Travel Startup Founders from Outside the Industry

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As an investor in travel companies — from private beta travel startups to larger VC & travel growth equity deals — I am fortunate to talk to travel companies of all sizes from all corners of the world.

One common theme are travel startup co-founders who do not come from the travel industry who reach an invisible ceiling when dealing with travel suppliers, reservation systems and members of the trade.

Foremost, If you find yourself in this situation, don’t feel bad. You’re not alone. That’s just the way it is. It won’t change anytime soon.  Heck, I wouldn’t have a job if it was that easy! Took me 12 years in travel (on the agency and travel technology side) to get a feeling for how things truly work and even now I learn new things by virtue of the seasoned executives I work with.

Secondly, there is nothing wrong with this situation. It’s what you do about it that I have an issue with.

How to Fix The Problem

  • Going It Alone: The Worst Thing To Do. There are outliers who do it alone but they are so few and far between that they’re not worth mentioning. The majority (in my experience circa 95% of) shouldn’t. The ones I’ve seen — and I can’t name them or I would — are because they are so different that traditional travel suppliers are willing to give it a shot  and these companies almost always have a very strong ‘IN’. While the founders may not be from the industry, they engaged somebody with some industry gray hair on their behalf. Rarely is it a ‘cold call’ into a supplier. Somebody new to the travel game going at it alone doesn’t have a chance past some fluke wins and never enough to have a sustainable business model. Ask for help, it’s natural
  • Get Good Advisors from the Travel Industry. Former travel executives, former travel company operators, somebody who has already done what you’re trying to do; who can advise you with your strategy and business development.  Somebody hands on through till the deal is completed. Not just an introduction and you’re on your own.  I’m biased but ask any travel startup whether I’m right. It would be one thing if “Going At It Alone” was only 2 or 3 times harder but my experience show it’s considerably longer. 7 to 10 times harder. That’s a lot of time and money to spend hitting your head against the wall — assuming you have the time and money to spare — which no travel startup ever does. All the while other travel startups are popping up every week.
  • Mashup with other travel startups/Web 2.0 Company API’s. Don’t have your own reservation system to pull flights from, what about using the Kayak API. What about a travel affiliate program in lieu of your own relationships. You won’t make alot of $ but you’ll have something to show your clients. Unfortunately this strategy won’t work because you’re selling what’s already out there. If you’re selling the same fares as everybody else, do you expect alot of transactions? You’re just keeping up appearances to avoid gaping holes on your site.  You’ll almost always need deep integration deployments which most affiliates programs don’t offer. It’s a viable interim solution. Travel startups use API mashups because they’re  (a) not concentrating on revenue or (b) as a stop gap measure until professional industrial grade travel technology (booking engines, GDS links, etc..) are available. You’ll need a proper travel technology platform if you intend on building a sustainable business.
  • Use Free or Open Source Data. You can get valuable content from Wikipedia.org to WikiTravel to a variety of places for free or for a low cost. Many travel startups already do if you take a deeper look. They have a core set of unique features complemented by 3rd party API’s (Google, Kayak, IAN, etc..). Panaramio is a good example. There are some good services out there I would use as an interim solution.
  • Do a Round to Hire A Travel Executive. This is a tough proposition. Most investors ‘don’t get’ travel investments. Be prepared for a lot of hand holding, a lot of ‘educating’, a reduced valuation and little in terms of productive post-investment relationships. While an investor “who knows somebody at Expedia” is better than nothing, knowing the contact is 1 thing — actually talking the talk in a way a travel supplier will understand is something only a travel industry executive can do best. Is that investor going to be with you every step of the way for the next 4-6 months it takes to close a deal? It can be done  — don’t get me wrong — but when you’re at a travel startup you don’t have the time to ‘experiment’ and no investor is going to put up with ‘trial by error’ on their dime.  Many a founder has realized money isn’t enough. You need domain expertise. At an angel investment level I think “non-travel” investors should be avoided unless they’re fine with putting in the money and hiring “travel experts” to formally guide the company. Being a “travel investor”, I am biased, but ask any travel startup founder and I suspect they’ll agree with me. If you have to get angel money, augment that with some travel executives and ensure everybody knows their place. The angel investors are the funds and the executives bring the travel industry knowledge.
  • Know What You’re Good At and What You Not. Or find somebody you trust to guide you. I had a meeting a few weeks ago with somebody in the tourism business who wanted to advise our experts on SEO and Online Marketing Initiatives yet prior to the meeting simply outsourced his website to somebody else and wasn’t using the Internet to sell his inventory now. It was purely a content site. My response was, what competency do you have with SEO/Online Marketing? This wasn’t a “I like to listen in so I can learn” call — which I encourage — this was a “I have some serious notions in mind” call yet I’ve never done this before all while I want to work with a team that’s done this for the past 5+ years with people who’ve done online travel marketing for the past 10 years. I gave him the benefit of the doubt and heard a few suggestions only to end the engagement 3 hours later. Its critically important to set the boundaries (ie: the vision is spearheaded by the founders, the travel related decisions are joint but favor the travel executive..) between what the (non travel) founders know and do and what the travel executives will do.
  • One Supplier Is Never Enough. Just because you have 1 vendors inventory — say a hotel vendor — doesn’t
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    mean you have all the inventory to sell. Said another way, getting Hotels.com or CCRA isn’t the end all of all. They are both fine companies but the more inventory you can get, the better. They may be enough for certain use cases but without knowing the strengths/weaknesses of all the discount discount hotel inventory, how do you know you’re okay? Particularly if you have a broad client base. If you have a niche — say Las Vegas Hotels — and you do a deal with the largest Las Vegas Discount Hotel Provider — you’re golden. Most travel startups don’t follow such a narrow niche.

  • Inventory is critical to any travel startup. You don’t need 1 set of inventory, you need them ALL. Do you even know how many pools of discount inventory are out there — multiply that for every travel product you sell. Let alone getting ‘approved’ at the highest purchasing levels to actually compete with established players. The introductory “you’re a small agency” commissions and price breaks isn’t going to cut it. You need the volume purchasing discounts and its unlikely you’ll get that without millions of dollars of existing volume and a track record even if you negotiate well and are funded. Once you get your account setup — assuming it happens at all and it always takes more time than you could ever imagine — you still have to get the inventory from their system into yours. A Javascript embed isn’t going to cut it. Do you have a team of developers that have nothing else to do? And you need to repeat this for every vendor you plan on adding. If there are 12 pools of discount hotel inventory, that’s 12 integrations, 12 relationships, months for each relationship and that’s assuming you actually get approved. Oh by the way, all of the API’s change all the time so you’ll need to keep up. Did I mention there are discrepancies between what a reservation system says it does and what it can actually do via the API. There are times — shockingly — where the marketing team suggests features the technical team hasn’t implemented yet. As a new client — will you be in on the beta group to figure this out early? I can list dozens of situations any one of whom would bog a travel startup down.
  • Travel Developers, Not Just Any Software Developer. Depending on the use case, you may have no choice but in hiring software developers versed in travel technology. Simply hiring very good programmers isn’t enough. There is a steep learning curve when it comes to travel supplier integrations and the nuances of travel trade that cannot be taught on the fly. Who’s going to teach them at a travel startup without travel founders? I’ve seen this happen time and again. The project does get done but multiples longer and costlier than intended. Which to a founder translates to stress and investors screaming at you for missing deadlines. There’s enough that can go wrong with any software development package — which are sometimes rushed, poorly planned and underfunded — coupled with offshore development headaches that by the time you throw in the travel trade learning curve, the founder is really dealing with a low to single digit success rate for an on time deployment.

You can see why travel startups have a low hit rate when it comes to penetrating the industry. They’re fishes out of water. Rest assured there is help out there.

Give Me Your Feedback

Do you work at a travel startup? What are your experiences? Have some ‘horror stories’ to share? If you find this post valuable, please comment and Retweet!

What the Google Travel Platform Could Look Like

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I see Google coming out with its own travel platform based on my  ‘connecting the dots’ between Google’s existing product line and previous travel acquisitions. It certainly has all the pieces to.

The exponential growth in possibilities given this list allows for multiple revenue opportunities makes it a compelling reason why Google would and at the very least could come out with it’s own travel platform.

I see the ITA Platform being the parent travel architecture — the Mother Ship — which it’ll use to plug existing and future travel products/services into. Throw a few acquisitions in there to balance out the platform offering.

  • Airfare Pricing — The billions of combinations of fares, schedules and availability available through the ITA QPX product.
  • Mobile Booking Engine or Mobile Travel Platform through the OnTheFly product ITA currently has.
  • Travel Content — through Ruba (there are better content companies to buy but that’s for another blog post!). Coupled with YouTube travel videos.
  • Visual Travel — add ITA Software to Google Earth and the notion of visual travel that many travel startups are attempting. Where a traveler can “see” their destination in 3D as part of researching a trip. How nice would that be – if their Visual Travel Offering is really good, maybe I won’t need to go on vacation at all. Just zooming in and “walking around” will be good enough.
  • Visual Travel Lite — add ITA Software to Google Maps for what I’ll describe as visual travel lite. Ability to pick multiple points on a Google Map and automatically get pricing. Where it’s a 2D experience akin to what Kayak Explore does (which I love by the way – we need that but with the right inventory so I don’t have to search another site but Kayak!).
  • Google Checkout Travel Merchant Services — Google Checkout, with changes in feature and policy, could easily offer a Travel Merchant Account Product. Anybody that sells travel knows how much of a problem taking credit cards is.
  • Google Social Travel play through the integration of ITA Software/Engine and the launch of (potential) Googles Kayak Killer coupled with its upcoming Facebook Killer. I agree that’s a lot of ‘theory’ but the stage is being set – whether they do it or not is a different story. A true social travel play could be in the making and I’ve had the pleasure of speaking with a number of social travel startups doing some very exciting things in this space. Google if you want to acquire any of them, please be in touch.
  • Predictive Travel. Take Google Insights for Search (for travel keywords for example) coupled with the QPX pricing engine coupled with the “predictive” algorithms in Google Trends and you could have a pretty interesting “travel suggestion engine” play going. End goal? For Google to tell me where I should go on vacation without having to think about it. 1 less thing I need to do.
  • The Door to Door Travel Company Play – take a number of “lesser” services like Google City Tours, Google Transit and add it to the ITA Software (and others on the page) along the lines of what Zoombu and other “door to door journey” sites want to do. Particularly as a differentiator within the (potential) Google Kayak Killer.
  • Location Based Travel — the opportunities within location based travel is just getting started. Google Places + Google Latitude + others on this list will make for a compelling advertising platform for Google. Check in to a place and you’ll get a coupon. Search for directions, GPS identifies your location, Google Places for local businesses with Google AdSense serving up advertisements/coupons.
  • YouTube Travel Videos and User Generated Travel Content.
  • Customer Service — Post purchase assistance with ticket changes and refunds and by addressing other “post purchase’ pain points based on the ITA Software ReShop product. Then integrating these services via an API.

Only the powers that be within Google truly know — I’m just thinking out loud here.

Agree? Disagree?

Please RETWEET!

Gaps in inventory at Travel Aggregators (Travel Metasearch Engines)

This blog post should be read from the perspective of helping travelers make smarter decisions while addressing the gaps I see in existing travel aggregation sites like Kayak & Mobissimo.

This post is not intended to be a hit piece. I strongly advocate you using travel aggregators but I just want you to know what you’re getting.

As always, companies improve, features get added and inventory gaps are filled and that’s in the best interest of the traveler and aggregator.

NO FRILLS INVENTORY GAP

An effective travel aggregator needs to search all airlines & travel agencies for a particular destination to yield the greatest benefit for the traveler. Sounds simple enough but the % of total inventory really drops if you’re searching flights originating outside of the United States and until recently for domestic routes. And the % drops further when you exclude the full breadth of consolidator fares that I’ll get to this later in this post.

If I’m doing an air search from Los Angeles to Boston then I am best served and the travel aggregator is most effective when I get 100% of the airlines that cover that route.  Emphasis on the word best. There is value in the current results but I’m looking beyond that. I want the best results not just pretty good results. For example, Southwest Airlines hasn’t been integrated into Kayak (as of the time I’m writing this blog post) so anybody searching Los Angeles Boston as of this very moment is by definition not being offered every option in the search results.

100% of the inventory for a route is a requirement for the traveler to get the best deal in the shortest amount of time. Which is the ultimate point of a travel aggregator. Capturing all the inventory for a given route is a monumental task so in the meantime consumers need to factor this inventory gap when searching fares.

What I don’t want to see is improvements on a lot of other things and this issue gets sidelined and misclassified as a a ‘nice to have’ when it’s absolutely a ‘need to have’. I’m realistic in suggesting travel aggregators start integrating no frills carriers for high volume  routes since they can pull a report with popular city pairs and cross reference the list to routes flown by low cost carriers.

In fairness, I do like that Southwest Airlines is listed in the left hand side when I searched Los Angeles Boston so I am tipped off but other city pair searches are not as generous.

It could be a lack of integration, a lack of intention on the part of the airline and/or aggregator, maybe they didn’t get around to it. Maybe an airline was in the search results and was taken off for business reasons. I don’t claim to know why but that’s not the point.

I do know the results – at this point in time for this particular route – are not comprehensive and consumers need to know this. Savvy travelers know these inventory gaps exist but not everybody. ‘Everybody’ is exactly who travel aggregators are increasingly marketing themselves to.

In the previous example the traveler could directly search the Southwest website but this assumes they they know Southwest services that route. That’s a big if. Los Angeles Boston somebody may know but who knows the routes for lesser known city pairs. The whole point is to go to one place and search everything and move on with life.

I don’t mean to pick on Kayak, this scenario could just as well apply to another aggregator. A comprehensive search is the ultimate goal for any travel aggregator because that’s what is best for the traveler.

And what about large, reputable low-cost carriers in Europe or Asia? If the low cost airline everybody and their brother in Hong Kong or Dubai knows about is not in the searched site list then (a) I am possibly not getting the best deal and (b) the aggregator risks brand dilution when I come to find out Airline XYZ was left out.

Conversely if the travel aggregator knows they have 100% of the airlines between LAX and BOS in the search results then please tell me. Consumers would love that and it’s a great competitive edge.

CONSOLIDATOR AIRFARE INVENTORY GAP

If the idea is to offer consumers the lowest airfare (for example) to a destination then more consolidator fares have to be to added to the results. Consolidator fares – bulk fares you can purchase that come with a lot of restrictions for a lower price than the airline direct rate – are included in the search results to some degree with Cheaptickets.com and Orbitz but I would like to see more tier 2 online travel agencies added to the mix.

Are you telling me there isn’t a $25M hybrid travel agency/consolidator specializing in consolidator fares to India that can’t be added to the mix every time I search Los Angeles Delhi? Of course there is. Why? Solely to drive down the cost for the end traveler.

I realize integrating consolidator fares is more complicated than airline direct rates but these are obstacles aggregators can overcome. I realize airlines are not going to be jumping up and down as they watch their wholesale channel competing side by side with their retail channel but something has to be worked out. I’m aware that some aggregators are offering private inventory (which just as well could be consolidator fares) so steps are being taken.

My point is, allow a few big tier 2 sites into the results or integrate them for select international destinations and leave them out where they don’t have a strong footprint like domestic fares within the USA. Consolidator fares do save consumers money and this product type needs to be included.

NOW WHAT?

As a traveler, you need to understand these inventory gaps and explore alternatives in the meantime.

Peace of mind. That’s a key pain point everybody booking a ticket faces. Am I getting the best deal. How do I eliminate or reduce that little voice questioning what else is out there? I would book this if I was just more confident that I’m searching everything that applies to my trip.

  • Search consolidator fare sites or ask your travel agency if they have them.
  • Search no frills airlines like FlyDubai and AirAsia.
  • Pay attention to airlines that are added to the mix with your favorite travel aggregator.
  • Use Google, Twitter or Facebook to request what no frills airlines service a city .
  • I would advocate searching more than one travel aggregator.

By all means use travel aggregators. They save you time and money. I use them. Just realize travel aggregators act as one tool and not the only tool in your travel toolbox.

All the best and happy travels.

Sounds simple enough but isn’t always the case. And the % really drops if you’re searching outside of the United States.