One of the larger challenges running a complex, supplier-facing business within the tours and activities sector is the competitors (all startups) that are failing.
They tend to have wonderful websites that entice product suppliers to spend multiple hours adding tour descriptions to their system but, frankly, for bookings that will never come.
One outcome of all this is that it poisons the well.
It is harder for the companies that are trading well to convince a supplier to yet again spend 20 hours or more configuring their business with your service, whatever your merits.
In the same vein last week I participated in the OpenTravel Alliance‘s Travel Traction event during ITB Berlin (backed by Travelport). The well-attended event was focused on travel startups and their potential needs from the industry they are attempting to work in.
Senior research director at PhoCusWright, Douglas Quinby, started by presenting some numbers. Of the 528 startups the company is  tracking, taking over 2.6 billion USD of funding, 8% have been acquired (between 2005 and 2012) while 8% have closed.
Many of the rest are just what I call zombies, or are following the tough path to success (or mediocrity).
What followed was a panel with a good discussion around simplified access for startups to GDS airline data. However, simplified access may create unintended consequences.
Startups need to fail
By retaining the somewhat expensive data access approach currently used by GDS companies this creates a barrier for startups as real money has to be changing hands to keep the startup alive. Only the toughest will therefore keep going.
Yes, data access fees should be reduced – they MUST be affordable to a pre-funding individual who wants to innovate – eg. $600 a year. Not free, but not $10,000 a year either.
Additionally this data fee should be payble on a monthly subscription contract with immediate cancellation ($50 a month), acting as a heartbeat and sending a signal to the GDS (and other partners) that the startup is still trading and has an ongoing need for the data.
Annual payments never give sufficient accurate insight whether the startup is still performing well or not. Regular payment will enable the startup to perhaps play for a few months without incurring larger costs.
The outcome to this approach is that the startup stops paying for the data then the site will go down.
Great! No more zombie startups!
Instead we will have fewer, but stronger startups. And this (sorry, Tnooz and for your TLabs Showcases) will be better for everyone.
NB: Zombie image via Shutterstock.
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About Alex Bainbridge
Why not do a bandwidth-based fee structure? As a startup in the pre-launch phase, we’ve got less than 10 people working on the application so I cannot imagine us overloading servers of the likes of Expedia or Travelport.
My other gripe with all the major players is complete lack of test environment (hat tip to Rome2Rio for giving access to their “evaluation” environment). As someone who’s shopping around for sources, trying out the system to determine whether it works well for us – surely this would help more startups in those early stages…
I really like the premise to the article, though it went in quite a different direction that I had expected. You seem to suggest that many/most tour & activity startups become zombies because of onerous data access fees. While this may make it more difficult for some to advance on the road to profitability, I would say that many more fail for very different reasons, including:
- too much of a focus on a slick user interface and too little on building a real business
- as you say, there are too many such companies on the market today and suppliers are overwhelmed with choice
- many of these startups are led by people with little industry experience, and they underestimate the importance of understanding the real pain points of tour & activity companies
- tours and activities are much harder to commoditize than flights and hotel rooms, and in a market where customization and authenticity are increasingly demanded by travellers, the current tour & activity marketplace model may well be flawed
- many such marketplaces try to connect travellers with local amateurs rather than genuine travel professionals, completely overlooking the fact that experienced professionals are actually of real value.
Cheers,
Andy
Hi Andy
Yes – T&A websites become zombies because they don’t have to pay for data – so stay around, half alive, polluting the well for the others. However flight websites, because they pay fees, tend to die very quickly if not successful. I think I prefer it with a quick death.
Alex
I think that this is a very patronizing solution to a non-existing problem.
Who are you, Mr. Alex Bainbridge at all, and why would you say that travel startups should die so ‘that the stronger’ ones will survive?
Competition, demand and operational difficulties kill enough startups anyway – no one needs an entrepreneur (if you consider yourself as one) to try and make things harder.
i just don’t get this whole article and can’t get your point – make your product better, make your company better, make your team better – trust me that it will give your more value than adding a $60 fee to young, hungry entrepreneurs.
And btw, if you’d actually consider helping some – you might find it even more beneficial for the eco-system.
@jake – i’m sure Alex can answer for himself, but you ask who he is but commented anonymously yourself!!
Still waiting for a reply
Why not come up with a business model, that does not depend upon a GDS to aggregate it? It seems that everyone is concentrating on distribution rather than travel and that field seems to be quite populated.
Eric we couldn’t agree more! The value on all these travel tech startups is the inventory, and we’ve found in setting out to build Globa.li, a next -gen reservations management ecosystem for boutique hotels, that the value is in the inventory… not necessarily playing to existing distributors.
Whoever has the most inventory will win and if it’s good, unique inventory everyone will want it. And yes, pay for it.
Having said that, we’ve appreciated conversations with potential partners such as airline data providers who are willing to let us experiment with their data for a period of time until proof of traction and scale. Valyn, we would have loved to be at the session in Berlin as it sounds like you tackled some of the very same issues we’re working through at our startup.
As the organizer of Travel Traction, I was paying fairly close attention to the sessions last week, and I remember a broader conversation on the panels about data and data providers (I’ll leave the zombie company comments to others).
Alex and I regularly disagree, and this time is no different!
The conversation wasn’t just about air, it was all about access to all sorts of travel data. It wasn’t just about data from the GDS’ but from all sorts of sources – OTAs, content aggregators like TripAdvisor, even suppliers themselves. And it wasn’t just about using other’s data but building your own (and possibly making money from that).
The holders of data have a right to expect payment for their hard-won information, and don’t have to share if they don’t want to. If they’re smart, they’ll figure out where the demand is and how to make money to support their efforts while spurring innovation for both their companies and the industry.
And the idea that a flat fee should apply across the board, not taking into account data set size, regularity or type of feed, or even what kind of return would be realized from the data, is naive. Data is a valuable commodity, and fees for access are necessarily going to reflect that.
Nice photo of the Tnooz leadership and Nodes at ITB!
Sorry I missed it this year.
Hi Alex,
Coming back to our conversation in eTravelLounge – for hotel startups are pretty much the same story: payouts are higher, but the challenges are the same: where to get quality data, and how to normalize it.
Providing free access to data is even more important in the tours and activities sector than any others such as accomodation, due to the highly fragmented market and the difficulty for small tour operators to have online presence.
To relax the atmosphere here, I have a good news for all startups and entrepreneurs: Rezdy provide access to thousands of tours and activities data for FREE, that is $0, nada, gratis! Come to us zombies… and tell us what sort of APIs your need to build a profitable business. OPEN DATA => INNOVATION => DISRUPTION => INDUSTRY BENEFIT.
PS: Rezdy offers a free hug for the first startup to build a mobile app for things to do with geolocated data.