After three years of refining BookDirect, a hotel
reservation search engine used by DMO’s (Destination Marketing
Organizations), Andrew Van Luchene knew his little company, JackRabbit
Systems, had reached the moment of truth. In early 2010, The Las Vegas
Convention and Visitors Authority, the largest and most visible DMOs in
the country, was suddenly interested in BookDirect. If JackRabbit could
land this business, success was virtually assured. In this case, what
happens in Vegas would be heard not just around the country, but also
around the world.
Not to kill the suspense but Van Luchene did win the Las Vegas DMO and went on to double sales in
2010. He also expects to triple if not quadruple sales in 2011 given the
company’s current momentum. Born during one of the worst travel slumps
in decades and self-funded, JackRabbit is by no means an overnight
success story. Its success is the story of perseverance and experience,
yielding in the process four questions every entrepreneur should ask
themselves before they land their make or break account.
Have you worked out the product kinks?
While every small company dreams of winning the marquee client
early on, the truth is that winning it too early can overwhelm a
product or service that has not been sufficiently tested from multiple
aspects. In the case of Book Direct, Van Luchene and his team had first
created the reservation service as a project for the Santa Fe
Convention and Visitors Bureau, where his company is based. Noted Van
Luchene, “We were just solving it for Santa Fe with the hopes that if we
could do it in one tourist-based market that it would work in others.”
But the initial solution according to Van Luchene was not quite
right, “I initially put up a Travelocity white label service. We had
30,000 people use it in a month and we only sold $12,000 worth of rooms
so I knew something was wrong.” Eighteen months later, “we figured out
consumers were going to the city site because they didn’t want to book
with a middle man but rather directly with the hotel,” an insight that
led to critical changes to the service itself. Noted a delighted Van
Luchene, “the problem that we solved for Santa Fe just happened to be a
problem that resonates pretty much everywhere in the world.”
Is your revenue model right?
When starting a new company in an existing industry, the temptation
is to seek revenue in the conventional fashion. This was certainly the
case with JackRabbit’s BookDirect system. Aggregating availability and
pricing data from local hotels, BookDirect initially charged on a
cost-per-click basis for leads passed to participating hotels. This
approach initially seemed acceptable to the DMO’s since it limited it
their upfront investment and distributed the costs to the hotels that
received the most benefit. But when tourism dropped off with the
economic downturn, that approach left JackRabbit quite vulnerable.
Noted Van Luchene, “it was very painful and we had a year of
reinventing our business.” Rather than charge each hotel by reservation
lead, Book Direct began leasing its reservation search engine directly
to the DMO’s. Explained Van Luchene, “now we had a great business
because government tourism departments pay for the software and we list
all of the hotels, who now get a huge benefit at no cost,” this in turn
justifies the existence of the DMO and the membership fees they
typically charge each hotel. This new model also gave BookDirect a
competitive advantage since the DMO was far more inclined to promote the
Are you focused more on the steak than the sizzle?
After tasting a little success, many entrepreneurs turn on the
marketing hype, sometimes at the expense of their core product. This is
definitely not the case for JackRabbit Systems, whose website is a
modest effort at best and marketing is a blank on the org chart. “We’re
like the shoemaker’s son who doesn’t get to wear shoes; we put all our
time into making our client sites work well and look beautiful,” noted a
somewhat chagrined Van Luchene. (After the interview, I learned that JackRabbit is launching a new, more socially savvy website 1/21/11).
Van Luchene went on to explain that his particular service is
dependent on sales people who use their client sites, not his site to
showcase the company. “What they need from me is to put my reputation
on the line by delivering a product that works,” offered Van Luchene.
He also noted that given the small size of his industry where “[the
DMOs] all know and listen to each other, making my current customers
happy is the best selling I can do.”
Is your organization scalable?
One of the biggest tests for entrepreneurs facing rapid growth is
scalability across the organization. After several years of
preparation, Van Luchene’s team at JackRabbit was indeed ready to
scale. First, having tested the product with several DMO’s, they had
already gone through the process of integrating 114 unique hotel
reservation systems. This meant that the Book Direct could be up and
running for Las Vegas in under two months and add other markets with
From a staffing perspective, JackRabbit relies on a virtual
organizational structure with only half of the full-time employees
actually working at the Santa Fe headquarters. “Everybody else is
distributed all over the country since I can’t necessarily find all the
programming talent in Santa Fe to do this,” explained Van Luchene.
Having learned to manage far-flung staff including a sales force that is
essentially outsourced to local market media reps, JackRabbit expects
to scale without the usual management and technology hiccups, growing
from 6 % to 25-30 % share of market in the next 12-24
Final Note: Not one to rest on his laurels, Van Luchene knows
exactly what’s next for his company, readying a mobile solution that
will allow visitors to survey their options and then complete the
booking on a call directly with the hotel, a surprisingly simple
solution that consumers are likely to embrace and one leaving little
question about the future success of JackRabbit.