innovation word
680 days ago
 

Come on, travel startups: Please innovate and stop replicating!

NB: This is a guest article by Andrey Spektor, founding CEO of Carsolize.

The travel industry is flooded with venture capital investment. Millions of Dollars and Euros are poured into a multitude of travel startups all the time.

One would expect these investments to result in exponential technological progress of the industry – however, a closer look reveals that most of the funding is spent on so-called concept interfaces, most linking back to established OTAs for content and booking services.

Dozens, even hundreds of companies pursue their dream to become the next Skyscanner, HotelTonight, Airbnb, and even Expedia, instead of coming up with new business models, or tackling an actual industry challenge/shortcomings (which are abound).

By doing so, they seem to defy what startup companies are all about: incumbent advantage, solid exit strategies and introduction of something truly new and different enough to deliver large, sustainable, and long-term profitability.

Idea-recycling is not sustainable

So many startups recycle the same ideas over and over again, offering little to no innovation:

  • X tries to be Y
  • Z replicates B
  • G builds a brand new F

If consumers want to compare rates, there’s a sea of metasearch based interfaces, which will show a myriad of confusing and often inconsistent data.

But there’s couple of leading brands for that already – Kayak, HotelsCombined or Skyscanner. If one was to pitch a VC with business plan to create “another kayak”, how disruptive this idea is?

And if so, how come so many startups do exactly that, and get funded in the process? In such a competitive business as online travel, there is a desperate need for innovation and so many real problems to be solved, yet we see so little of it.

Is it because complex development bears greater risk due to its longer-term nature, or is it because everyone wants to see immediate results?

Perhaps it’s both.

Value versus mischief

A cold look at recent investments reveals that travel startups often rely on business plans that aim at delivering measurable results in a short span of time.

As a result, in most cases they pitch a good looking concept interface. Granted, some startups can ride the wave of particular trends, like social planning, inspiration, vacation rentals, and same-night bookings.

  • However, what real value does X offers its clients?
  • What protects Y from being instantly replicated by any existing industry player?
  • What guarantees Z to still be relevant a year from now?

At the end of the day, if the most innovative and exciting interface completes the booking on a traditional OTA, the customer has gained no value from the interaction, the industry didn’t advance anywhere, and the beast is fed again.

The bottom line: Erosion through short-term focus

It would seem that the goal of many companies is sheer traffic generation. “If you build it, they will come,” goes the saying. And off they will go, to continue their shopping and comparison elsewhere.

  • How much revenue can a user generate and regenerate for a search-and-refer site?
  • How many startups actually engage in an attempt to extract top margin and value from each booking?
  • How many try new ways to tap different, new, or simply professional travel resources, not to mention creating such?
  • How many take a deeper look into the industry beyond readily available affiliate programs and resources?

Good examples are few and between, such as Hotel Tonight who introduced a new market niche, and GetYourGuide some argue established a new approach and different model to an existing product.

Startups require nurturing, until substantial traffic and conversion volumes (ie. sustainable revenue) are achieved.

Travel startup psychology dictates, that if you can generate X users with Y bookings by spending Z on advertising, scalability of the model is a function of Z.

The problem is that once you scale, Z exponentially grows – as established players engage to outbid competition.

In order to provide long term sustainability, these companies must develop actual travel operation (contracting, customer support, technological infrastructure), or figure out a new way to resolve a real challenge, yet most fail to consider and incorporate it in their business plan in due time.

Specialize, diversify, and innovate!

Travel industry is one of the most complex industries – commercially, technologically, and politically. Yet most travel startups have absolutely no experience in travel per se, rather a vague conception of how things operate and where the upside might be.

Creating value by providing convenient booking site is great, as long as you’re capable of actually profiting from it.

I reckon 90% of the existing startups can be easily eradicated by the slightest change in consumer behavior or by larger players adopting their ideas and structuring them to serve their needs.

So many startups are dependent on an idea that the likes of Expedia can replicate and implement at far lower cost with greater level of success, like calculating frequent flight miles or by adding tonight booking services.

The future belongs to those who introduce real innovation, actual technological advance, and patentable ideas or in other words figure out how to make money by breaching the gaps in the existing technological and commercial landscape of the travel industry.

NB: This is a guest article by Andrey Spektor, founding CEO of Carsolize.

NB2: Innovation word image via Shutterstock.

 
 
Special Nodes

About the Writer :: Special Nodes

Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.

 

Comments

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

  1. yair

    look what we do with our site
    http://www.youtube.com/watch?v=1MEU4zPogaU&feature=share&list=UUPWm_CuSQFWt5QQ1pA7J29w
    and we r doing more to be a uniqe site

     
  2. Elmer Alinsog

    Andrey, spot on I must say!

     
  3. Ashish Prabhudesai

    Andre

    I agree with your article to a certain extent and get the point too. I also see the point others are making with some good descriptive examples. The fundamental problem to me with every start-up innovating in travel is that most of them are focusing on solving a problem. Now this may be due to the fact that for every pitch that’s the main question you need to answer or address. Start-up also have a dependency on the existing technology in order to get their product fairly quickly to the markets. Start-ups also are not in a position to challenge the big companies or ask for customisation. Making their approach limited to using technology from A and other components from B to solve a problem that the customers face today.

    When innovation stops focusing merely on answering questions like what problem am I solving or what value am I adding will you really see the change you speak about.

    Thanks
    AP

     
    • Bob

      Ashish, I like your out-of-the-box thinking, but what is it you want to frame your innovation around, if not solving a problem or adding value? Innovation for the sake of something new and radical seems kind of empty to me. Can you give me examples of innovations from other domains that are not weighed down by the limiting framework of solving problems or adding value?

       
    • Drew Meyers

      I’m with Bob. If you’re not solving a real consumer problem, then getting any traction with your site is going to be next to impossible.

      Would love successful examples in other verticals of what you are talking about?

       
      • Ophir

        I suppose it depends on whether you are trying to solve a problem or address a need. I suppose we can philosophize that needs can be seen as problems and vice versa but I do believe there is a difference between the two.

         
  4. Benson-Ruhija-Bwindi

    I think travel agents have a place, if they embrace technology instead of shunning it. But only those on the wealthy end of the spectrum are actually willing to pay for this service at the moment, unfortunately.

     
    • Elmer Alinsog

      Benson,

      That is the most challenging fact. You really need to educate the agent market place to embrace technology. One of the problem in travel industry is, it is dominated by mom and pop shop. It’s not a Fortune 500 or Global 2000 market, whereas users base embraces technology. I’ve dealt with the independent travel agent community for nearly 10 years now – they’ll asks you over and over again where to signup or login or what’s their passwords. That’s not an exaggeration – that’s what we are against up, as travel technology entrepreneurs.

       
    • Murray Harrold

      Cannot let this pass. Travel Agents do not shun technology.

      They have not found anything that happens to be particularly useful.

      That travel has many “mom and pop” agents (whatever that means) is due to them being the backbone of travel. They are people who are not motivated by profit (as the pisspoor returns travel offers bears witness) but genuinely enjoy travel and wish others to do so too. They are people who are highly skilled at dealing with customers. They are people who have to remember everything from your not being able to take bicycles on the 06:15 Manchester to Hull to Australians needing transit visas for Slovakia. They can deal with customers requiring complicated holidays to those complaining that on their last holiday, the aircraft toilet door was not quite the right shade of blue. They can talk to clients and tell them facts about their destination and which hotel to stay in and what to avoid off the top of their heads, without reference to anything – because many of them have been there, done that and got more than one T shirt.

      Above all, they can do something technology cannot – and never will be able to do. Travel technology can do two things – it can answer a question and it can present information in many different and varied ways. Only a proper travel agents can establish that the wrong question is being asked in the first place.

      Those traditional travel agents are fast reducing in number. Technology scrambles, desperately to keep up – on two fronts. Firstly, for airlines and the like, chasing the holy grail of cheap or free product distribution and secondly, trying to replace that priceless knowledge that exists only in the heads of those “mom and pops”. The first is unlikely, the second, impossible. Techys produce travel stuff, much of which is repetitive and a lot more which demonstrates a rather tenuous grasp on the reality of travel. Techys get irritated when they see things like a GDS … with it’s late 1980′s look and feel… fine, you produce something better, get whatever you come up with, up and running on a global scale which does the job demonstrably better and we will use it. Just don’t come up with yet another system for talking about and posting holiday snaps and expect traditional agents to have ruddy orgasms.

      It is not a question of technology educating traditional agents. It is a question of technology understanding and embracing traditional agents and learning from them and then adapting to their needs. If they keep asking for a password, you keep reminding them, one twice, 100 times if needs be. It is not what travel agents can do for travel technology, it is what travel technology can do for agents.

      There is an alternative, of course. Do away with traditional agents and let technology take over. Please feel free to do so if you think technology is up to the job. The only people who will loose out are the consumers. They will have to pay a lot more for their travel (technology knows few of the wrinkles and from reading what many pundits come up with, neither do the published “experts”) – and many will find themselves in the wrong place at the wrong time.

      Personally (I cannot speak for other traditional agents as I have not been elected to do so) though I am sure many other traditional agents will agree, one feels insulted by these arrogant and conceited comments.

       
      • Elmer Alinsog

        It’s just an observation and opinion based on experience and no one should subscribe to it if it’s not true about them or perhaps I should have said NOT ALL, but there are many I’ve encountered. Anyone can interpret it anyway they want about someone’s opinion, and if it does not specifically pointed to you, then there should not be an issue.

        Innovation also comes from being blunt, some may call it insulting, arrogance or conceited, but there are actually people who are not addictive to unnecessary pleasantries to Lego anyone’s ego, but just a healthy discussion to bring up what might defines or constitute innovation.

         
  5. Benson-Ruhija-Bwindi

    I would say that,
    Bob has talked about the fact.

     
  6. Titus

    Andrey,

    LOVED your thoughts. Couples point to make:

    You have a very intriguing look at innovation within the travel realm, I believe you are right about what you said about TRUE innovation and disruption from startups in the travel space is extremely difficult. OTAs and GDSs have continuously made it hard for startups to truly innovate within the space. It will take a company like “Apple” within the travel space to truly innovate and change the landscape. There’s no way a startup could have invented the iPhone/iPod, that solely had to come from a large, established company that was ballsy enough to see opportunity and take a shot at it.

    With that said, startups can however challenge the OTAs on the customer experience and other areas in which OTAs drop the ball.

    “At the end of the day, if the most innovative and exciting interface completes the booking on a traditional OTA, the customer has gained no value from the interaction, the industry didn’t advance anywhere, and the beast is fed again.”

    This statement reminded me of Hipmunk and how their product is devalued by the fact that the website ultimately takes you else where to book your trip. I believe that this does not constitute as “innovation.” The customer experience is compromised by the end of the booking experience. By the end, I ended up dealing with 3-4 different companies (with all different customer experiences) that I end up thinking hipmunk was a waste. They need to fix this. And I think it might be too late because I am working at a startup that is looking to fix that problem.

    I work at a startup (http://myglobalpal.com/) that is making booking business travel a breeze by booking travel for you with no searching at all. I believe we have something special and are looking to enter the market through those niche/segmented markets you mentioned as well.

    Cheers

     
    • Murray Harrold

      … the biggest problem you have lies in that you assume that any business traveler will know what they wish to book in the first place. They may have meetings at A, B and C that does not always mean that A, B and C is the best way to do it. Now, I am sure you can arrange to book A to B to C … but how? … and how does the traveler know they are doing it the best way to obtain best value?

      Simple point to point stuff is easy enough. Anything other than that, the story is rather different. It is not a matter of presenting information, it is a matter of *interpreting* information. Endless websites will present information and then store and assimilate that information, once booked. Real innovation would come if someone could find a way of analysing the initial information and finding the best value for those travel dollars which would have to be spent – which is miles away from “the cheapest”.

      Many do not realise that, as soon as you decide to go and *start* making a travel booking – by whatever means – 95% of all opportunities to save money on travel have already been lost.

       
    • Drew Meyers

      I’m in Seattle for the next couple weeks…I see your startup is based here. Would love to grab a coffee or drink if you’re keen?

       
  7. Ophir

    This article articulates what I believe many of us have felt for quite some time. Very well done.

    We can combine two statements to come up with what may be the lion’s share of the problem:

    Mr. Spektor mentions in the article: “most travel startups have absolutely no experience in travel per se, rather a vague conception of how things operate and where the upside might be.”

    Mr. Beccari, in his comment, mentions that “It’s not the startups who are not innovative, it’s the VCs”.

    So we can sum this to say that VC’s who don’t innovate are being presented to by startups with no experience in the industry. The circle of death (of innovation).

    The third part of the problem, in my opinion, is that startups rarely cooperate. The norm is to start up in “stealth mode” and work with the cards held very closely, lest the competition steal the idea.

    And herein lies the possible solution. Travel startups can cooperate with each other in groups of 2-3 and build separate companies based on the fruits of collaboration – pick what you need from the mutual basket. Utilizing the diversity of products and functions among the startups as well as the experience, knowledge and expertise found in team members, can act as a huge stepping stone for the entire group to move up the innovation ladder together.

    One startup may be really good at data aggregation while another may have a team member who comes from within the travel industry. A third startup may be working on a unique tool for the travel trade. Why not cooperate?

    In the ongoing development of GoScopia.com, we have collaborated with several other startups and companies. In some cases it worked great and in others we parted as friends. I know we benefited from their expertise and am pretty sure they benefited from our knowledge as well. I highly recommend this approach to my fellow entrepreneurs.

     
    • Charles Ehredt

      Ophir, you make a very good point about multiple companies collaborating.

      Most start with a narrow focus (they are told to do this so they can be the very best), but they neglect to consider the eco-system in which they exist. Therefore, they produce something that is arguably ¨useful.¨

      However, if they considered the larger eco-system and how they could collaborate with other companies (may be early stage or established players) to provide a more complete solution, their offering goes from being useful to being valuable (of course that depends on what they are offering [some things are never useful or valuable]).

      Early stage companies should look at what other services their customers are buying (or showing interest in) and consider trying to sell both together – possibly with a degree of integration.

      In a collaboration, companies can leverage each other´s sales capabilities, which generally leads to higher conversion AND faster closing of the deal.

       
      • Ophir

        Indeed Charles, you also bring up a very interesting prospect of cross-integration between collaborating startups. Startup A might have hotel aggregation while startup B might have touring content to display around the hotels. A quick and easy sell to the client all in one place.

        The trick in cases such as this will be differentiation between the companies, so that they maintain their UVP and can grow independent of each should the collaboration end. I suppose the cross-integration can be seen either as long-term or as simple booster rockets for the toughest part of the journey – gaining runway speed and takeoff.

        “…their offering goes from being useful to being valuable”. hope it’s OK I quote you on this in professional discussions.

         
      • richard

        “…their offering goes from being useful to being valuable”

        This is the essence of everything!

         
  8. Murray Harrold

    Blimey, reading this lot, I am surprised there are any hotel rooms and/ or flight seats left to sell … Someone should work out just how much money has been thrown at travel technology over the past few years.

    Funny thing is that, it does not matter how you wrap it up, the commuter flight on a Monday morning will always be full and/ or expensive. The hotel during a trade fair will always be full and/ or expensive as too, the car rental. If you want a holiday mid-August during school summer holidays, the place you want will always be full and / or expensive….. so what is all this technology being thrown at? Well, yet another way of selling product which has a dramatically short shelf life whilst out of season – more the merrier, I suppose or yet another way of putting an itinerary on a bit of kit. Well, no, not that even. It is being thrown at building a big data database which one can then sell and a lot of income from advertising.

    So, where can there be innovation? Yes, the travel agency bit of the industry aka travel professionals. But as observed above, it is not sexy and people are not going to devise programs for people who cannot afford to buy them. Coupled with which, as long as you have a GDS, Google Earth and flavor of the month mash-up flight aggregator then there is not that much more one needs – or will have the time to get one’s head around. Ironically, the mouse and point and click are a real pain in travel. The last thing any travel professional wants is something which is trying to do the thinking for them. If one wants flights from A to B, then just present flights from A to B. From the front end perspective, the GDS does that just fine (much to the chargin and irritation of techys). The GDS systems tried point and click and all sorts of innovation – but no, Blue screen it was and that’s that. (Not me talking, just the way it seems to be)

    For the client, yes there are some areas. Trouble is, they are hard work. Not like nice simple algorithms, API’s and (yet another) way of manipulating the same. What about a surrogate GDS for all the junk-fare airlines? A lot of work on directly connecting local tour operators onto one system (many of which will never have heard of an API – sorry) A lot of work could be done with tying travel together – eg the Taxi (there was one presentation at PhoCusWright about Dry Cleaning and stuff – sounds odd, but there was a lot of merit in their suggestion) – so, the “concierge”. But here, one would really have to tramp the streets finding the right connections … which is very un-techy like.

    I am also a bit bemused as to how much tech is having to replace travel professionals – many TMC’s use what we call “baby travel agents” who have little, if any, holistic training. A lot of tech goes into setting rules and parameters – mainly because those baby travel agents are unable to take a holistic view. Thing is, because travel is inherently complex and rarely are two travel events the same, tech makes some horrible assumptions … which is why I am fond of mentioning that famous website: hopelesslyunrealistictravelsolutions.com.

     
    • Bob

      I think travel agents have a place, if they embrace technology instead of shunning it. Some ‘nice simple algorithms’ could actually benefit travel agents and help them accomplish a part of their job that is best served by technology. I can think of loads of ways a travel agent could make themselves useful in today’s information-bloated and time-starved world. But only those on the wealthy end of the spectrum are actually willing to pay for this service at the moment, unfortunately.

       
  9. George Warren

    You are completely right. We can see many copies of startups, some mashups of some to create one. The industry is really full of travel startups, that’s for sure.

    On the other hand, I agree with Daniele. Not all the startups are a copy-cat. I saw some nice projects at PhocusWright this year, like the http://www.minitime.com and http://www.wehostels.com as well as http://www.nativoo.com.

    I believe there is enough space for much more…

     
  10. Heddi Cundle

    Great article and my theory: at http://www.mytab.co we’re doing something incredibly innovative (gifting, saving for travels and the kicker – negotiating with the industry for deals at slow/long lead times to our cash rich demographic, generating incredible pre travel trend data on our customers & attacking the redundant flash/daily deals that are crippling the industry – all through a very simple platform).

    But we see investors are throwing cash at start ups who are doing a version of another start up – investors have lost the edge on innovation because they need fast turnarounds, little risk and a rapid exit. It’s that simple. Every time I see yet another travel recommendation site, new deal site, better algorithm to show better deals for better recommendations, I feel quite sick. Because the money is going to a safe bet and that’s absolutely lame. It is the exact opposite of disruptive.

    So don’t JUST blame it on the start ups – blame it on the investors who are dangling a carrot to any start up doing a ‘better version of…!’ At myTab – we’re banging the beat of our own drum, we’ll never compromise and sell out :)

     
  11. Paige

    All valid points – I’d have to argue with the fact that it is “easy” to enter the travel industry – I think from the surface and from the social/consumer side this could be perceived, however having been in both B2C and now B2B sides from the startup perspective I know this not to be true.

    You are right that it takes YEARS to get the right relationships lined up in travel and every partnership deal that we do might take a minimum of a year from contract to completed integration. This is a marathon, not a sprint and I think there are many startups who come in thinking they can launch and integrate with many large distribution players very quickly, which in turn is the demise of their idea because they run out of money.

    From our perspective after having tried multiple ideas within hotel distribution we’re finding that by improving upon a broken model which we see in the US/Europe and by replicating that in markets that are hungry for tools and distribution, we can be successful.

    What we’re doing may not be seen as “innovative” – as I see some of my classmates at TechStars creating ‘water from air’ and springs that allow you to jump 20 feet with each step BUT what we can do in travel is to solve the issues and make the industry better. In the long term we can create a profitable business that helps travelers reach the local markets and also helps to spur more successful B2C plays with dependable databases of inventory that are easy to integrate with.

     
  12. Murray Harrold

    I do agree with everything mentioned here. Having seen bits of the last PhoCusWright conference, it seemed, to me as an agent, that everything presented was either a variation on a theme or a rehash of something or demonstrated a rather tenuous grasp on the reality of travel. Nothing innovative at all.

    What is so galling to me, again, as someone who tries to earn money from travel and from knowing a little about travel, is that the actual concept of “making money from travel” no longer exists. indeed, look at recent multi-million dollar transactions – they are not about travel at all. They are about advertising revenue and big data – and big data only in so far as it can be sold on. Frankly, that whole priceline thing could have been about selling spingle-widgets – it just happened to involve travel, only because there are a lot of people washing about as travel buyers to whom others could (pay for) to advertise to..

    Airlines fear that they are being commoditised and scrabble about trying to work out why they are treated as glorified buses. Of course they are. The travel product they offer has been degraded to the extent that actually selling it is not a viable business proposition for anyone, save for the airline themselves. In fact, it has almost arrived at the point where American Airlines (say) would actually make more money if they “did a priceline” and simply bought a travel-related site that has good advertising revenue, licensed their trading name and sub contracted the whole running aeroplanes thing, lock stock and barrel, to anyone who could afford to lease a 757.

    All rather depressing really. Good job I have other interests, I suppose.

     
  13. Evgeniy Makarenko

    Picasso quote: “Good artists copy, great artists steal” I think this quote about startups too.

     
  14. Charles Ehredt

    Well, I suspect the purpose of Andrej´s post is to stimulate discussion – and that seems to have been achieved here.

    I think there is another dynamic at work in the travel industry. The barriers to entry are very low, which means dozens of companies can launch within a few years – all targeting a real need or perceived need at roughly the same time. After a couple years, the majority have burned through their invested capital and go out of business (many with very good technology and often good teams).

    The problem is they just could not get to a level of business with economies of scale because too many companies were trying to compete for a modest number of customers at the same time.

    Related to this point, the larger, established travel companies have seen so many ´innovators´ go out of business in their early years, they often spend the first year or so extracting insights from the start-up and only enter into an agreement if the company is still around in the 3rd or 4th year (or later).

    Similarly, with the distribution channels so complicated and fragmented, it can take 2-3 years for an early-stage company to build up necessary contacts and confidence among prospective customers to start generating revenue. Therefore, if the company cannot survive to the 3rd of 4th year, they are unlikely to harvest their investment in building relationships.

    The one point in the article that I would challenge is that I don´t think VCs are carelessly (or excessively) investing in travel start-ups. Rather it is Business Angels who are not doing their proper due diligence and end up funding an idea that looks new and interesting. This gives the start-up enough funds to get launched – and perhaps understand a few KPIs. However, when they need an A Round to expand, it becomes obvious that the majority are in a crowded space, they are not differentiated, and the threat of copying from established players is significant – so they can´t syndicate a round with one or more VCs.

    Entire conferences are organized around this debate, so we aren´t going to solve it here in a few paragraphs – but I wish the innovators of all types the best of luck in coming up with something that is truly valuable.

     
  15. Iain

    Our very small travel startup has been working profitably for several years. Small scale, yes, but genuinely innovative and definitely niche!

    The application? We forecast the load factors on every scheduled flight in real-time to assist airline employees in making decisions about the choice of standby flights when using industry discounted ‘space available’ tickets. Our users include employees on personal travel, and flight and cabin crew commuting to work on airlines other than their own. How niche is that?

    What value does it offer – well thousands of airline employees think it is worth paying for, year after year.

    What protects it from being instantly replicated? Nothing, except our algorithm is as unique as Google’s search magic, and is continually refined by feedback from members. Just like nothing prevents anyone trying to emulate KFC’s crispy batter… people like the taste of ours

    What guarantees we will still be relevant a year from now? Probably the fact that no airline is likely to start publicly sharing its load factors.

     
    • Eric Thomas

      Lian,

      You’re service is not public, it is designed for interline travel and carries many limitations, airlines withholding sublo information notwitstanding. Only airline personnel can use your service and must prove it.

      There are a variety of companies operating in this sphere, and while you may have an algorithm to assist in finding open seats for a specific flight, it still is limited. I commend you on the selection of a niche, but it is not a new one. Lufthansa offers “myidtravel” that provides integrated travel management for crew on leisure or corporate business which is becoming an industry standard.

      https://www.lhsystems.com/industries/airlines/staff-travel-management/myidtravel.html

       
      • Iain

        Eric,
        Yes, but……I agree our site at idDeals is niche, but that is surely a strength, In any industry there are only two ways to go – mass market leader or niche. Anything else is slow suicide.
        As for myidtravel, unless I am missing a trick I can only find a handful of airlines on there. idDeals covers every scheduled airline (except AA).
        Also some of our competitors go down the ‘smiley face’ route, but our forecast number gives more granularity.
        Anyway, appreciate the healthy discussion that this topic has raised. An episode or two of Dragons Den shows many of the pitfalls!
        cheers!

         
  16. Daniele Beccari

    Andrey,

    this post is meant to be provocative and I accept the challenge.

    I think you miss the target.

    It’s not the startups who are not innovative, it’s the VCs.

    There are TONS of very innovative startups.

    But when it comes to funding, and if you need other people’s money (most do if they have ambition), an investor will not care about innovation: they care about risk.

    Remember: the investor job is not to change the world. Their job is simply to give more money back to their own investors, and take a cut.

    If this can be achieved because you own an exclusive license, right or patent to selling pasta in Italy, it’s perfectly fine.

    Investors love the German clone of a successful US or UK model, because the market and product risk is low. You only take the execution risk and if you have a well-oiled rocket (or rather, Rocket), you can make a killing.

     
    • Bob

      Very valid comment, Daniele. Thats why angels are often preferred to VCs, at least in the explorative, start-up stage.

       
      • Daniele Beccari

        I would tend to agree Bob, angels are less forced to return money to their investors and have more gutts, especially if they feel like they can do something about the idea and help it grow.

        However, deep pocketed angels are rare, and if you step into angel clubs you end up managing teams of egos.

         
        • Varun Khona

          Daniele, as far as funding early-stage ventures are concerned, my understanding is funds with excess of 50 million US$ under its management do not help. There are quite a few early stage focus funds, angels (individuals not groups) and accelerators/incubators willing to listen and help. For the first round, all fantasies of getting funded by who’s who of the VC land will amount to nothing unless you are either a proven entrepreneur or a part of a start start-up.

           
    • Heddi Cundle

      Ah, just saw your comment Daniele and exactly what i’d written before viewing yours. We’re constantly claimed as disruptive at myTab.co by negotiating a bidding system with suppliers for our cash rich customer base so eliminate flash/daily deals, hit long lead/slow time revenues, smooth out the price wrinkle in travel, gain incredible pre travel data etc. Investors love it, they won’t fund. They want a sure bet and keep asking who our competitors are – that kills innovation. It’s all about giving investors a guarantee – and that’s why start ups are creating a version of something else vs truly tapping into a problem (like we’ve done) and creating a solution. Because they want the cash so they’ll pimp themselves. There are too many recommendation, planning, flash deal etc sites out there – but investors keep throwing moolah so it’s causing a vicious circle.

       
    • Andrey Spektor

      Daniele, true significant and lasting innovation requires substantial investment and a long term vision based on market expertise, experience and knowledge, both on entrepreneurial and venture sides. We see some great examples of this taking place (Hopper?) and hope to see more of that in the future.

       
  17. Eric Thomas

    There is no creating a niche in travel. You may be able to design an app to quench the need for a last minute room, but again that is not a niche, that is a distressed passenger using the app rather than a phone, at the hotel counter in the airport.

    Travel has become a commodity, distributors can only improve access to the varying levels of distressed inventory, the closer it gets to spoiling the cheaper, it becomes. Air Charters worked the same way 30 years ago, and had an app appeared then, it would have been stellar.

    You are right in that anyone with a VC’s ear can pitch a hair brain idea, and throw money at it until the the sap that invested in the idea throws in the towel.

    Expedia having been the pioneer in distribution did not not turn a profit for many years. Travel is fickle and while it may be a huge industry, it still lacks discipline. Rooms are theoretically rotting until reserved, that has not changed, since the beginning of hotels.

    Innovation in travel does not mean that one designs an app to interface with an OTA . The OTA’s are already engaging in old time distribution with their Travel Agent Programs (Expedia, decolar) to name a couple, this my friend is desperation not innovation.

    Innovation in travel will come from destinations and suppliers who will always determine how the product is sold. In the old days hotels used Tour Operators to get the hotel known and once known they went straight to the market and eliminated the middle man. They believed yesterday as they do today “It is my hotel my investment, so why should I share with a 10%er).

    All of these innovations have only created a deadly downward spiral in pricing, that has accomplished the misery traveling to and from a destination has become.

     
    • Andrey Spektor

      Eric, I believe that one can have a great business, especially if its a niche product, market/target specific and a one that pays the bills.

      There are many larger player and bodies in the industry that are preventing the innovation from occurring because they are simple too big to adopt rapidly, blocking from entrepreneurs many opportunities for creativity and adoption of new technologies.

      You’re right, connecting new interfaces to same OTA’s is not innovation. Moreover, you’re right that true innovation should perhaps come from within the industry. Not only destinations and suppliers, but actually the professionals that work in between and see the challenges/problems/opportunities the industry has to offer on a global scale.

       
      • Eric Thomas

        Andrey,

        Correct, you can have a nice business that is properly targeted and the focused to your segment. The fact that innovation is to bring new services and ideas into the arena is the question at hand. In june of 2005 I published a post in my blog http://www.usatravelspace.com/2005_06_26_archive.html albeit not very well written back then, but the idea was rather radical at the time since the technology was becoming very popular.

        Today, all I see are the rehashing of Auctions, Biddings, and overall gimmicks rather than the facilitating of the experience of actually traveling, which is what we are trying to sell. I may have been around a little too long for this I started very young as a guide and I remember that people would take the trip, and go home, tell everyone about it with a video or slide projector, and their friends would be on my bus a year later. In effect all we have done is taken that rudimentary “like” or friends recommendation to the internet.

        There is very little that is not exploited in travel, so we spend our time accelerating the reservation process. How about a travel lottery? Where people pay into a travel itinerary until everyone gets the opportunity to experience it. This is done for vehicle sales in Latam why not do it for travel? let’s think out of the box.

         
      • Drew Meyers

        “you’re right that true innovation should perhaps come from within the industry. Not only destinations and suppliers, but actually the professionals that work in between and see the challenges/problems/opportunities the industry has to offer on a global scale.”

        I’d actually say the opposite. Innovation is more likely to come from outside the industry. People in the industry have too many preconceived notions of what is possible and not possible. An outsider is naive and questions “why” every single component they come across is the way it is — and focuses on changing it if that reason doesn’t make sense.

         
        • Andrey Spektor

          Drew, you make it sound much more easier than it is. People outside of any industry can usually only grasp the flat surface they see, and I don’t believe that spark of genius can come from this realm. Similarly, what chance do I have to innovate in the heavy machinery industry, while it has in fact immense R&D behind it? I could apply new business models to distribution or appliance of things, but that makes good business, not innovation in that specific field or sector.

          I will agree that there’s a majority of people within the travel industry that are just too used to a “if it’s not broken, why fix it?” way of thinking.

           
  18. Sarah Fazendin

    Great article and excellent challenge to startups in the travel space. One overlooked area for real innovation rests with the needs of the travel trade, not only with consumers. Travel companies beholden to archaic distribution strategies (in the high price/low volume category) is a market ripe for innovation.

     
    • Andrey Spektor

      Sarah,

      Excellent comment, as so many perceive that innovation in travel has to be consumer facing, it is actually the industry itself and the challenges it is faced with that often get overlooked by start up initiatives. Perhaps it is the large cost of development, need for specialized knowledge and less sexy appeal, that keeps entrepreneurs off this arena.

       
  19. Kayla Preston

    I completely agree. In this day in age, someone has to stand out from the rest! I work for a startup called HotelMe who is trying to do just that.

    We offer verified reviews from real hotel stays as well as giving the hotel direct distribution allowing them to never have to pay hefty fees on OTA’s. We launched over a month ago and we are welcoming new brands every day to join our venture in revealing the truth about hotel reviews. This offers real value to the hotels as well as the consumers.

    Our founders have taken a deeper look at travel sites and know this is the future for the travel industry. Having experience in the travel sector, they know what consumers/hoteliers want! This a business model that will take us to the next level.

     
    • Rohit

      I am curious how you will make money from this hotel distribution model. I would love to know more about your revenue model.

       
      • Alex Bainbridge

        I thought the goal of most startups was to build a reputation for innovation so they get speaking slots at the travel industry conferences. Now you want people to make money? Who changed the goal posts?

         
        • Evgeniy Makarenko

          All startups sooner or later plan to convert their traffic/investing and get back money with the growth in 100% and more.. Nobody going to invest…

           
  20. Valyn Perini

    I agree with Evan – there’s nothing dishonorable about the evolutionary advancement of innovation. Innovation does not require revolution or disruption with a capital D (or a small d, for that matter). Innovation requires a good idea, some hard work to get it realized and a market in which to launch.

    The nice thing about innovation in effective markets is that replicators with nothing new to add die off quickly, but replicators with an additional something – new feature, new product, new way of doing business – can survive and thrive if the market likes what it sees. Not very sexy, but it seems to work. And that’s what generally leads to innovation.

    If beauty is in the eye of the beholder, then innovation is in the eye of the market; all the rest of us are just along for the ride.

     
    • Andrey Spektor

      Valyn,

      What you’re essentially saying is that innovation sums down to constantly evolving an array of features?

       
      • Valyn Perini

        Andrey, yes, the evolution of features is in fact one way innovation occurs. I’ll throw down the Hipmunk ‘agony index’ card – it is a new way of presenting existing products that any number of companies could have built but didn’t for whatever reasons. Evolving features? You bet. Technologically innovative? Not so much. Commercially innovative? Absolutely.

        Innovation is generally iterative – look at Apple. Those iPads and iPhones didn’t blast onto the market fully formed; it took years of product evolution to get there.

        Innovation is not a narrowly-defined concept – it can happen anywhere and everywhere, and while it can be distracting, it always moves us forward.

         
        • Andrey Spektor

          Valyn, you make it sound as am I against innovation, on the contrary you and I share some of goals and concerns in the industry as such – you’re trying to solve it from the core, we deal with it on the distribution end.

          Apple’s approach was dictating the market their vision/how stuff should work – and branding worked, however I don’t see a correlation between Hipmunk and Apple in the innovation sense of the word.

          Given 15$mln I could buzz off any travel concept idea and keep it floating for quite some time, saying that it’s innovative, until I need another 50 to continue doing so, and so on. Given huge difference in potential payoff, travel startups lack in many cases that “apple” potential.

           
  21. Alex Bainbridge

    Not sure GetYourGuide is a new model, particularly…. plenty of agent models out there both before GYG and after them. But what GYG has is a very nice execution. Would love to know why you listed them as an example of a new model

    To the wider point, out executing (but still replicating) is a perfectly fine strategy, in my book. Build something people want first…. then once you have attained that, then you can start innovating and building something that people don’t know they want yet, but when they see it, they will want it!

     
    • Andrey Spektor

      Alex, great seeing you perform on SFBO in London, keep up the good work!

      I mentioned GYG because they took an interesting approach to an existing product, and by doing so filled the gap they found Viator was missing. They didn’t reinvent the wheel, but certainly took another twist at it – essentially company’s true value lies with unique resources it holds and working business model, sustainable with or without major investments.

       
      • Varun Khona

        Andrey, great article. Generating a lot of debate! :)

        Interested to understand what exactly you mean when you say GYG took an interesting approach and plugged the gap left open by Viator. Are you refering to listing the tour operator’s name and credentials providing a more tranpsarent platform? They don’t do that anymore. Or is it something else?

        Cheers!

         
  22. Evan Konwiser

    Absolutely! I’ve been telling Z to stop replicating B and instead get together with Q to form something more resembling the Greek letter Omega. If only….we’d probably have space tourism by now.

    Seriously, though — innovation comes from all corners, sometimes the least suspecting places, and often looks like copy-cat in the beginning. Kayak didn’t invent meta-search, they just did it better, and now they’re credited as the big disrupter. There are countless examples. Making a random value judgement that if a start-up doesn’t do something such as change the travel agency business model it isn’t innovative is a ridiculous notion.

    Often the most successful ventures started as something else and then found their way to a more compelling product, a learning that can only come by doing — not just studying.

    The entrepreneurial process works. As an industry, we should be encouraging more entrepreneurs in our space to do absolutely anything they want to — informed, misinformed, silly, courageous, small-ball — whatever. That’s how we ALL learn, and some of those seemingly crazy things will turn into the next Kayak. That’s how it works. Belittling attempts is surely not a way to move our industry forward.

     
    • Leith Stevens

      I was going to comment, but Evan already made the interesting points.

      The only other point to make is that when starting a new company, particularly in travel, you need to focus on one thing that you can do better than anyone else. This may make your business look like a small idea, but early traction is much more likely. That doesn’t mean there isn’t a much bigger vision you are planning on executing over the longe term, but you have to crawl before you walk before you run.

       
    • Andrey Spektor

      Evan,

      Innovation costs money, innovation in travel costs even more. I don’t believe that Pintrest models can emerge out of garages and change the world, in all that’s at least related to travel distribution as it is today. Most start ups I’m referring to have the good will and spirit, and in no way I’m trying to diminish that, but most are taking the easier path, because they don’t know enough. In many industries, like biotech, hitech, pharmatech – innovation comes from actual experience and specialization and not discomfort during my road trip to Europe. I agree that great ideas lurk in the corners, but I think that many startups would fair much better if they were to spend some time with a travel professional ( someone like you perhaps) and understand more about the intricacies of the industry, and it’s underlying challenges before trying to make kayak better.

       
    • Amit Wadhawan

      I agree with Evan. Sometimes you need just need a foundation to innovate on. Sometimes the best products start out as X for Y but then hit that Eureka moment and realize how to actually make the Y part disruptive.

      As Andrey pointed out, innovation in the travel sector costs a lot of money since the data is tightly held by the few big giants. The technology is also held in a stagnant state by these giants. A simple example is just searching for Hotels and Airfare. The amount of time it takes to get the results is maddening in an age where millions of records can be accessed in a matter of milliseconds, yet, we sit there waiting for the 1970′s-like technology to parse through results like a bookkeeper doing an audit. :)

       
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel