FareHarbor, seller of an online booking and reservation management platform, has acquired Activity Link Systems (ALS), a seller of reservation software to the activity industry, particularly in Hawaii and Orlando.
ALS is just a three-person shop, but the deal highlights a growth trajectory for FareHarbor. The company, which will have about 110 employees (after adding the 3 from ALS), anticipates about $30 million in total revenue for the 2016 year.
The company is surpassing the 3,500-client mark, up from the 2,000 it touted last spring during an interview with Tnooz.
Despite the fast growth, there may be limits to the pace of scaling upward.
The ALS acquisition illustrates the particular dilemma of scaling up software services aimed at tour-and-activity operators.
Kumar Manuel, CEO of ALS, tells Tnooz:
"Of all the companies, only FareHarbor understands that you cannot fit all activity companies into a widget box for their offerings.... Many operators need special features that, if your current platform does not support, need to be build out.
The others don't get it. I think it is because the Hester brothers actually worked at an activity company themselves.
Most of the Peeks and Rezdys and other companies out there have great ideas, but cannot seem to see beyond what worked for one activity operator should work for all. If you have never had to do the actual job at a tour supplier, it is difficult to really grasp the end-user needs."
Manuel's arguments may be true, but investors looking at the tours-and-activities sector may perceive such high-touch customization as a stumbling block to scaling up a software platform.
"There are no growth-hacking shortcuts," says Valverde. "Tours-and-activities are too complex, not just on bookability but also commissions based on where an order originated. An individual salesperson might have their own custom commission, even. The activity sector resists commodification."
But Lawrence Hester, CEO and co-founder of FareHarbor, says it's a balancing act, not a tradeoff. He says many of the modules that ALS has built for its software will be applicable to other companies worldwide. He adds:
"We don't want to build custom code for each customer> Deals like this one with ALS help us not to have to re-invent the wheel on smart solutions to tech problems others have already solved."
Benefits of the deal
ALS was founded in Wailuku, Hawaii, in 2000, though Manuel had been creating reservation software for local companies many years before that.
ALS's most distinctive software is AL-Pro Helicopter Edition. Industry insiders say there is no other viable alternative system for the tour rotorcraft businesses, especially in Hawaii. ALS also provides point-of-sale systems that support real-time reservation integration with a provider or vendor's existing website.
ALS brings into FareHarbor's orbit some large clients, such as Papillion Airways, Pleasant Holidays, and Blue Hawaiian Helicopters.
The 110 new clients "will not face a forced migration, whatsoever, to FareHarbor's tools", says Max Valverde, CCO.
A payday for a quiet entrepreneur
Manuel is said by a couple of industry veterans to be one of those rare entrepreneurs who focuses on solving the technical and sales challenges rather than by relying on flashy marketing.
He came to Hawaii having graduated school with a degree in business accounting and a minor in computer science. Around 1985, he fell into the work of developing DOS-based software solutions for tour and activity operators.
Along with two partners, whom he subsequently bought out, Manuel started ALS in 2001. The primary focus was, in the long run, to provide the linking between the various agencies and concierge desks and the vendors. The (by now old-school) platform was Object Pascal, with a middleware using TCP/IP to provide all connectivity.
"The applications sold like shave-ice on a hot beach," says Manuel. He concedes that he had some failings at properly pricing his applications and services, but notes that ALS grew in sales and net income every year.
For years FareHarbor was stumped as to why it couldn't make inroads into ALS's client base,
except for wooing away a single customer, says Manuel.
In 2014, Manuel first met with Lawrence and Zach Hester. The scope of the meeting was looking at ALS providing real-time bookings from ALS's agency clients into FH’s vendors.
But less than a year later Manuel began negotiations to sell. In light of his recent marriage and 50th birthday, he thought it may be time to offload some of the technical challenges of website integrations to a younger and more ambitious crowd, he says.
FareHarbor claims that its client portfolio will cover about 10% of the tours and activities market in 2017. To manage its growth, the company has recently hired a VP of operations who came over from Airbnb and a VP of engineering, who is focused on scaling the team.
See Tnooz's earlier profile of the company: FareHarbor claims a fast rise as a reservations tool for tours and activities