NB: This is a guest article by Matt Zito, an online travel business consultant.
Is it me or are you noticing more travel startups that are really just technology businesses or media companies operating under the disguise as a leisure travel business?
These new startups are companies termed as social travel, meta-travel, affiliate-travel ventures.
Under the hood, I am not finding any real traditional travel products or services that I can purchase as a consumer. Yes, they might help me plan my trip, connect me with my friends, show me reviews of what other people think but they don’t sell me a travel product.
There’s a lot of me-too in there.
These so-called travel companies are neither travel operators nor resellers of travel. So I wonder:
- Does this hurt the travel industry or help the industry?
- Why do so few want to take the transaction and, instead, perfer to just push me to a third party for the booking?
- Has building a company that truly services the traveler through the entire travel experience become to difficult or is technology driven companies and data driven companies where’s it at right now?
I believe part of the reason for this shift is because technology has made it easier to create companies. It’s just easier today to move data, users profiles and the like from one computer to the other.
It’s much more difficult, so it seems, to have relationships with travel operators and to service customers in the traditional customer service sense – phone, email and postal mail, etc.
Where is the authenticity being created with today’s new startups and, for that matter, some of the more mature travel brands like an American Express Travel that just announced it is letting go of 5,400 people?
Airbnb, HotelTonight and Mauiva AirCruise are three companies I admire that have created what I believe to be authentic travel businesses.
All three companies leverage technology but what they do different is that they service the traveler and are forging close relationships with their travel operators, suppliers and B2B customers.
We have hard a lot about Airbnb and Hotel Tonight, so I thought I would share with you a look at a real innovator, risk-taker and truly authentic travel company Mauiva AirCruise.
Mauiva AirCruise was founded by Uri Argov, the CEO of Tourico Holidays. Tourico Holidays is one of the largest B2B hotel room wholesalers in the world.
The vision was simple: “…to create a better way to travel and see the world.”
The plan complex but Mauiva AirCruise in effect delivers the travel a service to the traveler through the entire consumer travel funnel. Mauiva AirCruise basically owns or controls the entire travel experience.
Travelers can book directly on their website, a tour guide accompanies you on the trip. Mauiva AirCruise has private chartered planes that pick you up, a private tour bus waits to pick you up and take you to the hotel after you land and you lodge in hotels that have been directly contracted with by the company. Mauiva AirCruise is servicing its client’s travel before, during and after the trip.
Status quo issues
CEO’s of mature travel companies, founders and entrepreneurs with dreams of entering the travel business should be thinking about how to build more travel companies like Mauiva, Hotel Tonight and Airbnb.
My entrepreneurial instinct says that companies that focus on owning the customers travel experience will be around much longer than most of the new travel technology-driven companies we see being started today.
In short: leverage your assets, innovate and service your customers
AMEX’s cuts are due to competition from the Internet and their customers moving to online portals to book their travel.
Its clients are some of the most prized clientele in the entire travel industry, high net worth individuals, SMBs and corporations are booking their travel cheaper somewhere else.
CEO Chenault says:
“The company must embrace new technologies, become more efficient and position itself to invest in growth opportunities in a marketplace that’s increasingly becoming defined by consumers’ use of the Internet and mobile technology.”
Now, AMEX has a $68 billion market cap. They have millions of business travelers. Are they just going to sit there and watch them book somewhere else or can they innovate and become more like the newbies?
I am sure AMEX has direct contracts with hotels but if they do not then this could be a start: how about take $1 billion in cash and debt and buy one business hotel in the top 25 cities in the USA, hire a major brand to manage the property.
Don’t stop there
Why not after they make 25 hotel acquisitions they also buy Uber or one of the new hot private share ride services to whisk their executive business class clients from the airport to your hotel in private limos.
AMEX travel agents, the best travel professionals in the world, now focus on driving clients to AMEX-branded hotels. When the executive checks in to the hotel he or she will of course use their credit card to earn AMEX hotel points.
Now you they a bigger part of the business traveler funnel and use technology and a powerful brand to execute the entire process.
If you’re a start up entrepreneur or a CEO of a mature travel company it’s time to start thinking out of the box and, sadly, not like everyone else.
Let’s start building more authentic travel companies focusing on servicing the traveler, creating real value and have travel technology be the enabler not the travel product.
Over the long-term companies like the trio listed above are the real innovators and will help move the travel industry forward by facilitating and creating truly wonderful travel experiences for travelers.
NB: This is a guest article by Matt Zito, an online travel business consultant. The Travel Business Academy helps entrepreneurs start and grow travel businesses.
Related posts:
About Special Nodes
Tough article, but good tips.. Thanks
CK
Authenticity in an industry is not something the free markets value. As long as merchants thrive and consumers benefit, what else matters?
Camilo
CEO
PayByGroup.com
Hi, Camilo
Thanks for your post. I beg to differ that the markets do not value authenticity, quite to the contrary. In my view authenticity is an outcome of a original or unique product idea.
When building and developing a travel startup the founder or entrepreneur should seek to create authenticity in its business model.
I wrote an article here at Tnooz in April, “Facebook IPO signals disruption ahead for online travel distribution.” The founder Mark Zuckerberg says, “We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services. As people share more, they have access to more opinions from the people they trust about the products and services they use.
This makes it easier to discover the best products and improve the quality and efficiency of their lives. One result of making it easier to find better products is that businesses will be rewarded for building better products — ones that are personalized and designed around people.
We have found that products that are “social by design” tend to be more engaging than their traditional counterparts, and we look forward to seeing more of the world’s products move in this direction. In addition to building better products, a more open world will also encourage businesses to engage with their customers directly and authentically.”
Read more at http://www.tnooz.com/2012/04/26/news/facebook-ipo-signals-disruption-ahead-for-online-travel-distribution/
Thanks,
Matt Zito
207-460-0740
mdz@mattzito.com
Hey Matt,
Nice post. I completely agree with you. We started Queertrip.com, an online LGBT travel agency specializing in gay and lesbian travel. We focus on providing a service to the LGBT traveler. We specialize in cruises, honeymoons, vacation packages, tours, pride travel and more. Products that often require more assistance than an app or technology can provide.
Hi, Jeremy, thanks for the post. I will take a look at your website, not familiar with Queertrip.com.
From a more practical point of view, it is hard for a startup to create something different and then manage to get some funding or support while they grow. Unless the investor is an immersed industry insider, they have hard time seeing value and understanding the business model – it’s much easier to do something similar to existing (with a smaller twist) and then justify funding by saying “Hey, X is funded/profitable!”
Can’t agree with you more, however. Despite the sad reality I described above, we’ll keep looking.
Hi, Alex
You pose an interesting question regarding funding for travel start-ups. “Is it harder to create something different then manage to get funding or support?” I don’t know the answer to this question but my instinct says that you are correct.
As a veteran travel entrepreneur I’d rather create something different and authentic and slog through the fundraising and support process vs. creating something that is a clone or somewhat similar to another company and then using that as an example of what your business idea can be.
It’s just easier like you say to clone or create something similar and in my view this is what I am seeing lately from travel start ups and is the basis for this post.
Thanks for your post.
Matt Zito
Hotel Tonight sure looks like a great company. However looks can be deceiving, will they ever make a real profit given their business model? They are merely a gambit to be acquired by someone bigger for profit. Between pumping up their app downloads with fiksu.com and a great press attack they give the appearance of being a big player, but I know exactly how much money one can make from that narrow market and they don’t have enough volume. This is a common problem with any travel startup – the real payoff is in volume and a startup has difficulty grabbing enough volume to build an actually profitable business. airbnb.com is a different beast as they really have little competition, whereas a hotel or flight startup has to compete with enormous players.
NB: Edited before approval.
Hi, mobileguy
I think looks are deceiving for most things when you are on the outside looking in. Unless your actually running Hotel Tonight or AirBnb you really don’t know. I think AirBnB is more unique than Hotel Tonight only from the perspective that have be able to create an entire new room inventory category in personal room rentals. I own a vacation home rental in Maine near Bar Harbor and use AirBnB to fill some of my last minute inventory.
I like Hotel Tonight and believe they will succeed due to their strict focus on selling room inventory via mobile. You say above “this is a narrow market with low volume.” I am not necessarily sure about that but I’d rather build a travel company in a narrow market with low volume and own that market, a market leader vs. being just another clone or secondary bit player. Over the long-term the market leaders will earn higher commissions, build stronger relationships and command higher valuations when they go to sell the company.
Travel entrepreneurs get caught up in this high volume thinking and they put aside the idea of building something unique, one-of-a-kind, and authentic. Look at AirBnB as an example. When these two guys started there was no volume, they were just trying to figure out a way to pay their rent.
Thanks,
Matt
Interesting article. As a travel technology supplier for American Express I am of course bound by non-disclosure, but Amex certainly have deep and direct commercial links with hotel providers, and as you say its clear that their customers are requiring more high quality, online access to product and fulfilment, both for business, MR and general leisure travel. Why do so many companies want to attract customers and then pass on the bookings to a 3rd party? Because completing and servicing the travel transaction is technically and organizationally much more complex than simply marketing and attracting customers to a web site. There is also the small matter of bonding (ABTA and/or ATOL). I think the marketeers with their web sites and referrals will come and go, whilst those that truly add value to the supply chain will persist. American express is definitely in the latter category.
Rob Wortham
CIO, RWA Ltd
Hi, Rob
I agree that American Express is in the latter category. Why are they risking having their prized business clients go and book online somewhere else? Ultimately they will loose their clients over the long-term.
Why compete on technology alone?
Transition the travel division business model to a more vertical one and fully service their business client through the entire travel booking funnel. This would crush and destroy any of the competing online marketers.
American Express has so much brand clout and cash that I believe they could do it.
“Don’t leave home without it”….to….”Don’t travel without us.”
Thanks,
Matt
Matt,
I’d just like to say you are dead on with your point regarding authenticity and your strategies are extremely valuable. You root for the little guy and I sense a certain genuineness in your writing which I appreciate.
Pete
Hi, Pete, thanks for the nice words.
Matt,
I enjoyed the article and it definitely has me thinking. AS someone that is trying to start a travel based business with now experience in the industry there seems to be a high barrier to entry both in knowledge and infrastructure, for lack of a better word. Because of that it seems to me it is much more difficult to do something truly innovative.
I do agree with your premise though, there seems to be a large number of sites out there that offer the window dressing but don’t give you the meal too.
Hi, Chris
For the past 13 months I have been attacking the education/knowledge aspect of helping entrepreneurs learn more about the travel business and travel industry through the Travel Business Academy an online professional course that teaches you how to start a travel business. The technology and infrastructure side is the next phase for us at the Travel Business Academy to help educate entrepreneurs with limited experience in the travel industry.
Innovation is difficult. If it was easy everyone would be doing it. Technology has advanced so much in the travel industry over the last 5 years that it is becoming easier and easier to distribute travel. Most of the new start ups are building in the distribution funnel or marketing funnel. As I mentioned above in the article to me there seems to be less selling of the actual travel product (taking the transaction).
Thanks for your post.
Great article Matt.
Mauiva has done a great job of putting together a unique and authentic travel experience that middle-upper class can afford and appreciate. I hope their model continues to be succesfull and they add more tours.
I’m always a fan of inventive apps but the only ones that I use (non brand speciific) are Hoteltonight, Tripit, and Tripadvisor and Travelzoo for deals. Many smaller apps either don’t provide a one step to book or don’t offer deep, reliable, content based on real world travel.
Amex has the cash and the relationships to redefine online travel in the upscale segment. Many of those travelers demanding great service and high quality don’t trust booking on normal OTAs unless the property is branded. Amex’s unique position with deep relationships with private hotels and resorts is the point of leverage. Unless you’re booking on buisness however the Amex pricing is almost never the best pricing and that is a turnoff to leisure travelers. The wealthy don’t get wealthy by wasting money, they are some of the worlds savviest travelers and many times have the flexibility to get the best deals.
It’s to noisy in the market with people launching little spinoffs, let’s see some major players step up and innovate while keeping hotel and consumer needs in mind.
I read article and agree with some of the statements made in the article. I concur with the basic theme. There is a basic story that the heavy lifting of the processes of travel need to be included in the deisgn of a travel startup not just an after thought. E.G. its not all just about the User Experience. (I am sure we can name several companies who have built their model on just that component and achieved crazy valuations accordingly).
Sadly, I am appalled that you would laud AirBnB as an authentic travel company. It breaks basic tenants of law (and not just one) inside its business model to achieve success at the expense (amongst others) of its consumers and competitors. I am all for innovation and creativity with regard to the market but not at the expense of competing in an unfair manner.
We have a surfeit of Aggregators and even Aggregators of Aggregators. Managing the entire customer experience is very hard. I speak from bitter experience on this subject. Technology led solutions frequently fail the customer at the final mile of the experience. But there is a certain inevitability that this is going to happen anyway. Even those with money to spend are cutting back. You mention American Express. I note recently Amadeus’s decision to start to charge for some customer service calls. (And look at the Madrid based company’s yields).
I would like to add something to your point about taking the $1 billion and laying out cash to buy properties in the major metros. Buying a property in the major metros would take many billions of dollars.
There are very few inventory risk takers in travel. By risk taker I mean taking it and holding onto it – not returning it 3 weeks before departure dates. Something that always has had me scratching the back of my head. But if you had looked at history – you would note that Amex did try once to take inventory risk in something more volatile and easier to manage. Namely flight seats. In a complicated deal stemming in the 1980s, Amex, CO and VS all came together to support an extra flight LGW-EWR. For 6 months Amex guaranteed a block of seats, CO committed to taking more than 50% of the seats and VS operated the flight. For Amex it was a large failure. They ended up having to pay for the unused seats. Why? Because while Amex has scale it doesnt have control over the products it sells. It has a hard time directing sales.
Surely a better example would have been Carlson through its share in CWT and in its lodging brands. IE promoting the same and committing to take large blocks of rooms at its properties CWT business folks would get better rates. Indeed while Carlson doesnt actually own many of its properties – it could drive great rates for its business travellers. However from appearances the traditional travel industry is not innovative enough to think that one through.
Cheers
Timothy
Timothy,
Thanks for taking the time out of your day to engage and you bring a fresh perspective on my article about travel start ups and the lack of authenticity I see in the marketplace.
Appalled is a strong word. I can’t comment on whether AirBnB is breaking the law. I am not a lawyer and I don’t have first hand knowledge that in fact they are breaking the law. I own a vacation home rental in Maine on the coast and rent a few weeks each year through AirBnB. Recently AirBnB requested my tax status so that they can comply with U.S. Federal tax law, so in my experience, AirBnB is on top of it’s legal requirements.
AirBnB’s authenticity lies in their original idea to create room inventory where it may have never existed before. The company is highly professional with phenomenal customer service from the owner/supplier side of the business. A unique service they offered was to send a photographer for free to my vacation home to take pictures to help improve my listing. This is purely authentic and displays extreme focus and dedication to their core product. I haven’t seen this level of commitment to a travel product in a long time.
You say, “Managing the customer experience is very hard.” As a former online travel entrepreneur managing the customer experience is not hard. I believe that many technology oriented travel companies really just don’t care about the customer experience and this is in line with my theme for this article. As you mention in your comment. “There is a basic story that the heavy lifting of the processes of travel need to be included in the design of the start up.” I couldn’t agree with you more and managing the customer experience should be at the top of the list.
I love your comment about inventory risk taking. We built one of the most successful youth based travel companies in the U.S. and one of the key’s to our success was taking ownership of large blocks of hotel room inventory, holding it, selling it and distributing it. In my current consulting business with travel companies I introduce the model of acquiring owned inventory and the benefits that come with it. Tourico Holidays is one of the king’s of this unique business model.
Regarding American Express and their commitment to air seats inventory in the 1980’s. Do you think they could look at that failed project, learn from it and then apply my business model? I would love for the opportunity to share my thinking with American Express Travel executives.
Ok, maybe you need multi-billions for 25 city hotel acquisitions but American Express Travel could purchase one or two hotels and one of the hot private transportation companies and then train a core group of American Express Travel agents to direct sell their own inventory.
I had an interesting comment that came direct to my email vs. being posted here at Tnooz. The travel executive told me that the reason American Express Travel could not create what I had envisioned wasn’t because of the money but was because of the people and talent it could not acquire. In his opinion only a start up could create the opportunity I painted and that the most talented engineers would not want to go to American Express, rather they would want to go work at an AirBnB. I thought this view was interesting.
Best,
Matt Zito
For the record, AirBnB should have requested your tax status the day you signed up. A frantic round of T&C changes at the end of the year was clearly precipitated by a realization of how much AirBnB is not in compliance with a wide spread swath of laws. I think it has been well documented in a variety of media outlets how AirBnB does indeed break multiple regulations in multiple jurisdictions.
I do not believe in any shape or form that managing customer experience is easy. Indeed there is considerable pushback from consumers. The low success rate on conversion vs other product categories and high abandonment rates should be clue enough. Perhaps I should have said “successfully managing customer experience”. As a whole the online travel market has failed the consumer in the User Experience area. The current state of the art is in my view pathetic. It has hardly moved on in 17 years. There are very few sites that are successful at selling product that have a decent UX.
Cheers
Timothy
Great observations and article Matt.
I feel you must differentiate someone simply looking for the best value on a flight from point A to B or booking a room in a particular hotel that is known to the traveler. These aforementioned items are simply what’s the best price that can be found for the service I need and am familiar with.
A particular tour or destination has many more variables that, I feel, require discussion with the client.
Most times potential clients contact us with a generic request for “A trip to Africa”. This is quite a broad request that requires several questions to pin down what the client is looking to see and get out of their safari, budget, special needs that prohibit certain activities etc. etc. It is this personal interaction that allows a provider to deliver an experience unique to the wishes and abilities of the client. It’s also this personal interaction that creates a relationship which lends itself to referrals as well as repeat business. These two items are imperative to the growth and longevity of any business. An internet based portal that pushes you through to a third party may create high volume but builds no customer loyalty that we are all looking for.
I could not agree more! How many trip planning websites do we need? Each one says, “we offer….” but then you compare to another site and it has the same features…. But then again, why establish a creditable business when you can just use someone else’s products and be a middle man without having to do all the hard work
I am working to build a unique travel website that I believe could be an innovator. I am not just saying that because I own it, I really believe that the site could be an airbnb because it is not like any of the other sites out there.
Matt, I will be in touch with you soon!