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Featured Tour Operator is a new series that will profile a different operator.
This month:
Tourico Holidays
At last week’s World Travel Market in London, NAJ caught up with Uri Argov, president of Tourico Holidays, one of the most talked about tour operators in the worldwide travel and tourism industry. Established in 1994, the Orlando-based company was named by Inc. Magazine in 2003 and 2004 as one of the 500 fastest growing companies in the U.S. It later merged with LastMinuteTravel.com and Travel Global Systems, Inc., which is based in Tel Aviv, to create Travel Holdings, Inc. The company’s chairman is Alan Greenberg, who spent nearly 20 years with Whittle Communications as vice chairman, chief marketing officer and publisher of Esquire Magazine. Argov came to the U.S. from Israel, where he was a branch manager for Tourico Holidays Travel & Tours, which was one of the largest travel agencies in Israel. Argov received his B.S. in Geology and Computer Science from the Hebrew University in Jerusalem and is a certified ATP pilot with over 2,000 flight hours. Following are excerpts from our interview with Argov.
Q: Before we start, could you give us a brief overview of your company?
A: Today, we’re not pure receptives. We work with 2,500 wholesale companies from 122 countries around the world. We do close to $300 million in business annually, with 65 percent going to North America. We have 22 locations worldwide. We have three offices in mainland China and Hong Kong. We sell to the public in the U.S. and Israel, using two GDS operations -- Amadeus and Abacus-- with huge penetration in China. We are now finalizing development with Pegasus, and we’ll be selling to a switch company. We support Expedia and Hotels.com, Travelocity, Orbitz group business and Groople. We work with any major dot-com, including Opodo and Ebookers.
Q: Where did Tourico get its start and how did the five founders come together?
A: I was a pilot in Israel in 1994 flying charter flights. I applied to three different airlines and was hired by Comair, a Delta connecting partner in Orlando. However, I wasn’t able to get INS (U.S. Immigration and Naturalization Service) approval, and I found myself without a job. Someone told me that if I established a fictitious company, I could get a work permit. So, since my father owned a tourism company in Israel, I opened a company with the same company name to get papers. We first operated out of our walk-in closet with used equipment. Amir Kalmar, who was working for a hotel company in Miami at the time, was a good friend of mine from high school. Asi Ginio, who has been our contract manager, was the boyfriend of another of our partners. Soon we rented an office for $250 month that had been vacant for 32 years. There were six founders of the company-including my wife, Miriam, who was the CFO, and we each have equal shares to this day. My mother and wife liked going to psychic mediums, which I always felt were
phony BS. One time my mother had to cancel an engagement, and my wife dragged me along for kicks. As I sat there bored, the psychic told me that even though I was a pilot I will never fly, but you’ll one day have a big company. I sent letters to 300 hotels in Florida and within two weeks we had 120 contracts, and we started selling them to my father’s agency in Israel. We had $800,000 in turnover. Each year since, we’ve doubled the figures.
Q: What was the original philosophy and objective?
A: To make a living. When Amir joined, he said we needed to find business beyond the Israeli market, and focus on markets that have a tendency to pay in advance. So we targeted our sales efforts on the UK and Japan, on smaller operators which paid six to eight weeks in advance who needed someone to grow with, so we had the cash to prepay for rooms in advance in New York. For two years we made so many serious mistakes we nearly lost the company.
Q: When you started, competitors (and some suppliers) accused of Tourico of blast-faxing hotels at rates that never seemed to be available. Were they being fair?
A: I wouldn’t say we would be proud of everything we did, but here’s what happened. We put out a brochure with many hotels we didn’t have and once we found interest from operators, we went back to the properties and said, listen, there’s real demand for your property from these international markets and wholesalers, but we need an FIT rate from you to be able to sell them. So we were able to get contracts on the fly. Another thing we did to distinguish ourselves was to offer guaranteed commitments by prepaying for rooms in cash to get rooms in 1996 and 1997 when demand was high in New York. We were very tight for cash and I had to sell my house in Israel to get the money.
Q: How did you develop the focus on technology?
A: I was a computer science major in college, so I understood computers. At that time we started to look at the Internet as a distribution channel as a tool. Major companies such as Allied, ATI (AmericanTours International), and T Pro had computerized booking systems but they weren’t online. So we came across Galor, an Israeli software company that built our original online system that we licensed for years. We now have our own software company and in the future may license our technology to others.
Q: As a company formed by Israeli immigrants, you were the only receptive operator to attend the Arab Travel Fair in Dubai. What prompted your company to go?
A: We’re still there as the only American tour operator company. There is a business opportunity in every country and you can’t leave any stone unturned. The Arab world offers legitimate business for everyone. Business is stronger than politics. Sometimes with our clients we discuss politics over dinner and we find the differences are very small among people, but great between leaders. We have three Palestinians in the company, as well as four Moroccans and two Egyptians who work in the company.
Q: You created quite a stir last year when you bought out the entire inventory for a New York hotel (Astor on the Park) for most of 2006. How has that worked out?
A: We have one in London and one in New York -- the Astor on the Park, a boutique-style hotel with 117 rooms. It’s a great vehicle to do two things. First, it’s a way to fill holes when you have no availability anywhere else and we can redirect traffic by maximizing margins and manage yield and make clients happy. Secondly, it’s a great way to take care of overflow by relocating clients.
Q: Are the CVBs any help in generating business for you? What could they be doing that they are not doing now?
A: They need to begin doing what is required of them to do business. To me the DMOs are a bunch of people waiting for a salary. They need to be the hook between supply and demand. There are people all over the world who would like to sell their product but need to be educated about the destinations. Meanwhile, they also need to educate suppliers about the international market opportunities. Why would I ever invest in the Orlando CVB when the last time I went to Tokyo and answered a question at a meeting they told me to shut up. After 9/11, what New York did was ridiculous. We had so many cancellations that we finally subsidized travel agents to come to New York; they did a red, white and blue promotion that no one heard about. CVBs should be run by entrepreneurs, not clerks. They should co-op with companies that are willing to invest in the markets with CVBs.
Q: Would you Co-op with a CVB?
A: We tried it with Rapid City, South Dakota. We created a website for them but they did nothing with it. They probably didn’t have the budget; it went for salaries for people to say they had no budget.
Q: At the TIA Marketing Outlook Forum last month, it became pretty clear that the brand/image of the U.S. abroad is in bad shape. Is this hurting your ability to do business?
A: Not so far. The U.S. image and politics are a problem for Europeans --not the destinations-- so they’re traveling to other countries, but it’s cyclical. In Latin America there are big increases to North America despite huge problems with visas because of the cycle of demand. Show me one destination that’s a better value than the U.S. where you get so much for the dollar.
Q: What steps ought to be taken to improve the U.S. brand/image?
A: I think the problem is that you need to look at what’s driving people to come to the U.S. Some people are forgetting that. The major reason is to explore new places and visit attractions. They are traveling to see places. The U.S. needs to start promoting its attractions: New York, the capital of nightlife; Las Vegas, the capital of gambling; Orlando, the capital of family vacations; Los Angeles, the capital of the movie industry. Where can you find a car that is larger than the one you drive at home for less that $200 a week? In southern Tennessee there are tourism attractions that no one knows about. Near Chattanooga you have the world’s steepest incline train and Ruby Falls, an underground waterfall that is beautiful. Then, a few miles ways you have an underground lake. If you start to promote the underground waterfall, operators will begin putting it in their itineraries. What are they going to promote? Disney, which everyone already knows about and chances are they’ve already seen it? Look at New Orleans: no one has done anything about promoting New Orleans, but the government spent 100 million dollars to improve it.
Q: The U.S. Department of Commerce and OTTI (Office of Travel and Tourism Industries) have announced a project in which they are seeking applications to develop an international travel and tourism website for consumers. They will provide technical and marketing assistance, as well as $3.6 million to the successful applicant to launch the website. Who, or what entity, is best equipped to handle this task, and what would you recommend go into the site?
A: It’s a waste of money. Why spend money on an informative website when you have so much information there already? Put $3 million in the subways of London and you’d have better results. I believe government offices should be privatized and business people should run them for results.
Q: There is much talk about the potential of the Chinese market once the U.S. is granted Approved Destination Status from the Chinese government. What’s your take on this? Is this a market that you are interested in?
A: It will be fantastic. China is an opportunity in every business segment. There are major cities in China and they are the most modern downtowns you can imagine. Within the U.S. their travel patterns with us are very unusual. For example, the number one destination for the Chinese market, currently 12 percent of all bookings for the company, is Houston. Don’t ask me why. Guess we’re getting just the leftovers. Mostly they are going direct.
Q: Some suppliers see great possibilities in the Indian market because of the growing middle class and the fact that most of the potential travelers to the U.S. are already comfortable in English. Do you see the possibilities that others see in India? Why/Why not?
A: The Indians have a huge issue with visas. Seventy-five million people in India have money to travel, which makes them bigger than the UK or Germany potentially. They’ve been denied entry for so long. If the government wants to do something they should make it easier for Indian travelers to get visas. They travel in groups more than they travel alone.
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