Bizzplan

Business Positioning Overview

ZZZZZZZ SYSTEMS develops, markets, operates and supports an Internet-enabled convention and group meeting hotel registration solution that solves the widely recognized room reservations problem in the convention and group meetings industry. The ZZZZZZZ solution uses the Internet to automate and simplify the housing (room reservation) and registration process, streamlining the information flow among parties and yielding improved performance, reduced costs, and enhanced revenue opportunities for all industry participants.

ZZZZZZZ is a unique business-to-business software and services enterprise, using a fee per-transaction model and the Internet communications infrastructure to re-architect the way a $83 billion dollar industry manages its business flow. ZZZZZZZ is first-to-market with a working product, is in the process of gaining endorsement from key industry groups, has contracts in hand, and a forecast pointing to $6 million in #### revenues.

Background

Since XXXX, when Convene Magazine first discussed the issue, to July XXXX when the editors dubbed it “The Nightmare of Convention Housing,” [see Attachment 1] the problems surrounding the management of hotel reservations for conventions and group meetings have been widely recognized. These are problems that cost every player in the industry in reduced revenue and lost opportunity.

The problems revolve around processing hotel reservations information for attendees of a given event. The crux of the problem ZZZZZZZ solves: hotel reservation systems do not keep track of group reservations until 30 days before an event. This occurs because up until that point meeting planners own the inventory and are processing reservations, decreasing this inventory behind closed doors on antiquated and proprietary systems.

With many parties involved in the convention and group meeting reservation process¾ meeting planners, multiple hotels, third-party event registration and management companies, call centers, convention and visitor bureaus¾ the flow of information is continually disrupted. The result: reserved rooms that are never consumed, incomplete and inaccurate reports of room consumption, incompatible technologies force repeated manual re-entry of information into the systems of each party, inability to gauge reservation activity in a timely manner, poor customer service, high costs, lost revenue, and more. Everybody involved in the process loses. With over 104 million meeting reservations handled each year in the US alone, there is much at stake in overcoming the information obstacles.

The emergence of the Internet coupled with sophisticated database technology provides the opportunity for ZZZZZZZ Systems to solve the information flow problem, and streamline the convention and group meeting reservation process on a worldwide basis. The Web provides a low cost, efficient, effective global communication infrastructure ready to be used, and enables easy access to information on the Internet from anywhere by anyone. Secure electronic commerce software ensures that organizations can effectively process reservations over the Internet. Combined with other behind-the-scenes technologies, such as relational databases, Java applets, Web servers, and various security and financial authorization technology, the technology pieces are now available to implement an effective convention and group housing solution industry-wide.

Such a solution uses Internet technology via the Web to connect all industry participants, enabling two-way communication among all parties involved in group and convention reservations for the purposes of setup, management, and reporting of event reservation and registration transactions. Communication can now be ongoing and pervasive, eliminating the costly information gaps that currently exist, and streamlining the entire process. Meeting planners, hotels, third-party service providers, call centers, and convention bureaus will experience lower costs while attendees receive better services.

Recognizing the potential of the Internet for convention housing, ZZZZZZZ SYSTEMS designed and built a working Internet-based reservation system, referred to simply as ZZZZZZZ, that meets the specific requirements of the convention and group meeting industry. Unlike solutions adopted from the leisure travel market or inflexible one-size-fits-all solutions, the ZZZZZZZ approach allows all parties within the industry to take advantage of the Internet to automate their business processes without fundamentally altering their existing individual business models. Early ZZZZZZZ implementations have demonstrated to many players in the industry the value of such an approach for group reservation information sharing among all participants in the process.

ZZZZZZZ SYSTEMS, a neutral, value-added player in the industry, is well positioned to profit by eliminating the inefficiencies that plague the current approach. Pricing of the ZZZZZZZ solution is transaction-oriented, ensuring that organizations can budget on a cost-per-transaction basis from the start. ZZZZZZZ transaction costs amount to a fraction of the current industry transaction costs, priced to ensure that all participants in the industry feel compelled to adopt it as a tool for processing reservations their way. Once participants run the numbers for themselves, the ZZZZZZZ solution becomes a no-brainer.

By combining convention housing industry neutrality, key relationships with industry leaders, extensive group housing knowledge, and Internet and database technology expertise, ZZZZZZZ SYSTEMS is uniquely situated to meet the convention housing challenge.

 

 

Executive Summary

Convention Hotel Reservation (Housing) Process

All parties to the convention and group meeting industry recognize the problems involved in the way hotel reservations for attendees, referred to as housing, are currently handled. Currently, the industry relies on disparate systems and antiquated processes to facilitate the hotel reservation process for conventions and group meetingsThis includes the processing of attendee personal data, assigning attendees to hotel rooms for the event, charging a deposit on their credit card to guarantee their reservation, and reporting this reservation information to the meeting planner on an ongoing basis and eventually to the hotels. Remember, as noted above, the hotels’ own central reservation systems do not, by design, handle group reservations until very late in the game.

Today, the meetings industry processes reservations by telephone, fax and mail. The majority of reservations (32 percent) are processed by third-party housing companies, which usually provide a range of additional services, such as attendee event registration and onsite event management. Convention and visitor bureaus [CVB] process 22 percent with the remainder being processed by the group/corporation staff or direct by the hotels’ reservation group.

Typically, reservation agents working from a call center answer attendees’ phone calls and process request forms received via fax and mail. This data is manually keyed into the individual call center’s own proprietary system. There are no industry standards guiding these proprietary operations, which are expensive, require redundant manual data entry and payment processing, and offer only one-way communication, which makes it difficult to share information.

This process limits the timely feedback necessary to effectively manage the housing inventory. Hotels, for example, don’t know if they should make more inventory available for the event, or if they will suddenly find themselves with unsold rooms. In addition, today’s attendees seldom receive enough information to be able to make value comparisons between hotels.

Furthermore, attendees frequently make last minute changes to their reservations, which today require that the changes be handled outside the group housing process. Thus, as the hotel makes last minute changes, the reservation is re-coded as a transient reservation, now untraceable as a group reservation tied to a specific event. Such exceptions, estimated to be 20 percent of the total, complicates the tallying of total attendee housing histories and produces inaccurate attendee counts. This results in the various parties, such as meeting planners, convention bureaus or third-party firms, not receiving full credit and, most importantly, the associated revenue for all the attendee reservations they initially directed to a hotel for their event.

Costly for All

It is not surprising that Convene Magazine dubbed this process “the Nightmare of Convention Housing”. Currently, all parties in the process lose. Meeting planners, for instance, can’t ensure quality service for their attendees, struggle with inaccurate data from which to forecast future events, and don’t get full credit for the revenue and economic impact they have generated.

Hotels can’t effectively monitor and thus manage their room inventory, which can result in lost revenue. The need to manually re-enter information into their in-house systems when attendee reservations are transferred from the group reservation organization, such as a third-party firm or a convention and visitors bureau causes many problems which ZZZZZZZ eliminates:

  • High labor costs to re-enter the information
  • Errors introduced during the re-keying
  • The inventory of rooms unavailable during the transition time
  • Added labor costs of handling the reservation during the period from cutoff to arrival

Third-party service firms and convention bureaus lose revenue when they aren’t credited for attendees whose reservation records are improperly coded during the processing of last minute changes, which usually occurs at the hotel. In addition, the process of transferring reservation information to hotels and meeting planners is quite cumbersome, requiring manual intervention to complete the hand over of attendees’ reservation data, which further drives up the cost. In addition, any deposit and fee payment processing must be performed manually, adding more cost.

Attendees themselves suffer from the inefficiencies of the process, which often result in a lack of choice in accommodations, poor information about the destination, and the inability to discern where inventory exists for an event. In other words, without ZZZZZZZ, the meeting reservations process is not always a pleasant shopping experience.

Every party in the process recognizes a compelling interest in fixing today’s process. To date, efforts to address the problem have suffered from several failings. They have been either utterly proprietary solutions controlled by parties with vested interests or were being marketed and supported by people outside of the industry or were too inflexible to work across the industry at large. Nor did these efforts attract the support of meeting planners, the critical market segment that delivers the attendees.

ZZZZZZZ SYSTEMS Solution

ZZZZZZZ comes to the convention housing process as a knowledgeable yet neutral party, familiar with all players and business rules in the process. ZZZZZZZ solves the group meetings problems using Internet and database technology to connect all industry participants, allowing them to communicate, setup, manage and report event-related room reservation transaction activity in real time while dramatically reducing costs. Registration services are being introduced now as well, which represent an additional revenue stream for ZZZZZZZ.

ZZZZZZZ provides a solution that allows all parties to share information easily, through two-way communication via the Internet. ZZZZZZZ maintains a database of housing options and related information, which can be accessed by meeting planners, hotels, convention and visitor bureaus, third-party service firms, and attendees. Whether attendees make their reservations by phone, fax, email, or over the Internet, all the information is immediately stored in a relational database accessible by authorized parties over the Internet.

Using a simple Web browser such as Internet Explorer from Microsoft, for example, a hotel reservations manager at any time can check how many of the rooms it has allotted to the meeting have been taken. Third-party service firms and convention bureaus can get accurate counts even as the hotels handle last minute changes. Meeting planners get fast, accurate tallies of their attendee’s reservations. The manual handoffs and workarounds are eliminated as each organization accesses this central data repository electronically, pulling it into their own systems as needed. These efficiencies clearly will improve the hotels’ bottom line.

Specifically, ZZZZZZZ provides the following:

  • Real-time, interactive information between the housing company (third-party firm or convention bureau), planner, hotels, and attendees.
  • Re-architected reservation delivery and cutoff date processes (The cutoff date is the date when reservations are passed from the housing company to the hotel and unsold inventory is once again controlled by the hotels.)
  • Improved management of events through availability of reports on demand.
  • An easily accessible (via the Web) central database for group (association) meeting attendance data (at the meeting planner’s option)
  • Automated commercial transaction processing – the collection and disbursement of deposits and fees.
  • Increased productivity and efficiency by transferring data electronically to hotels (coming soon).
  • More accurate industry-standard total convention history report immediately following the event.
  • A targeted advertising platform for both destination-focused and event attendee-focused (demographics) ads.
  • Hotel, flight, and rental car reservations in one place
  • Ability to manage inventory for individual travel operations as desired.
  • Event and seminar registration in one place

ZZZZZZZ Revenue Model

ZZZZZZZ processes all attendee reservations regardless of source (Internet, phone, fax, or mail), and charges a transaction-based fee for this service. Thus, ZZZZZZZ’s revenue is derived from each attendee reservation transaction. (As a result, revenue is not dependent on attendees booking via the Internet. All reservations are processed through ZZZZZZZ and subject to the transaction fee.)

In addition to transaction fees, ZZZZZZZ expects to generate revenue from event registrations, event set-up fees for front-end customization of the relevant web pages and software licensing fees. It also targets ancillary revenue from the sale of targeted advertising and from commissions for other Web content, such as handling airline and car rental reservations and tickets to attractions.

Sales and Marketing Strategy

ZZZZZZZ markets to both the supply and demand sides of reservation transactions. The supply side consists of hotels (which control the inventory), which have aggregate representation in all destinations through the local convention and visitor bureaus. The company is focusing on the top 12 U.S. convention destinations as priority targets. By enlisting hotels in the top 12 destinations, ZZZZZZZ will be able to bring the majority of convention properties online, and train them on inventory management after cutoff.

On the demand side, the company simply needs to get meeting attendees to book hotel rooms for meetings that are using the ZZZZZZZ Reservation System. This is very straightforward. Attendees are instructed by their meeting planner on how to arrange for event housing and registration.

CVBs are a unique entity in that they help ZZZZZZZ aggregate the sign-up of the supply (hotels) in their cities, and become a demand channel service provider as they resell ZZZZZZZ to meeting planners that contract with them to provide housing services through ZZZZZZZ. (Three convention and visitor bureaus (Orlando, Dallas, and San Diego) are currently in the process of contracting with ZZZZZZZ to use the system with various call center options.)

ZZZZZZZ also is marketing to leading third-party housing firms. They represent another substantial demand channel. As meeting planners request ZZZZZZZ services, these firms will need to have a plan to deliver.

ZZZZZZZ will market to large event meeting planners directly, and will target planners indirectly by marketing to CVB housing departments and Third Party Vendors (TPV).

Because meetings and conventions are often booked from 2-5 years in advance, when ZZZZZZZ wins a new account (CVB/TPV), we’ll know the exact volume of business (not accounting for additional business booked in that year, for that year).

Subsequently, we will market more heavily to planners in the high tech, biotech, medical, legal and engineering professions due their tendency to adopt new technologies quickly, as demonstrated by the current high level of Internet usage within these industries.

Meeting planners will bring their attendees to cities where ZZZZZZZ is installed locally with hotels, and will want to use ZZZZZZZ from city-to-city. Today, planners that use CVB housing struggle through an entire re-ramp up every time they move to a new city and need to learn a different CVB’s system and procedures. Thus, we expect planners to request subsequent cities to bring the ZZZZZZZ standard online to service their business.

Sales are made by ZZZZZZZ’s regional vice presidents–a direct sales force consisting of people knowledgeable about convention and group meeting activity in a particular market. Top management is also heavily and directly involved in sales.

Initial sales efforts have achieved the following results:

  • ZZZZZZZ already has a signed contract with the [name removed] NOTMC, and launched online reservation functionality to 15 hotels across the NOTMC site on May 21, ####. Reservations have been successfully entered, processed, rooms occupied and ZZZZZZZ paid as a result. Expanding in NOTMC, ZZZZZZZ will have a signed contract with the NOCVB, independent of NOTMC, by late fall, ####.
  • AAA, BBB, CCC Convention & Visitor Bureaus are in the process of contracting with ZZZZZZZ. They are beginning in each city with a beta test involving several midsize conventions using various call centers, beginning in December ####.
  • The [TRADE ASSOCIATION] is partnering with ZZZZZZZ to make ZZZZZZZ the CVB Housing standard. The contract is scheduled to be finalized at the IACVB Board Meeting in Jan. ####.
  • A second initiative with TRADE ASSOCIATION, calls for ZZZZZZZ to act as the architect of a central WWW site for all member sites to be linked to ZZZZZZZ reservation functionality as well as other allied revenue and content channels–clarify this—travel related products and services?]]. We are jointly writing this proposal for this venture.
  • SECTUR [name deleted], under a five-year contract with TTVW [name deleted] has launched an Internet-based travel site using ZZZZZZZ as the hotel booking engine for both group and leisure travel. Included in the site are destinations such as Cancun, Acapulco, Puerto Vallarta, Los Cabos, Mexico City, Monterrey, and San Miguel de Allende. Participating hotel chains include Fiesta Americana, and Camino Real Hotels. Fiesta Americana has already seen reservations through the system.

Three leading third-party housing companies, Housing Online (Las Vegas) and Smith Bucklin and Associates (Chicago), and Helms-Briscoe have scheduled contract negotiations with ZZZZZZZ. Combined, these three companies represent a potential of over 800,000 reservations annually, and over $3.2 million in annual revenue to ZZZZZZZ.

ZZZZZZZ is under contract directly with ITTS as the housing and registration system for the ITTS [name deleted] Sales Leadership Conference, which opened for reservations on [date]. This is ITTS’ annual international meeting (900 attendees) of all key corporate personnel and franchisees, to be held this year in New Orleans in January XXXX. ZZZZZZZ also will be exhibiting during the trade show portion of this event.

The American Society of Association Executives (ASAE), a convention and group meeting trade group, is considering using ZZZZZZZ for its upcoming annual convention housing, opening for reservations in Jan. ####. 3000 attendees are expected to attend.

ACOM, (the National Association of Convention Operations Management) has also named ZZZZZZZ to facilitate their March #### meeting housing, as well as host their WWW site.

ZZZZZZZ Technology

ZZZZZZZ’s technology model uses state-of-the-art, commercially available technology. The core of the system is a relational database, which is accessed over the Internet through the ZZZZZZZ Web site. The site itself is hosted by DIGEX Business Internet, an industrial strength Web hosting firm (currently hosts World Bank, FEMA, etc., ensuring that the ZZZZZZZ WWW site and database remain up and running at all times and can scale to increasingly high volumes of transactional traffic. [For more information on DIGEX see Appendix D.]

 

The ZZZZZZZ housing application’s structure and business rules are the result of 1½ years of market research conducted by ZZZZZZZ’s founders with input and feedback from industry experts. ZZZZZZZ worked with N International, Boston — a leading technology solutions firm to write the final software specification and create the reservation system for ZZZZZZZ. The commercial software release was completed in September ####. Version 2 is currently up and running. In Oct. ####, ZZZZZZZ finalized terms to buy out the source code, and jointly implemented a five-month strategy to migrate all technology in-house at ZZZZZZZ. This ensures ZZZZZZZ’s control of the core technology.

Competition

There are not yet direct competitors for the specific Internet-based services, which ZZZZZZZ provides today, although some firms claim to be creating similar applications (such as WorldRes), while others are marketing pieces of the solution (such as Thisco).

WorldRes, San Mateo, CA., has a leisure-only travel site (placestostay.com) and, to date, its volume comes from linking to other retail leisure sites. WorldRes has announced its ability and desire to custom build group reservation functionality into their core leisure reservation system as requested, but has not demonstrated a functional version or customer reference account. ZZZZZZZ already has a complete group housing processing system up and running, making it the first into the market.

Currently, Pegasus Systems’ ULTRARES is sometimes mistakenly seen as a competitor to ZZZZZZZ. This is not the case. ULTRARES provides electronic housing information transfer services only, just one part of the convention housing process solution fully addressed by ZZZZZZZ. In addition, it does not take advantage of the Internet.

ULTRARES may in fact be poised to become the standard reservation data delivery channel into hotel property management systems. Recently ULTRARES seemed to be positioning itself as a back end to ZZZZZZZ’s Internet front end. This was confirmed in November #### when THISCO asked ZZZZZZZ to consider a co-marketing agreement. This, however, represents a major step forward for ZZZZZZZ in that the company will benefit from the business to be delivered by others through our system as a result of this relationship.

McHugh Inc., Abita Springs, LA, currently has nine CVB customers running its obsolete DOS-based system for event management, and is moving to a Windows-based system in the fourth quarter of ####. Eight of those nine CVBs are in the third-tier of the market and do not represent significant revenue for ZZZZZZZ.

The greatest competition comes from the natural reluctance the change a long established business process. Although the problems with the existing process and systems are widely documented, the natural resistance to change makes doing nothing an easy first choice for those TPVs who choose to wait and see how the market reacts to ZZZZZZZ.

CVBs and planners, however, have taken an active role early on with ZZZZZZZ in seeking alternative means to get the job done. There is no doubt that each party in the process has compelling strategic and financial interests in adopting a solution like ZZZZZZZ, which is the only viable Internet-based option. This fact is demonstrated by the current interest many large TPVs have taken in ZZZZZZZ recently.

Financial Projections

Projections

####

####

####

Number of Reservations

1,023,600

2,347,665

4,964,050

Percent of Target Market

.8%

2%

4.2%

Gross Revenues

6,136,000

14,220,000

31,791,000

Pre Tax Income

201,000

2,099,000

6,528,000

Net Income

131,000

1,364,000

4,243,000

Profit Percentage

2.1%

9.6%

13.3%

The chart above illustrates our base case projections for sales and resulting profits. All revenue projections are based on transaction revenues only, and do not include potential for licensing fees and other ancillary revenues. More detailed revenue and expense figures are provided in the full business plan.

ZZZZZZZ has completed a first round financing of $1,000,000. To date, these funds have enabled us to complete versions 1 and 2 of the software, develop an organizational infrastructure, bring our beta city online, secure contracts with several other destinations and hotels, and initiate industry-wide marketing and sales efforts.

New funds will help us continue to hire key management talent to support current and anticipated sales and bring us our first significant transaction revenues. We are in the final stages of negotiation with a number of prospective customers and expect to have 6-8 of top 12 major convention destinations and TPVs online, and obtain 3-4 industry-leading reference clients that will help us build market demand. ZZZZZZZ revenue projections, above, are based on actual sales.

With the client list growing as it is, ZZZZZZZ will need additional funds to ramp up enlistment and setup of customers (destinations, hotels and housing companies), including international customers. Setting up new customers entails significant expense before transaction revenues begin flowing. We will also need to fund an advanced customer support/technical support staff. These initiatives need to be implemented immediately, and cannot wait nine months for cash flow to fund them

Management Organization

ZZZZZZZ has assembled a management team that combines extensive hotel management, meeting planning technology product management, and Internet marketing experience. The team consists of:

Joe Blow, President, Founder¾ Mr. Blow has 25 years of hotel industry experience in operations and marketing for … and has been recognized by numerous industry organizations for his success in the hospitality field.

John Doe, Executive Vice President, Co-Founder¾ Mr. Doe has 12 years experience in sales promotion, corporate communications and advertising, and is an experienced incentive travel meeting planner. He has conceived, designed and implemented advertising and promotional programs for….

Dave Smart, Chief Executive Officer¾ Mr. Smart has 25 years experience in successfully bringing innovative software products to worldwide markets, most recently with… As the tenth full time person hired at [previous employer], Mr. Smart brings successful experience in growing and managing a startup technology company.

Steven Money, Vice President of Finance and Administration—Mr. Money has over 10 years of financial and managerial experience in the software and high technology marketplace. He is a CPA and holds an MBA from Boston University. Prior to joining ZZZZZZZ, he was Vice President of Finance and Administration for….

Paul Fast, Vice President/Business Development¾ Mr. Fast is experienced in developing and implementing advertising programs, sales/marketing initiatives and business development partnerships in the Internet sector. He was a member of the initial business development team at …

Risks and Exit Strategy

Like every technology company, ZZZZZZZ faces a number of risks. The company recognizes these risks and actively pursues strategies to mitigate them.

Technology may change. The Internet is more than a passing fad and e-business clearly has emerged as the wave of the future. The Web has become a permanent part of the communications and commerce landscape. ZZZZZZZ is prepared to continually adapt to advances in this technology.

People with Internet skills and with proven track records in technology sales and marketing are in high demand. ZZZZZZZ offers an exciting opportunity in the hot area of Internet transaction processing and a desirable location in an area with a wealth of the talent we need. We expect to be able to compete for, attract, and retain top people. Our recent hires attest to ZZZZZZZ’s ability to attract key talent.

Competition will arrive. ZZZZZZZ, however, is the first into this market and has already established a presence and partnerships among industry leaders. The company intends to compete aggressively to attain, maintain, and expand market leadership. It continues to invest in customer research and product development.

The market need isn’t going away. The problems that ZZZZZZZ addresses are real and reflect direct out of pocket costs to all the parties in the group housing market. ZZZZZZZ’s solution is cost effective and efficient, saving all parties significant revenue while producing significant revenue and profits for the company. ZZZZZZZ will become and remain a profitable and growing private company as long as that is in the best interests of its shareholders. A public offering or merger or acquisition will be done if it significantly benefits the shareholders, customers and employees.