Autobytel founder finds himself in hot water - and he loves it

Peter Ellis is in hot water.

It's the kind of hot water many of us would like to be in after a long, stressful day at the office - the soothing water of a whirlpool bath at a glitzy spa. And no one should have an easier time finding a spa than Ellis.

Ellis is applying the lessons he learned when he ran Autobytel Inc. (autobytel.com) to his newest venture, Spa Finder Inc., which offers travel packages to spas worldwide. It's no coincidence that a key part of the service relies on the Internet.

With a couple of clicks of a computer mouse, a user can find a spa, view pictures, get pricing and, in some cases, make a reservation on spafinder.com.

Sound familiar?

Autobytel, which Ellis founded 10 years ago this month, lets users research vehicles, compare prices and contact dealers.

It's a business model that made Ellis, 58, wealthy. The former Southern California car dealer owned more than 3.5 million shares of Autobytel of Irvine, Calif., when he took it public in March 1999. Autobytel stock closed at more than $40 a share on its first day of trading after opening at $23. Ellis told the Orange County Business Journal that he made about $19 million from the deal.

Ellis bought Spa Finder for an undisclosed amount in 2001, two years after he left Autobytel to form his own investment firm. Spa Finder is private and does not release revenue figures.

Early days

A lot has changed since Ellis founded Autobytel.

"The Internet was like Satan to car dealers," Ellis recalls.

Many dealers viewed car buying through a Web service as a threat to their franchises.

But for Ellis, the Internet was the gospel, and he preached it to all who would listen.

"The consumer is now out of the box," Ellis said at the 1998 Automotive News World Congress in Detroit. "They're not confined to having to go to a dealer who can manipulate them into a car that they don't want."

According to a 2004 study by J.D. Power and Associates (jdpower.com), about 60 percent of automotive Internet users begin new-vehicle shopping at an independent site such as Autobytel.

"Autobytel made a huge impact and changed forever how dealers would interface with customers and gave the factories another way to look at how to work with customers," Ellis says.

Much of Autobytel's success was because of the software the company built, he says. As the concept of using the Web to buy cars caught on with dealers and consumers, about 1,500 dealers signed up, Ellis says.

Similarities

The Internet is as big a plus for Spa Finder. Ellis says his company developed software not only for online booking and pricing but also to tie in with travel portals, such as Expedia (expedia.com).

About 60 spas worldwide have signed up to offer reservations though spafinder.com, Ellis says. He expects that to grow to about 300 spas by the end of 2006.

The business includes the Internet site, Spa Finder magazine and Spa Enthusiast newsletter.

Ellis says he was attracted to Spa Finder because he met his wife, Susie, at a spa in 1983. He calls his wife the "soul of the spa business like I was the soul of the auto business."

Today, Ellis is based in New York City. His car businesses were in Southern California and Arizona.

While he talks at length about Autobytel, Ellis says he doesn't miss the auto industry. His sums up his desire to return in one word: "Zero."

As an auto dealer, Ellis says he was "at the mercy of the factories" and often was forced to take slow-selling vehicles when he requested a larger allotment of the hot cars.

"They made me take 50 Eagles for the 100 Wranglers I wanted," he says. "I only got 25 to 40 Wranglers before Chrysler sent a memo saying I couldn't have more for four to five months because they ran out of trim."

It's those kinds of experiences that keep Ellis in the comfort of the rushing hot waters.