A few weeks later, I got in my Honda Accord with a hundred dollars in my wallet and headed to Vegas.
There was no corner office waiting for me when I walked in for my first day of work at Las Vegas Reservation Systems on January 25, 1993—just a conference table next to Tim’s desk. It didn’t take long to figure out that the setup was a lot of the reason behind our success.
Our company was like a little boat on the ocean—we felt every wave around us. If a massive operation like American Express had come up with the same idea as Tim and executed it properly, it would have owned the world. But American Express was built like an ocean liner, heavily structured, and the executives at the wheel were way above the swirling foam. They didn’t seem to see the sea change occurring in travel booking—until we grew into a big boat and they wanted to buy us.
The more I began to understand what we were doing at LVRS, the more I realized there were a lot of smart people who didn’t get it. “Explain this to me again,” asked J. A. Tiberti, the owner of a construction company that had built a good chunk of Las Vegas over half a century. “Your company doesn’t have anything. But it sells things?”
He was right. Our inventory was virtual: blocks of rooms that didn’t physically exist. We didn’t have to pay ahead to get the rooms. We didn’t have to load them up and take them to a warehouse. We didn’t have to maintain an inventory.
All we had to do was sell the rooms and find ways to get more of them. That came as naturally to me as starting a conversation to pick up a new customer on my paper route. Only in Vegas, the ante was raised.
After awhile, I was walking into the Excalibur, where we’d been allotted five rooms per night, and asking for fifty. The hotel fit our market perfectly. It was new, with a medieval ambiance that appealed to families with kids. And it offered inexpensive food and entertainment. The trouble was, the hotel had been consistently selling out on its own. Why in the world would management hand its rooms over to us at a discount?
But nearly twelve thousand additional rooms came into the market when the Luxor, Treasure Island, and MGM Grand were finished. Excalibur was now competing against those twelve thousand rooms, and it was beginning to feel the squeeze.
We were right on top of it. Our proposal to take fifty rooms was timed perfectly, and they came back with an offer to give us twenty-five if we prepaid for them. We didn’t have that kind of money to put up. But we had the friendships sealed at Bishop Gorman High School.
“I gotta go see Lorenzo,” Tim said.
The guy whom he’d once given an 11-1 parlay on Sugar Ray Leonard returned the favor by loaning us $300,000 to prepay for the rooms.
We immediately started to sell twenty-five rooms a night, and soon the Excalibur offered us fifty. Once the other hotels saw us selling those fifty, they knew they could trust us with larger blocks.
There’s an old saying, “The harder you work, the luckier you get.”
Tim began to save great cigars in the humidor to celebrate when we reached milestones like grossing $10,000 a day. We constantly seemed to be moving to new offices at three in the morning (the downtime for calls) to keep up with the demand for more desks, more phones, more operators, and more parking spaces. American Express had those same brick-and-mortar offices stationed all over the world. We were like a kid who kept outgrowing his shoes. Our company would move to bigger offices ten times in eleven years.
When hotels started to give us large blocks of rooms, they began to feel linked to us, and their feedback guided our expansion. The hotels wanted us to fly people in. They wanted us to create air-hotel-car rental packages. They wanted more than a one-time guest. They wanted us to capture markets from all over America, just as the Las Vegas Convention and Visitors Authority was targeting markets for huge trade shows.
We weren’t going to set up charter flights. And the largest carrier into Las Vegas, Southwest Airlines, worked exclusively with a competitor and was off limits. So we set our sights on a few others.
And now you’ll see why it was so fun to come to work every day. You couldn’t create a reality TV show better than what we had going on in our office. It was an amusement park of energy. Even people who weren’t working for us—guys like Bob Nagy, “Naaygs” to us—wanted to come by and dive headfirst down the waterslide.
No scriptwriter could possibly invent Bob Nagy. Naaygs made even the most ordinary backyard picnic introduction unforgettable. We were at the home of our friend Tito Tiberti when Naaygs was presented to us along with two sentences. “I apologize in advance for introducing Bob to you,” Tito said. “I take no responsibility for what happens to you next.”
How could I possibly describe Naaygs? You can start by trying to imagine a cross between Don King, Archie Bunker, and Louis Rukeyser running a midsized investment firm. A cheap cross between Don King, Archie Bunker, and Louis Rukeyser. Tighter than two coats of paint, Tim used to say, shaking his head. The fact that Naaygs was a multimillionaire only made his antics all the more exasperating and comical.
But Naaygs was very successful and capable of lightning-bolt ideas. He was one of those guys who read everything, and for the first five minutes of a conversation could appear to be an expert on whatever subject was tossed his way. He was so persuasive he could convince you to turn off on a highway exit even when you knew it wouldn’t take you to the place that you wanted to go. Naaygs pleaded to be part of our presentation to bring the airlines into our fold. It was sheer passion. He wasn’t making a cent.
Okay, okay, we said, not exactly sure how he was going to blend with his partner on the assignment. Now, imagine Naaygs paired with our vice president of sales—Richie Rich.
That was our nickname for Michael Reichartz, whose dad had been president of Caesars Palace and who’d grown up playing soccer in the halls of the Waldorf-Astoria.
Richie Rich showed up immaculately dressed for the first airline presentation. Naaygs arrived in our office with the remnants of an omelet on the lapel of his suit—a suit, by the way, which had gone out of style twenty years before. The hem on his pants was coming loose. And his cream-colored socks clashed horribly with the dark hue of his suit. Tim went berserk, half-appalled and half loving it.
“Look at yourself!” he howled. “You got egg on your suit! Your pants are coming undone! Your lapels are too wide! Your tie is too big! Naaygs, what the fuck?”
So Naaygs washed off the eggs, grabbed a stapler, stapled the cuff on his pants leg, turned to Tim, and fired back, “Well, now what’ve you got to say?”
No, this just wasn’t going to happen at American Express. And it was only the beginning.
We got Naaygs a new tie and some dark socks and sent him off with Richie Rich to meet an executive from TWA. The meeting was three weeks after the tragic midair explosion of a TWA jet leaving JFK for Paris, and on the drive over Richie Rich cautioned Naaygs about bringing up the incident. Remember, he said, this is simply about putting together vacation packages with Las Vegas Reservation Systems.
As soon as they sat down with the TWA executive, Naaygs opened the conversation with “So what do you think it was?”
“What do I think what was?” the TWA exec asked.
“The explosion that took down Flight 800. I think it was a missile. I don’t see any other explanation.”
Richie Rich ground his teeth and bit his lip all through the meeting, and he really let Naaygs have it on the ride back to the office. By the time we’d all gotten through with him, Naaygs looked like a slapped puppy. He begged us to let him make up for his blunder the following day in the meeting scheduled with United Airlines.
Looking back on it, I can’t believe we let him go. But Tim and I loved him so much we relented. He really was a smart guy. His heart was in the right place. Remember, the guy wasn’t getting paid a cent!
The next day, Naaygs and Richie Rich showed up for the meeting with United. The airline’s sales manager was an elegant woman named Julia Wong. Very classy. Naaygs was on his best behavior at the start, but as the meeting loosened up he told a story that led to the line, “Yeah, and this guy didn’t have a Chinaman’s chance of getting promoted.”
Ms. Wong let the comment pass, but when she excused herself a few moments later, Richie Rich stood up and started pummeling Naaygs.
“How could you do this to me two days in a row?” he screamed through clenched teeth.
“What I do?” Naaygs wanted to know.
Well, we ended up getting the account and developing a great relationship with United. (TWA went out of business.) And there was no way Tim would ever keep Naaygs from coming back through our doors because he loved to tell stories about Naaygs as much as he did smoking those landmark cigars.
We were lighting up quite a bit. Our sales numbers were heading through the roof:
1991: $1,600,000
1992: $2,800,000
1993: $3,600,000
1994: $4,800,000
1995: $6,200,000
1996: $8,500,000
No matter how much we grew or where we moved, though, the frat-house element remained in the air. Tim’s Aunt Mary, his first unpaid employee, wandered around and scolded whomever she heard cursing “Watch your mouth, boys! This is not a bar and grill. This is a fancy business. You don’t use words like that in a classy place.” Our rottweiler, Bally, roamed the hallways. And we were always up for a good prank.
Once, after hearing about Nagy’s endless negotiations with several computer companies to get the absolute rock-bottom prices when he reoutfitted his investment office with twenty desktops, we couldn’t help ourselves. We snuck into his office after his computers had been delivered and removed the ball at the base of every new mouse. When Nagy arrived the next day, he went ballistic, phoning the computer company and screaming, “My mice have no balls!”
We were like college kids having the time of our lives without a notion of the technical revolution that lay ahead: the Internet.
Like any curious kid, I started to wonder what we could do with the computer. My college internship at Channel 10 in San Diego had opened my eyes to how a computer could access information in seconds. But, hard as this is to believe for many college students now, when I came to work with Tim in 1993 most people still didn’t have cell phones. People used pagers back then. If a businessman was on the road, he could see the number of the person trying to contact him, and he might stop at a pay phone to return the call. Back then, if you wanted to research a topic you reached for the bound volumes of Encyclopedia Britannica that lined libraries and bookshelves across America. Before 1995, there was no such thing as Internet Explorer or Netscape Navigator for people to link up with the Internet. And even when the two Web browsers got up and running in 1995 and gained popularity in 1996, traditional companies like American Express were still living in the past, putting out slick brochures that listed prices on excursions months and maybe even a year in advance.
The future started appearing to me in fragments. At a conference in Chicago run by SABRE, the computer system that American Airlines used to tap into the industry rates, I heard the founder of Netscape speak and immediately realized that information available only to travel agents would soon be accessible to anyone who owned a computer. If our company started a Web site, I figured, we could create a brochure that could be continually updated.
This would allow us to make two major breakthroughs. We could raise or lower our prices in an instant based on demand. Also, we could show our customers rooms offered at our hotels and quickly update the pictures if the rooms were recently refurbished. This might not have been a big deal if we were only selling rooms at the Hilton. A room at the Hilton is a room at the Hilton whether it’s in Birmingham or Chicago. But we were selling rooms in Las Vegas. The hotels we were offering had exotic themes. People were curious about the pirate motif at Treasure Island, the pyramid designs at the Luxor, and the medieval décor at Excalibur.
When we first launched a rudimentary site in 1996, feedback was immediate. Customers loved seeing pictures of the hotels and discovering the amenities on the properties. The computer screen was much more compelling and efficient than a reservation agent. An agent could only describe the hotels. An agent could pass on rates only as fast as the customer could write them down. Now, in the snap of a finger, the customer’s eye could take in columns of rates listed on our site.
It was a huge leap. But our initial Web site was still no more than an electronic brochure. Once the customer saw it, he or she then had to call our 800 number to make the reservation.
Then came an ordinary phone call that nobody would pick up. No matter how many people we hired to work the phones, we never seemed to be able to keep pace with the ringing telephones. Many times, I would jump in and lend a hand, but that would drive Tim crazy.
“Tom, what are you picking up the phone for? That’s not your job. You’re in charge of the company!”
But I just couldn’t help myself. If somebody was calling up for our business, I couldn’t bear to stand by and let the phone ring. One day, I picked up and, in the best spirit of my mother, got into a conversation with the customer.
“When are we going to be able to book over the Internet,” he asked, “without making a phone call?”
I didn’t have an answer. So I started to answer more calls. I asked everyone if they’d prefer to book their reservations over the Internet from start to finish. Many said they would. Then I examined all of our e-mails. People were asking about full Internet service there, too.
Usually, I’m the brake and Tim’s the accelerator. But I just felt like I had to hit the gas pedal on this one. Still, it wasn’t in my nature to go roaring ahead without talking it over.
In October of 1997, Tim and I went to the Notre Dame-USC football game with the Fertittas. Lorenzo’s dad was old school and didn’t understand or appreciate the Internet at the time. But we really valued his wisdom and counsel. He’d come to Las Vegas from Texas in 1960 with $160 in his pocket and built a multibillion dollar company of casinos that were favorites among the locals. His sons, Frank and Lorenzo, had bought a huge piece of LVRS when Tim needed money at the outset. And they later sold it back to us when LVRS became an impediment to Station Casinos going public. The Fertittas were always there for us.
I explained the possibilities of the Internet to Mr. Fertitta on the ride back from the game. “It might be a great opportunity,” he said. “Just don’t put yourself in a position where you’ll go out of business if it doesn’t work. Put half of this year’s profit in it and give it a real shot. If it doesn’t work, it won’t bury you.”
I was off and running, and it was a good thing. Because business was changing so fast during those days that a couple of weeks meant the difference between becoming the industry leader with a powerful foothold and a Johnny-come-lately that was lost in the pack.
I sketched out an easy-to-use reservation process with Richie Rich that would take five clicks or less. I wanted each page to load in just a few seconds. Being the fastest travel Web site was important.
Five months and $11,000 later, on February 26, 1998, we launched.
When I came into the office the next day, there was a long queue of reservations listed on the screen. Next to each one was a single word. Charge.
That meant all we had to do was hit a key and the customer’s credit card account would be charged.
This six-letter word dropped in a column all the way down the screen.
Charge.
Charge.
Charge.
Charge.
Charge.
Charge.
Charge.
I hit the Charge key and thirty seconds later a message came back from the credit card company indicating the transaction had been approved. I moved on to the next reservation and again hit the Charge key. Thirty seconds later, that one was approved. I sat down and kept hitting the Charge key over and over. It was like money falling from the heavens. All you had to do was hit a key.
I couldn’t hit the key fast enough. The queue of reservations was so long I could never catch up—and it was constantly getting longer. I stayed up all night hitting the Charge key.
When he saw what I was doing, Tim’s jaw dropped. By the time he picked it up, he already understood the enormity of what had just taken place.
“Tom,” he roared, “we can hire somebody else to hit the Charge key! Quick! Let’s get some more rooms!”
Neither one of us could sleep. I had the system automated so that we didn’t even have to hit the Charge key at all and then went out to hustle up accommodations. If my foot was on the gas, Tim’s was pushing the pedal through the floorboards. Search engines like Yahoo, Infoseek, Excite, Lycos, and Alta Vista were now becoming popular. Tim started buying every Las Vegas–based keyword he could get his hands on—even with misspellings of the words “Las Vegas.”
“Every quarter we put in,” Tim howled, “comes back dressed up as a dollar!”
We were no longer in that place where when you think you’ve got the best of it, you take dead aim and hold onto your balls. We were now like gamblers at a craps table who knew that every first roll of the dice would come up seven. Tim was pushing all our chips out on the table. Not only that, but he was frantic to get more chips so we could move to a table with higher limits.
“Tom, this doesn’t just work for Las Vegas,” he said. “It’ll work for hotels all around America. It’ll work for the entire world!”
“Let’s go for it,” I said.
A new company was formed. We decided to call it Travelscape.
“I gotta go see Lorenzo,” Tim said, bolting out the door.
Once again, Lorenzo was there for us. He loved the idea, and when he bought 10 percent of the company we had an infusion of cash.
But we were growing so fast we needed much more. The beauty of being connected in Las Vegas is there’s always a chance you’ll find it. When Tim told Uncle Jack about our situation, Uncle Jack made a suggestion. Uncle Jack could always be counted on to come up with money even if it was passed along in unusual ways. When Tim was in college and running low on funds, Uncle Jack sent money through a bookmaker in L.A. known as The Roadrunner. The Roadrunner lived in a huge apartment building, but he wouldn’t let Tim come through the doorman to make a quick pickup. The Roadrunner thought that might look suspicious. Instead, at obscure times, he threw manila envelopes containing cash and clasped tight with string out the window of his high-rise. Tim would stand below waiting, and on some windy days looked like a comical outfielder trying to make a catch as the envelope blew back and forth on the currents and dropped into the hedges below.
This time, Uncle Jack suggested that Tim go see an old friend on the East Coast: The Captain.
Captain John Kassap is the great uncle that everybody wishes they had. A guy who sailed around the world as a young man with the Merchant Marines, who could tell you stories about Shanghai in the ’40s, who landed in Baltimore, bought a bar, ran junkets to Las Vegas, and over time evolved into an investment guru who could keep up with the sharpest minds at Goldman Sachs. The Captain had no airs, and walked around in a cab driver’s cap. His investment record was so good over decades that friends of his put money into projects simply because The Captain recommended them. On the surface, The Captain was not the best candidate to fund a fledgling Internet travel company. He was approaching seventy, and he didn’t know anything about computers. To this day, he does his spreadsheets in pencil. And he’s not the type to invest over the long haul. No quarterly interest payments for The Captain and his investors. Oh, no. “Me and my guys don’t buy green bananas,” he liked to say. “We want our interest payments monthly.”
But The Captain immediately intuited that travel and the Internet were a perfect partnership. He invited Tim to make a presentation to a group of his pals in Baltimore.
When Tim told Lorenzo that he was going to Baltimore to raise money, Lorenzo’s eyelids lifted. Baltimore? Lorenzo had been to the dance before when his own company went public back in 1993. He knew how the game was played. You give your pitch at a meeting in New York with investment bankers who’ll do their due diligence, who’ll make twenty additional phone calls with plenty of questions, and then, if they like the deal, will start negotiating the terms.
Things were a little different in Baltimore. Tim and Lorenzo stepped into a banquet room at a restaurant on the waterfront. There were about thirty guys eating and drinking. Tim went up to the podium and gave his PowerPoint presentation. As soon as he was done, before a single question could be asked, The Captain grabbed the microphone, looked out into the crowd, and said, “All right, now, listen to me! I’m passing around a clipboard. I want you all to write your name down and how much you’re in for—and don’t embarrass yourself!”
As the evening wound down, Lorenzo stood by in disbelief as people came up to Tim and said, “Oh, I remember going to the racetrack with your Uncle Jack back in…must’ve been 1949. If you’re okay with The Captain, you’re okay with me, kid. You need money, you can have whatever you need.”
After it was over, the bill came to Tim. “Twelve thousand dollars!” he yelped.
“So my guys had a few glasses of wine,” The Captain said. “What are you complaining about? We just raised $8 million. Just sign the damn check.”
That $8 million built up our infrastructure and propelled our numbers through the roof. In a single year, our sales climbed 60 percent.
The year before the Internet, 1997: $12 million.
The year of the Internet, 1998: $20 million.
Once again, our timing was perfect. The entire travel agency business was being flipped upside down by the Internet. At first, United Airlines cut the standard airline commission to travel agencies from 10 percent down to 8 percent. The other airlines followed suit, and soon commissions were slashed to 5 percent. Then down to $20 maximum per ticket. Eventually, they were cut to nothing at all.
Brick-and-mortar travel agencies with fixed costs that relied on traffic off the streets and phone calls just couldn’t compete with five clicks on a computer. We were like the telegraph in the day of the Pony Express. Two days after the last telegraph wire was strung, the Pony Express went out of business.
We threw millions into advertising with search engines and partners. And even with so many reservations coming through the Internet, our phone traffic tripled.
We hired Mr. In-credible—Edward Muncey—away from the Bellagio to bring in hotel rooms around the country. We’d set a goal. Twenty-five cities and 250 hotels.
“How ya doin’, Edward?”
“In-credible!” he’d say.
We’d set a new goal. Fifty cities and 500 hotels.
“How ya doin’, Edward?”
“In-credible!”
A hundred cities and 2,500 hotels.
“How ya doin’, Edward?”
“In-credible!”
Our revenues shot to the heavens.
The ringing phone that I’d casually picked up in Tim’s tiny office back in the days when I was trying to be the next Bob Costas had led to $20 million in revenues by 1998.
By 1999, the revenues that had grown out of the sandwich that Tim bought me on the day we first met reached $100 million.