Matt Kaye
(WG'07) |
Welcome Wharton Community to the Alumni Chat with Michelle Peluso. Michelle is the founder of site59.com and the current CEO of Travelocity. Please type your questions for Michelle in the window below and hit the "Ask" button. |
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Matt Kaye
(WG'07) |
Michelle, Can you describe your decision to leave your secure position at BCG and the White House and dive into the unknown world of entrepreneurship? Thanks. |
Michelle Peluso |
Hi everyone. It was both extremely exciting and totally terrifying! But, to my core I knew that it was time for me to take a risk and try something entrepreneurial. My dad is an entrepreneur as are my grandparents, and it was always something I wanted to try. And I knew if I didn't just jump, I'd get complacent and never make the leap. I sometimes feel that the more success you have, the more afraid you become of taking risk - you are so used to succeeding that you become terrified of failing, and so you stay in the comfort zone. I didn't want that to happen to me. |
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Puneet Singh
(W'08) |
Hi Michelle, thanks for doing this. How do you think Wharton helped you in your career, and would you recommend we experience anything specifically while we're here? |
Michelle Peluso |
Wharton is a great place to start a career in business - there are fantastic professors and great courses. But, I would say, most of what I learned when I was at Penn, I learned outside the classroom. Business is largely about understanding other people and being able to be effective in really diverse situations. So, make sure you get out of the Wharton classroom. Take classes at Penn if you are an undergrad - Italian, world history, art, etc. And, most importantly, take on leadership roles; get to know people who are nothing like you; get out and explore West Philly . |
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Joel Frey |
How do you keep your team motivated? |
Michelle Peluso |
It's probably the most important job I have - it's certainly the part of my job I care about most. At the end of the day, people put in discretionary effort if they believe in what the company is doing. So, understanding how to motivate the team is critical. You have to care. You have to put their needs above your own; you have to present a clear vision; you have to communicate ALL the time; you have to be responsive (hyper responsive?).
In the end, it's all about the team, really. I spend a lot of each day walking the halls, holding brown bag sessions, and mentoring our top performers. I write a weekly email, I hold quarterly all-staff meetings; and I make sure everyone knows if they email me or call or swing by, they'll always get an answer to a question they have within 24 hours. |
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Ryan Comfort
(W'05) |
When you initially designed the site, did you have it developed domestically or abroad? |
Michelle Peluso |
Domestically. We have a really visionary design and usability team in Dallas, lead by an amazing guy named Troy. They came up with the new and improved design about 2 years ago, and we developed it domestically, after lots of usability work. However, we do have some developers in India and Sydney, and we have a large development team in Europe as well. |
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Emily Cieri |
I don't believe you had a background in the travel industry. How did you handle launching a business in a complex industry that you didn't know a lot about. And what advice do you have for others thinking about doing this. |
Michelle Peluso |
Great question! Well, first of all, I'm passionate about travel, and it's always great to do something entrepreneurial in a field that you love. But, being a smart entreprenuer means you have to be ruthlessly honest with yourself about your strengths and more importantly, your weaknesses. I realized I didn't have travel experience and that was a liability, and so it was critical in the early days that we found some people with technical, operational, and travel experience. |
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Matt Kaye
(WG'07) |
Where did you find your initial management team? What was your initial selection criteria and how has that changed over time? |
Michelle Peluso |
We found the initial management team from lots of places, but mostly, they were friends of mine. Now, I know that is a huge "don't-do" in many textbooks on starting a business, but I will say, 6 of us started Site59 in 1998, and today, all 6 of us are helping to lead Travelocity. We've had a remarkable friendship. There's not a day that goes by that I'm not in awe of each of them and their talent and smarts. It's been one of the biggest gifts of my life. |
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Matt Kaye
(WG'07) |
Where did your initial source of funding come from? Did you need more or less money than you expected? How did you manage your cash flow in the early days? |
Michelle Peluso |
Initially, BCG (my old company - and the company that came up with the idea for a lastminute portal) gave us seed money. We then went on and raised money from the iFormation fund (which at the time was a fund with Goldman and General Atlantic and BCG), and we also took a bit of strategic money from three hotel companies - Starwood, Accor, and Intercontinental. On managing cash flow, you do it very tightly! We built our plan, and then we'd reforecast each month. But, every night, we'd look at our cash balance. Cash is king in a startup. |
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James Sharples
(WG'03) |
As the president of a travel company that focuses solely on mature and disabled travelers (Level Travel), I was wondering what your early thoughts are on the success of your Passport program with AARP. And what other roles do you see Travelocity taking in helping Boomers who need a little more accessible accommodations when they travel? Thanks. |
Michelle Peluso |
It's been going very well, thanks for asking. Big picture, AARP does a great job in understanding seniors and what they want and need, and we can pitch in by providing great travel opportunities for the senior community. It's a strong partnership, and I look forward to our getting better and better - there still is SO much more we can do on the areas of accessibility across our site and the passport site. |
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Megan Mitchell |
It would seem to be incredibly unique that all 6 of the founders are still with Travelocity. To what do you credit having been able to retain the original team? |
Michelle Peluso |
Yes, I think it is incredibly unique, and as I said, it's one of the greatest gifts of my life. I think in the end, we are each really passionate about the business; we each have different talents; and we each have enormous respect for the others in the group. There's just no ego - we are here because we want to make Travelocity a great company and we want our teams to love what they do and have rewarding careers. It really is that simple. And, it's hard to even describe how wonderful it is to be in the boat with people you trust and admire as much as I do them. |
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Christine Lee
(WG'08) |
What were some of your toughest challenges in the early stages of the company growth? |
Michelle Peluso |
The toughest challenge came after 9/11. We were located 2 blocks off ground zero, and we couldn't find our last employees until very late that night. We had been growing strongly and in acquisition conversations. and most importantly, we were a team of 80 highly committed people. After 9/11, we lost out office space for a bit; our revenues fell by 70%; we halted all acquisition conversations; we went from burning 200K a month to burning 1M a month with only 2M in the bank; and of course, we had to work hard to rebuild who we were as individuals after what we had witnessed.
The amazing thing is how the team pulled together. We simply decided we were NOT going to let 9/11 crush the business. We worked hard to rebuild the business; we started cooking monday night dinners with our neighbors - the local firehouse (they had lost 4 of the 5 first responders since they were only 2 blocks away); and the amazing thing is by January we were the size we had been in August; by February 50% bigger; and by March we were ahead of even our pre-9/11 schedule AND we hit profitability. We sold the company in March to Travelocity . |
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Emily Cieri |
How did the sale of Site59 to Travelocity come about? |
Michelle Peluso |
We had been talking to Travelocity and others before 9/11. Afterwards, we put talks on hold. We started them again in December when the business was clearly showing signs of improved performance and strength. We sold to Travelocity in March of 2002, and I took a job as SVP of hotels and packaging. |
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Matt Kaye
(WG'07) |
It seems rare that the CEO of a target company becomes the CEO of the acquiring company. How did you and the Site59 management team rise to your current positions? |
Michelle Peluso |
Yes, I guess so! I (and the whole site59 team) were lucky as when we came to Travelocity, we had really complementary skills. Travelocity wasn't doing well while the rest of the industry was prospering, and the existing management team took a chance on me and my team to help turn the company around. I became COO 9 months after the acquisition, and CEO 9 months after that. And, the good news is, we've significantly improved travelocity. We went from being the slowest growing (by far!) to being the fastest growing over the past 2 years; and we went from losing a lot of money to being sizably profitable. The joy in all of it for me has been to work with the extraordinary travelocity team along the way. |
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Ryan Comfort
(W'05) |
What would your advice be for entrepreneurs who are hesitant to get outside funding because they want to maintain ownership control? |
Michelle Peluso |
It depends on your business model and your aspirations/expectations. If you think you can fund it and grow it to the level you want on your own, by all means, go for it. Having said that, most businesses need more capital than that to scale, so outside funding is an imperative. Of course, there are lots of ways to make sure it's the right partner, that you still have control, etc. |
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Puneet Singh
(W'08) |
You are both a Thoroun scholar and a White House fellow. What impact did those opportunities have on you, and do you have any recommendations for people who are interested in applying to those types of programs? |
Michelle Peluso |
AMAZING impact! I've always believed that you have to stay open to opportunities that take you outside the path your on and expose you to challenging and new circumstances. I turned down all the great banking and consulting jobs coming out of Wharton because I wanted to try living abroad and studying philosophy. I won the Thoroun Scholarship, went to Oxford and did just that - and I have to say, it was one of the best experiences of my life on so many levels. You should definitely apply if you are interested - it's an extraordinary opportunity. And, as I did my third year at BCG, I started thinking about whether to go back for more education or try something new. I found out about the White HOuse Fellowship program and decided to apply. I was 26 when I won the White House Fellowship, and again, it was one of the best years of my life. It's an incredible honor and privilege to work in the White House in a senior capacity and to get to explore how goverment works. Hard for me to imagine a better way to spend a year if you ever get the chance. |
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Nancy Loh
(W'97) |
Did you ever encounter any challenges or stereotyping by other people because you are a woman in a high-level executive position? How do you handle these situations? |
Michelle Peluso |
Yes, sure, a bit. But I love when people underestimate me! And, I usually have a lot of fun with it. Big picture, you have to be comfortable with who you are. I love being a woman in business, and there isn't anybody who can shake my belief in who I am. So, relax and enjoy being who you are. |
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Sun Lee |
What quality you think makes it possible to handel the toughest challenge? |
Michelle Peluso |
Being true to your core. Integrity. Confidence in your team coupled with humility (arrogance destroys companies). Spending the time needed to think your way through the problem with those you trust most and then being clear-headed in execution. A clear sense of purpose. |
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Catherine Cheung
(W03) |
Going forward, do you see consolidation in the online or entire travel industry for that matter? Now that consumers have so much more transparency and choice, what's next? |
Michelle Peluso |
Experience retailing and great service. Travel is about so much more than shopping and booking, and our job has to be to elevate the role of the travel experience. We need to provide great dreaming and planning tools. We need to personalize offers based on what we know about you. We need to use web 2.0 technologies to bring information to you wherever you are. AND, we need to take accountability for great travel experiences. We need to stand by at every step of the way and make sure you have a great trip. |
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Marcello Chermisqui
(W'08) |
The Travelocity Guarantee states that you will honor any error on the website. I was wondering the factors which were behind this decision? How did you balance the interests of the company's stakeholders and customers? |
Michelle Peluso |
Launching the Travelocity Guarantee was risky and one of the hardest things we've done - but we knew we had to get back to taking accountability for the magic of travel (not just cheap prices). That's where loyalty is won. We spent 18 months combing through the organization to find areas where we were disappointing customers and systematically went after them before we launched. Every employee went through championship training. And, the amazing news is not only have we seen sizable improvements in customer satisfaction and likelihood to repeat purchase, but we've also decreased costs as we've fixed things that drove calls in the first place. Risky. But, ultimately a great move for us that continues to pay strong dividends. |
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Martin Hak
(WG'05) |
What are your thoughts on social networking sites and customization/personalization and how those issues might/have impact(ed) the travel industry? |
Michelle Peluso |
Huge opportunities here. We just folded in a company called igougo (great site!) into Travelocity, which is a social network of expert and passionate travelers, and we are very busy integrating throughout Travelocity. We've also launched (only to select VIP members as a beta site) a product called Experience Finder which radically changes the way you shop and book travel, allowing you to access great dreaming and planning tools, save things to a wishlist, send the wishlist to friends, get customized feeds based on your wishlist, etc. I'm very excited about the future. |
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Sun Lee |
As an entrepreneur, you might have to make a decision where to invest limited resource first. What was your choice? |
Michelle Peluso |
You need to make sure you know what is core to your model and be very, very focused on core. With a limited budget, you don't have resource to spread yourself thin. We decided site59 would be mostly a provider of lastminute deals to other sites instead of spending big dollars on marketing directly. That enabled us to scale fast and get to profitability. |
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Marcello Chermisqui
(W'08) |
What has been your strategy for expanding the Travelocity brand in Europe? |
Michelle Peluso |
We bought a company called lastminute.com in Europe to help expand our footprint. Europe is a huge travel marketplace, and the lastminute.com brand and business is very strong (check out the site). We've also expanded into Asia with our brand Zuji. |
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Meesh Pierce
(W'93, WG'98) |
Hi Michelle! As the online marketing space continues to get more competitive, are you nervous that budgets will continue to grow with decreased ROI? If so, how do you foresee reaching your customers? |
Michelle Peluso |
I actually strongly believe that as search inflation grows, a lot of the traditional models for advertising look more and more attractive - TV, radio, newspaper, etc. So, as long as you have a strong brand proposition, I think a lot of these channels can be highly effective, particularly for a larger business like Travelocity. We are very careful about our search spend, and in the end, we believe it's useful, but we like offline channels even more. |
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Francis Kim
(W'08) |
Michelle, how did you build your first development team at Site59? |
Michelle Peluso |
We hired a really amazing CTO, Josh, and he helped build the team, often relying on his network. |
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Cindy Baker
(WG'84) |
Michelle, How have you used your Alumni connections to get established? What advice do you have to others? |
Michelle Peluso |
I haven't used Alumni connections much. My biggest advice is make sure that when you are assembling a team, surround yourself with the best possible people who complement your weaknesses and who you trust entirely. In a startup environment, that is so critical. In terms of alumni networking, I know others have used it extensively, but I would just caution to make sure there is a legitimate connection and you know what you want before you call someone. |
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Martin Hak
(WG'05) |
What do you see as emerging opportunities in online travel with the talk of Travel 2.0, going beyond metasearch engines (e.g. Kayak, SideStep)? Social networking travel sites like WAYN are receiving substantial VC funding ($11 M last month). What business opportunity would you pursue now as an entrepreneur if you were to start a new online company without established ties to a GDS like Sabre? Would you focus on specific niches in travel, e.g. baby boomers, GenXers? |
Michelle Peluso |
I don't think sites that are just price comparison sites are doing much to help consumers, so I wouldn't focus there. I'd focus on dreaming and planning tools - that's the area of travel that is just starting to come online and offers huge opportunities to garner consumer stickness - lots of web 2.0 technologies apply. |
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Catherine Cheung
(W'03) |
How does managing a start-up differ from managing a much larger company? Have you had to change your leadership style or team as you've grown? |
Michelle Peluso |
The core is the same - you have to have a vision and spend most of your time motivating the team to get there. The scale is very different :) When we had 80 people at site59, i knew everyone. Now that we are a much bigger company with over 5,000 employees, it's harder, but the principles still apply. I'm on the road a lot with employees around the world; I use technology to communicate regularly; and I work really hard to make sure that despite the complexity of a large company, we all stay very focused on the core mission - retailing great travel experiences and being the customers' champion every step of the way. |
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Eric Weiner |
Michelle: Many other industries like healthcare and personal finance are bracing for the seismic shift of the baby boomer generation. Is it all good news for the travel industry, or are there some hidden challenges? How do you (we) balance sustainability issues associated with increased travel? |
Michelle Peluso |
Mostly good news for travelers as travel spend increases as you get older and are empty nesters. Sustainability is a big issue for sure. At travelocity, we've launched carbon offsets, so you can buy carbon offsets for your trip when you travel, which we think helps a lot. All of the money goes to planting trees to offset the carbon for your trip. We're also starting to work with hotels to understand and promote their go green programs. |
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Martin Hak
(WG'05) |
Which Web 2.0 technologies do you find most exciting and what do you see are their applications to the future of online travel? |
Michelle Peluso |
Social networking allows communities with similar interests to emerge in the dreaming and planning stages of travel and share advice on itineraries, reviews of hotels and trips, etc. Very powerful for travel. We are also excited by things like RSS feeds which allow us to broadcast information to consumers that want it in different channels. |
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Vishal Gupta
(MBAExec'04) |
Do you see opportunity for innovative travel sites in countries like India which are starting to get to critical mass? |
Michelle Peluso |
Yes! And, travelocity is launching in india in the first quarter. We are starting with a hotel offering and will build out air and dynamic packaging over the course of the year. |
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Sun Lee |
Michelle, how do you balance your personal and professional life? |
Michelle Peluso |
That's always hard for all of us, right?! Well, at the end of the day, my biggest priority is to my husband (I just got married), my friends, and my family. If they need me, I'll be there. I work extremely hard, but I'd drop anything if I knew they needed me. And, more than that, when you have a great team around you, it makes it a lot easier to leave the office and enjoy life. |
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Puneet Singh
(W'08) |
What is your biggest regret? |
Michelle Peluso |
Hmm . .. that's a hard one! My regrets almost always are when I have those moments when I realize I could have pushed myself harder or given more. Life is so short, and the sidelines are no place to spend your time. |
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Matt Kaye
(WG'07) |
That brings us to a close. Thank you very much Michelle for being with us today. I hope that everyone can also join us for the next WEP Alumni Chat on Friday, Feb. 9, 2007 at 11:30 am ET. We are excited to host John Tedesco (WG99), President & CEO and founder of Guardian Mobile Monitoring Systems. Previously John was CEO of PayMyBills.com, a company started at Wharton that he helped grow to 200 employees with nearly 40,000 consumers signed up. The company merged with Paytrust and is now owned and operated by Intuit. |
