Pegasus Launches New Service for Tour Operators

Pegasus Solutions, Inc
. (Nasdaq: PEGS)
introduced its newest technology service for the travel industry today
at HITEC 2002 in Chicago.  Continuing its track record of developing
innovative technology solutions to solve worldwide travel industry
problems and inefficiencies, Pegasus has launched PegsPay(SM), an
ASP-based service for travel businesses that operate under the
merchant model. 
The first of its kind, PegsPay automates the exchange of funds and
incentives between travel distributors such as tour operators, online
net rate providers, consolidators and wholesalers, and any type of
travel supplier, including hotels, rental cars, airlines, railways and
cruise lines.  PegsPay is designed for travel distributors that employ
the merchant model.  PegsPay eases the process for both the travel
distributor and the travel supplier, providing confidence that the
financial transactions supporting their relationship will be complete,
dependable and supported by quality service and information. 

“The net rate merchant model is a very successful business model, but
its current methods of operation are highly labor intensive, with
little or no automation,” said John F. Davis III
, chairman and chief
executive officer of Pegasus Solutions.  “With the recent
proliferation and success of online net rate providers, such as
Travelweb LLC (formerly HDS LLC) and Priceline, it became clear that
the administrative problems surrounding quick, accurate and efficient
payments to travel suppliers for travel inventory has grown to become
an industry-wide issue.  It`s an issue that traditional tour operators
have faced for many years, but it has now escalated due to the growth
of travel purchasing over the Internet.”

“Once again, we saw an opportunity to bring our unique payment
clearing expertise to help solve an industry problem,” Davis
continued.  “After studying the problem and speaking with travel
distributors, we realized how similar their issues were to those
previously faced by hoteliers prior to the launch of our Pegasus
Commission Processing service.  In the same way that Pegasus
Commission Processing collects and pays commissions to travel agents
from hoteliers, PegsPay similarly collects and clears the net rate
payments from the travel distributor or merchant (online discount
travel seller) to the travel supplier.  We created PegsPay by
leveraging the technology and infrastructure of the highly successful
Pegasus Commission Processing service we launched more than 10 years

Under the merchant model, travel distributors, such as tour operators
and online net rate providers, obtain travel inventory (hotel rooms,
rental cars, airline tickets, other package components, etc.) from
travel suppliers at a negotiated rate, mark it up, and re-sell it to
consumers either directly or through an affiliate.  The travel
distributor is then obligated to pay the travel supplier that provided
the inventory.  Without PegsPay, the travel supplier must manually
track the inventory that has been sold by various distributors on
their behalf and must try to collect the revenues due to them from the
distributor in a timely manner.  Today, the travel supplier typically
either invoices the travel distributor, which is administratively
burdensome and expensive, or charges a credit card provided by the
distributor, which incurs additional costs for the supplier due to
credit card fees.

According to Jeff Bzdawka, senior vice president of Pegasus Financial
Services, “As a result of existing processes, the travel merchant
typically receives thousands of individual invoices and credit card
bills from its suppliers.  One online travel merchant reported that by
month end, its invoices and bills typically create stacks several feet
high.  Another online discount travel site reported that it recently
had to increase its accounting department by eight people to handle
the huge accounts receivables and payables burden that the growth in
Internet bookings has created.” 


Another payment transaction generated by many merchants that will also
benefit from an automated solution occurs when a net rate travel
distributor sells travel products or inventory through agents or
online affiliate sites.  For example, the new online hotel merchant
Travelweb distributes its net rate hotel rooms through the Orbitz
travel Web site.  In this case, the travel distributor must also
compensate its affiliate for securing the reservation.  PegsPay also
automates this time-consuming payment transaction. 

“PegsPay automates each of these labor intensive processes, while
providing additional value to both sides in the form of customer
service assistance, reconciliation support, and valuable management
information,” Bzdawka said.

While PegsPay definitely benefits the distributor`s travel suppliers
and affiliates, the travel distributor pays for the service via a
transaction fee.  The new service allows the travel distributor to pay
each travel supplier via one consolidated payment in the travel
supplier`s choice of currency and in the manner in which the supplier
wishes to get paid (e.g., check or direct deposit).  Additionally, the
travel supplier receives detailed reservation reporting that allows
them to better manage their net rate distribution programs.

The service is being marketed to travel merchants and distributors
worldwide.  “With the abundance of tour operators and packagers in
Europe, we see a huge potential there for PegsPay,” Bzdawka said.  “As
a testament to the great industry need for this type of solution,
we`ve already received numerous inquiries about the service since
announcing our agreement with Travelweb last week.”

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