Alexis Herman. By 1998, her stint in Washington was ending, and she was pondering her future.

As part of the group that had conceived Site59, Weber planned to help launch the site and then return to her consulting job. Her Boston Consulting bosses wanted a capable manager in place when she did so, so she called Peluso. Peluso ended up inducing her to stay, even though she had a new baby. "Michelle is very persuasive," Weber says.

"I went to her office and got down on bended knee," Peluso quips.

Over the next three years, they built Site59 into a viable, if not profitable, business. By the summer of 2001, sales were rising by 50 percent a month. "We had about $2 million left of our funding," Peluso recalls. "And we were only burning about $200,000 a month." They figured they were poised for an eventual acquisition by a bigger competitor, which would allow their investors to cash out.

Then came Sept. 11, 2001.

Sales dropped by 70 percent. What's worse, their office was just two blocks from the World Trade Center. "Our people saw things that you should never see," Peluso says. No one at the company was hurt, and their building was little damaged. But for weeks afterward, "the smell was awful." Life in New York was worried and tense.

Peluso and Weber grappled with how their company might aid the city's recovery and decided to cook dinner at the neighborhood firehouse once a week. The experience not only increased staffers' camaraderie but redoubled their commitment to Site59's success, Peluso and Weber say.

By January 2002, the site's revenues had returned to the pre- Sept. 11 level and Travelocity began to take serious notice. In early March, the company broke even and a deal with Travelocity gelled quickly, closing by the end of the month, with Travelocity paying $43 million in cash.

Both women became Travelocity executives and soon learned that the bigger company had misjudged the evolution of the online travel market. It had bet heavily on booking airline tickets, with 70 percent of its revenue coming from standalone flights.

The industry, in contrast, was moving toward bundling tickets with hotel and car reservations. Future profits, Peluso and Weber believed, would come from creating vacation packages in the same way that store-based travel agents did.

"Travelocity had outsourced hotels to a competitor," Peluso says. "And it had outsourced packaging to semi-competitors."

They ended the hotel deal and built their own hotel offering. They overhauled the finance and legal departments. And they spruced up the brand, introducing a new logo, website and ad campaign.

Today, they aim to differentiate themselves by stressing travelers' rights, Peluso says. "Some of our competitors, if they don't have a negotiated discount with a hotel — aka, they don't make a lot of money with that hotel — they'll show it as sold out. So you're trying to book into a hotel where your friend's having a wedding, their site will tell you it's sold out, and it's not."

For cars, Travelocity trumped competitors by showing the true cost of rentals, including taxes and airport fees. For cruises, it broke ground by providing pictures and videos of all cabins.

These days, the company is evolving from web-based travel broker to more of a travel marketer. "We're push-marketing a lot of destinations," Weber explains. "Someone will type in a search for Miami, and we'll also show them that they could pay a lot less if they went to Tampa."

Plus, in 2004, the company acquired a brick-and-mortar retail presence by purchasing Allstate Ticketing in Las Vegas. Using kiosks, Allstate sells tickets to Vegas shows, Grand Canyon and Hoover Dam tours and other activities.

Both women say their gender has presented no obstacle at Travelocity or, for that matter, in their careers. If anything, it has benefited them. "Women have a broader array of management styles that they can use," Weber says. "There aren't as many molds preset for us.

Peluso jumps in: "Fifteen or 20 years ago, women felt they had to fit a male mold — you know, be tough, slam your hand on tables, wear big shoulder pads and those silly little man ties. Today, we can be ourselves. Companies recognize that different styles can make people successful."

Peluso and Weber didn't know each other at Wharton. But they say they talk frequently about their time at the school — about their friends, their professors and Philadelphia.
And they draw on their Wharton educations and networks nearly everyday.

"There was such an emphasis in working on teams," Weber recalls. "I remember thinking at the time, ‘This team stuff can be so painful.' But that's what business is all about. I don't think I do anything by myself at Travelocity."

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