Travel startups: ditch the consumer traction and focus on data
There has been plenty of digital inches written recently about the Series A crunch. Is it real? I don’t know.
However my instinct is that there are certainly less entrepreneurs with travel startup ambitions than in recent history (2011/2012), let alone those ready for going for Series A.
I can think of several reasons why this may be the case:
1. Joining a big company now more attractive than before
Got a great idea for a new hotel search? Larger companies who already have access to the necessary hotel product data (and associated supplier relationships) are out there looking for new blood who can bring in fresh ideas.
Certainly an attractive proposition for potential entrepreneurs versus the long slog towards profitability that setting up your own business can require.
2. Become a professional travel blogger
Got a passion for travel and being self-employed? Instead of forming a travel startup go and set up a travel blog.
It requires many of the same skills as running a travel startup except you don’t have to disrupt anything, or fix anything, to create a viable income flow.
I am sure some would-be entrepreneurs have taken this route.
3. Barriers to entry are rising
It is becoming increasingly hard for bootstrapped, unfunded travel startups to get to the point of building consumer traction sufficient to take larger investment.
BUT now, in order to expose your innovation, you have to build an entire business – product contracting, customer service, SEO and B2C marketing.
Uh-oh – massive barrier to entry problems. Certainly will put some potential entrepreneurs off.
So, some alternative approaches
If you still DO want to continue with your own path then various options are open to you.
First you have to think about whether you really want to work within the existing flow of the industry or whether you are looking to disrupt it in some way.
If you want to work within the existing industry constraints then you can go to an incumbent product supplier and take their data feed (with their permission).
Great – except they will only work with you if you are giving them bookings NOT if they think you are going to disrupt them.
If your ambition is to be acquired by your data provider, innovating on their data is probably not such a bad idea.
You may find, as a standalone innovative company, you may be able to circumvent their internal politics and bring something to market several years before they can. Go for it.
Create your own data
Instead of relying on someone else’s data it seems that most “industry changing” entrepreneurs are actually in the data creation business.
This isn’t right for everyone – for example, Hipmunk focused on innovating using someone else’s data.
But for companies like AirBnb, creating its own data (home-owners willing to rent their space) was mandatory to unlock the opportunity it saw.
This brings me to the key point. If having your own data is so important to the success of a travel startup, then why are we all so focused on consumer traction?
Ultimately the consumers belong to Google, Bing et al and the online travel agencies/metasearch companies, so unless you are looking to join them, let them worry about consumer traction while you focus on data traction instead.
Going back to the Beachscape example. Perhaps instead of innovating on UI and user experience around consumer facing beach holiday searching (and building the big surrounding business this will require to get traction) they should be providing a data API with a “beach score” for each beach resort hotel.
Would OTAs license that?
They probably would as long as the data was cheaper than what they could create it for, there was a return on investment (ie. it actually does something useful for them or their consumers) AND that they could build competitive advantage on top of the data (so not every data customer got the same benefit).
So is this hypothesis right? Is data traction more important than consumer traction? If so, why do we hear so much in the business media about consumer traction and not data traction?
NB: Traction people image via Shutterstock.
Alex is a contributing Node to Tnooz and writes about travel technology, travel startups, specialist tour operators and the tours & activities sector. He has previously led ecommerce, social media and reservation system projects for airlines, leading mainstream tour operators and hotel distribution companies in both leisure and business travel sectors.
He is the CEO of TourCMS, a web based software-as-a-service reservation system and distribution platform used by many specialist tour operators worldwide to take online bookings and distribute to 3rd parties.
He also moderates Small Fish Big Ocean, a community that welcomes small tour operators and niche travel agents to come and discuss travel ecommerce issues. Alex has a computing degree, is passionate about usability, speaks French and still writes and reviews code.