[Ireland] Ray Nolan, co-founder of Irish company Web Reservations International (WRI) — parent company to booking site Hostelworld.com and reborn travel site Boo.com — says WRI’s initial plan was for an audacious 2008 IPO at a market cap almost double the company’s final selling price of about $340 million last week. Ironically, he made almost as much money out of the Boo.com holding company as Boo lost back in the dotcom bust.
WRI was picked up by private equity firm Hellman and Friedman, to the surprise of many who assumed a travel giant such as Expedia or Priceline would make the acquisition.
“We were trying to push it out to a $600-700 million market cap. That’s a big IPO. It was so big that the market only had to cough, and we knew the IPO was off.” Obviously, the market didn’t just cough; it tanked, and the IPO was abandoned.
A three-time serial entrepreneur — he set up his first company, Raven Computing, in Dublin at age 22 — Nolan stepped down as WRI chief executive in advance of the planned IPO and was a non-executive director by the time of last week’s sale. However, with 25% of the company’s shares, he did well out of the transaction.
He confirms he was able to bank about $100 million from Hostelworld, a very successful online hostel booking site, and from other WRI properties in the decade since he and Dublin hostel owner Tom Kennedy first set up Hostelworld. “We were pretty good to ourselves all the way up [at WRI]”, he acknowledges. “We took cash out when we could.”
Hostelworld was the cash cow for WRI, bringing in €18.3 million profit on revenue of €38 million from €350 million worth of transactions last year. Hostelworld’s model was “beautifully simple”, Nolan says: hostels could sign up to make themselves available over the booking service and then paid Hostelworld 10% of every booking — only a euro or two per booking, but millions of transactions paid out millions in profit annually.
Nolan says WRI “very nearly crossed the line” and came a hair’s breadth from being sold to either Priceline or Expedia — he won’t say which — but the final offer never appeared. Price too high in the current economic climate? “All I can say is there are more things than price. There’s the culture of the company. We all did travel and are online, yes. But many other elements of their business aren’t like ours.”
He’s disappointed the IPO never happened however, as he says WRI “would have been a great candidate. It has great demographics, 20 and 30 something travellers, and there’s a lot of possibility upselling to that demographic.”
He adds: “When I left (as CEO), we had a 65 per cent EBITDA margin.” He thinks it likely that WRI’s new owners will hang on to it until the market improves, and then take it public.
Hostelworld’s early promise drew in investors to WRI such as NewBay founder Paddy Holahan (who became WRI chairman up until the planned IPO) and U2 manager Paul McGuinness, who will each exit with a nice nest egg.
WRI picked up the infamous Boo.com url in 2007 when Holahan saw that it was available “for under seven figures” on Fashionmall.com. Though in its first incarnation, one time fashion site Boo.com burned through £100 million in 18 months before becoming one of the highest profile British dotcom wrecks, Nolan said the url was short, snappy and easy to remember for a travel advice site.
Plus, the former notoriety of the web address drew in plenty of publicity for WRI from the media, without the negative associations for users. “The thing is, people over 30, journalists and Boo’s unpaid creditors remember Boo, but no one else does,” he said in 2007.
If WRI was doing so well, then, why sell? “It was time. It had been 10 years,” Nolan says. Plus, he has his eye on some new prospects, and feels ready to go again as an entrepreneur.
Though he is involved in some way with about 10 tech start-ups, Nolan currently has four major interests: CloudSplit, Asavie.com, Worky.com, and RevaHealth.com. “I fully believe I’m riding four horses, and one of those is the next Hostelworld.”