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Tourist “smart card” firm nabs $4.5M in VC

May 5, 2005 -- Smart Destinations Inc. a Boston-based provider of “smart cards” for tourists, has raised $4.5 million in venture capital to expand into seven major metropolitan areas this year.

The company’s proprietary technology resembles a credit card and functions much like an all-access pass to an amusement park, the difference being that Smart Destinations’ customers have an entire city’s worth of attractions to choose from. Company officials said the cards sell for under $50 and deliver free access to between 20 and 60 premium services and destinations — museums, aquariums, boat tours — depending on the city.

The firm has been selling its “Go Boston Card” since 2003, and launched its “Go San Francisco Card” last year. Now, with a fresh round of venture capital in its wallet, the company has announced plans to segue into Chicago; Orlando, FL; San Diego; and Seattle. The Orlando card also offers access to destinations in Miami.

The company said three unnamed metropolitan expansions are on this summer’s docket.

Noting that New York is conspicuously absent from its list of participating cities, Chief Executive Officer Kevin McLaughlin said the company wanted to refine its operations before taking on the “800 pound gorilla” that is Manhattan. “We wanted to learn this business first,” he said.

McLaughlin would not comment on whether Smart Destinations is profitable (“we’re doing pretty good”), though he noted the company minimizes its overhead by leveraging connections to a global network of tourism offices and travel agencies. He plans to support the ongoing expansion by adding another 30 people to the company’s existing 25-person work force.

Smart Destinations has partnered with roughly 1,000 distributors to date, including hotels and airline carriers, who have delivered more than 100,000 Go Card tourists to major destinations since 2003. The company counts travel concerns Virgin Holidays, American Airlines Vacations, Expedia Inc., Travelocity.com and Orbitz among its largest channel partners.

Brett Rome, a general partner at North Hill Ventures in Boston, said Smart Destinations’ exponential growth and disciplined cost structure were convincing factors during the recent funding round. The firm led the cash infusion with a $2.6 million investment. New Jersey-based Zon Capital Partners also chipped in $1.9 million.

“Each city’s attractions have a way of driving volume and marketing themselves,” said Rome, who oversees two investment funds totaling $80 million. North Hill Ventures is the early-stage investment arm of Capital One Bank.

“There really just aren’t lots of companies looking to do this now,” Rome continued. “In the markets they’re going in to, there just aren’t any similar products.”

Rivals differ

To date, the company’s biggest competitor appears to be CityPass, a 7-year-old company based on the West Coast. The firm offers coupon books to a handful of theme parks and major attractions in nine major U.S. and Canadian markets, charging as little as $19.50 for children’s book in Boston and as much as $185 for an adult book in “Southern California”. In Boston, those passes are valid for an entire year.

Smart Destinations’ cards are only good for up to seven days, but they come with a detailed city guidebook and offer additional discounts at local restaurants and shops.

“It (Go Pass) is broader than the CityPass. In Boston, it’s good for more than 50 attractions,” said Pat Moscaritolo, CEO of the Greater Boston Convention and Visitors Bureau, who works with both companies in his role as a Boston tourism promoter. “It’s all inclusive. With this one card ... it really does make it easier for the visitor.”

Smart Destinations also argues that its credit card-like format delivers unparalleled convenience to city tourists and even provides a much-needed boost to the local economy. McLaughlin said Go Card customers average around $163 in additional purchases during their travels.

He also trumpeted the cards’ “priority” access at some sites, a feature similar to the “Fast Lane” transponders used on the Massachusetts Turnpike Authority. “A lot of the time you get to cut the line. If you’re at the Museum of Science on a Saturday morning, you’ll be happy you bought this card,” he said.

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