If there’s one thing travel startups like, it’s sexiness. Not the raunchy kind, but something that sets them apart from the status quo and has some kind of wow factor. Or at least that’s the aim.
As a studious reader of every Tnooz TLabs Showcase for the past year and a half, it’s always great to read a startup trying to create a new market, kill an industry giant, or create a new sector entirely.
But what many startups know (or should know) is that their chances of success are small. And while it’s always great to swing for the fences, it’s often a great idea to play in the part of the field where few others are playing.
And in this industry, the field has many empty spots. But before we get into the where, let’s take a look at the why.
Antiques = Profit
It’s no secret that there’s a ton of companies in travel which are based on tried (read: old) technology.
- Mainframes? Yeah, still plenty of those.
- Built on Active Server Pages? Yup.
- “Requires Internet Explorer”? It’s out there.
The startup crowd out there might be thinking “So what? They’ll eventually die and go away”. But the interesting thing about a lot of these companies is that they consistently turn a tidy profit, and have been for decades.
Year after year, these antiques keep generating cash, with little or no innovation required.
Not what you were thinking
If you’ve been in travel for a while, you might be thinking I’m referring to GDSs. But there are tons of other sectors in travel that are ripe for some restoration. Here’s a few on my list:
- Tour operator systems
- Hotel property management systems
- Meetings and conventions
- Ancillary products and services
- DMO systems
- Cruise systems
By no means comprehensive, the above list is just a sampling of sectors where large, established players are in what could best be described as maintenance mode. Old, antiquated systems with decades of patchwork offered for tens — if not hundreds — of thousands of dollars per install.
These are classic opportunities for startups, but few are successfully attacking them.
It doesn’t have to be sexy
Why? Likely because these are sectors where there will be no Techcrunch love on your launch. No furious investor bidding for your first round of funding. No coverage in the travel section of your favorite media publication.
As a startup, would you be willing to trade all of that for a significant increase in your chance of success? If your answer is no, you should probably just start buying lottery tickets instead.
Sectors with low barriers to entry and incumbents that are funded by support contracts required by their blindingly complex systems are about as good as it gets for startups.
These opportunties are as boring and vanilla as it gets. As a startup, you can build a modern and competitive solution for one hundreth of the cost it took the established guys to build theirs. You can define your success by old fashioned selling – not having to get a million pageviews.
You can make a whole swath of customers happy that currently have no choice other than to buy expensive antiques.
Not just B2B
While the above examples mostly fall into the B2B category, don’t assume that’s where the opportunities end. There are numerous examples of B2B startups using tried and proven B2C methodologies to widen their markets.
Further, the lines between B2B and B2C are starting to blur across many other industries. Travel won’t be an exception.
Cash money
And finally, you’ll be able to work on converting paying customers. Your revenue model will be clear – whether SaaS/monthly or whatever you chose, you’ll be counting on a tried and true model: People buying your stuff.
The glory of eyeballs, page views and tech blog coverage will be replaced with money in the bank. A pretty good trade-off.
How to get started
So, you may be convinced to take a crack at one of the above (or different) sectors. But where do you start?
I recommend following some of the guidelines I outlined a while ago in Life Lessons for Travel Startups, especially Lesson 1: Customer development.
Get out there, network, and find a customer of one of the dinosaurs in your chosen sector. Find out what’s making them unhappy, and what features they’ve been missing.
Then, go out and find someone in a similar boat. Pretty soon, you’ll start noticing some trends. The rest is all about iterating on your product and finding product/market fit.
Conclusion
I hope the above has inspired some thought and shines the light on some of the rather dusty nooks and crannies of the travel industry. Which sectors do you think could use a bit of startup love?
I’d love to hear your thoughts in the comments.
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About Alex Kremer
BOOM! Lovely. Nail. Head.
Revenue = Sexy.
Short and to the point. Good information which I plan on sharing with my team.
Great advice. I was just at the Outdoor Retailer Winter Market, put on by one of the biggest trade show organizers, and almost nobody uses their app and online system for anything but finding where a booth is located. It’s too old, clunky, and stand-alone for networking. Then at the hotel where I was staying and the airport where I was leaving, I saw computer monitors displaying the Windows XP screen saver. Likely they’re still using the OS from 3 versions ago because their old software would be too expensive to upgrade—keeping the same system that is.
And why again do I have to call Delta or American on the phone to book award flights on partner airlines?
Spot on, Alex!
Nothing is sexier than money (revenues). No, I don’t mean sugar daddies
What I mean is that nobody should care what tech is behind your solution as long as there is a bunch of people lining up to pay for it.
I completely agree with your point Alex, but alas, there is the cultural reality.
These startups are engaged in mating rituals for funding, and Sex sells.
Many investors are only interested in superficial relationships and gravitate toward those with an attractive outward appearance. They don’t care about the underlying product or service, they want to use the startup to get a fast a return on their investment and then toss them aside when its benefits have expired. They then engage in their next dating ritual.
Or, when the money starts getting tight, a number of startups will abandon their ideals and resort to the world’s oldest profession – prostituting themselves in order to capture the next round of funding.
Of course, cash and fame are sexy attributes too. That’s the reason why some ugly, morally bankrupt, loathsome excuses humans driving Lamborghinis or sporting some recent surgical purchase can frequently get a date.
But all is not lost – examples like Warren Buffet do exist – resisting the sex appeal and investing in boring companies that profitably sell products that satisfy a large common need. That takes intelligence, time and discipline – commodities many investors – and startups – frequently lack.
I like the point that venture industry stimulates “startup sexuality”. But haven’t we got some interesting disruptive projects that have accepted VC-rules and sold themselves in a pretty way with a pretty good outcome for investors (say, AirBnb, for example)?
Thanks for the comment, Robert. Thankfully there are still plenty of investors who can still sniff out a good business opportunity.
I absolutely love your metaphors! I am currently fighting these two extremes: on one hand I need to eat and hence I need money so the standard “startup” mentality is pushing for something Fancy and Easy to be developed quickly and start looking for investors; on the other hand, I really want to take my time and polish the product that actually stands out in terms of its purpose and features and it’s going to take a travel-knowledgeable investor to understand that. There are very few of those, sadly…
Very interesting, BUT I don’t understand one thing: shouldn’t newcomer to the industry, where dinosaurs rule, be sexy or at least make customers feel that he’s sexy in order to fight with established antiques?
Of course! You want to be appealing and have excited customers. The point I was trying to make is that you can do that in sectors of the industry where there is no spotlight and glory for the sector as a whole.
Oh yeah, that’s true story: “Go and do enterprise startups”, – they often say nowadays. The point is that doing b2b-startup really doesn’t seem so sexy in terms of drive and industry disruption maybe. Of course, you can speak about making more money with less bustle but maybe that’s not what young startupers want.
I always remember TripFab story – it looks so typical – it’s nice that it was shared with the community: http://www.tnooz.com/2012/09/28/news/tripfab-kind-of-came-through-on-its-promise-but-ironically-found-itself-down-the-toilet-instead/
BTW, I’m the guy who tries to be sexy too. Guess, it’s really ordinary way for the newcomer to the industry.
Substance over Style? Who’d have thunk it! Good Article
I do have to argue though that just because its not “sexy” from a consumer perspective doesn’t mean it can’t be sexy from the customer perspective.
If we’re simplifying and streamlining a process for lets say in our case a hotel owner and its well designed, that within itself can be sexy
Beauty is in the eye of the beholder.
Check, check, cheque…..
Great article Alex.
Cheers,
Riaan
Great article Alex,
Too many start-ups think they can disrupt travel without understanding the supplier dynamics and how “the plumbing” really works.
Dynamics are also changing. There’s definitely a move in investor preferences from consumer application to SaaS models that have a better chance of success. Also an opportunity here for founders to bootstrap longer versus selling out too early.
Charles de Gaspe Beaubien
Groupize Solutions
“Too many start-ups think they can disrupt travel without understanding the supplier dynamics and how “the plumbing” really works.”
This can go both ways. It’s not always effective to try to follow traditional industry norms when trying to disrupt. When you don’t know how it works, anything is possible in your mind. Then you run into the obstacles later – but they are just obstacles, rather than mental roadblocks that prevent you from getting started.
Like your point, Drew. I like to use the term “professional dilettante” for such cases and believe that I’m still such kind of guy in travel.
Great insight from a respected industry expert. Thanks Alex!
Good Stuff!!! Altough we are planning something sexy for the B2C beta3.0, in regards to our extranet, we tried to build from scratch something that will be very intuitive and very useful for the hotelier. And so far we have 97% of positive opinions about it.