Next came $11 million funding over the course of a few months and a new focus on day tour deals. Shortly after saw it strike a deal with Google Offers and another with Foursquare.

Now it has announced Zozi Gurus, a new platform to connect travellers with top celebrity athletes and adventure-types, for once-in-a-lifetime experiences.

This is quite an evolution, but one that makes a great deal of sense.

Multi-day tours and activities remains the unconquered Mount Everest, where margins are high but intermediary-delivered conversions are minimal.

Deals have too many similar companies chasing the same suppliers and customers – so differentiation via expert-delivered experiences could be the answer.

It doesn’t come particularly cheap for the consumer, but let’s face it, so-called once-in-a-lifetime experiences rarely do. For example, $2,700 will buy you a ski experience with US Olympic gold medal winning Jonny Mosely.

From a business perspective, this latest move puts Zozi up against other VC-backed person-2-person (P2P) tours, activities and experiences marketplaces.

Why this is an interesting play

The key element here is that it that Zozi’s product is not just a ski experience, but a ski experience delivered by someone that the public would respect as a subject matter expert – an experience money could probably not otherwise buy.

One of the only other examples of a similar strategy is Sidetour – there you can also book local experiences with experts, such as a Silver medal Luge winner. Most other P2P marketplaces just have regular folk – mainly destination locals – offering tours.

One problem with celebrity-fronted experiences is the lack of supply. Zozi has its ski expert ONLY available on a forthcoming weekend in March. For Sidetour the same problem – the luge trip is only available the same weekend in March.

One-off events and experiences also cause quite a number of issues from a PR perspective.

Journalists won’t cover trips where their readers, often reading some months later, can’t buy or recreate the same experience themselves.

However, Zozi with its $2,700 experience will at least be making more money from selling the experience versus Sidetour with its $150 offering.

Differentiation and marketplaces

An ongoing challenge that faces these P2P tour and activity marketplaces is that the product does not exist independent of the marketplaces.

This is unlike a hotel intermediary where the property itself will be attracting bookings on a regular basis, so will have a highly tuned product proposition – if the intermediary can’t sell it then the problem is likely with the intermediary rather than the hotel.

Where the product doesn’t exist except for within the marketplace the product never gets the tuning required to make it a standout experience.

It could be priced wrong (either too high or too low) or just not be sufficiently wonderful to want to book, or may suffer from lack of incorporated feedback due to the low volume of real world sales.

It is also challenging to distinguish between tuning of the product description/marketplace UI/marketplace marketing and the product itself.

This problem is reinforced by the marketplaces aiming to be the anthesis of popular, mainstream, tours and activities, hence many are trying to create highly bookable popular experiences BUT without going mainstream.

Ultimately for most of these VC-backed marketplaces, going mainstream WILL be necessary in order to attain the valuation the VC investments suggest, so it will be interesting to watch how this this all turns out.

Better suited systems exist that solve mainstream tour and activity distribution challenges - Zozi might well dodge this conundrum by selling high-value, high-margin experiences rather than being low-value, low-margin like competing P2P marketplaces.

This could work.

2012 and the tours and activities sector is already hotting up nicely… lots more to come no doubt!

NB: Here is a Gurus clip:

There is always plenty of discussion (and a plea to stop) about commercialising the craft, but in order to make money there are two ways these bloggers can evolve:

• Solve consumer problems.
• Solve travel industry problems.

People pay to have their problems addressed and problems are a solid basis to form a business or maintain employment.

As a distant cousin of travel bloggers, travel startup entrepreneurs constantly strive to understand problems and so-called pain-points (with ideas and innovation being the by-product of understanding the problem with sufficient skill that they spot a commercially viable solution).

For travel bloggers it should be no different.

Here are two travel industry problems that travel bloggers could address in order to earn their keep:

1. Destination data

The future of travel websites (and services) revolves around data and building tools to understand this data and present appropriate versions of it to consumers.

Product data tends to be openly available in API form. Even review and other data is nicely standardised and able to built into a global travel system at scale without too much fuss.

But destination articles and data is hard to source that matches the brand criteria of the travel website (a luxury tour operator would have quite different demands to a backpacker website).

At this point travel bloggers and writers are often brought in, sub-contract, to research and write a handul of freetext articles about that destination.

So far so good. But with personalisation coming (increasing demands on data) and global websites wanting to give equal prominence to all destinations (requiring content from everywhere, globally, within a short timeframe) this can’t be serviced by just a few travel writers.

I want to see a marketplace system where, as a content consumer (a travel website), I say I want to know the top five spas in 100 destinations….. and 100 travel bloggers, each knowledgeable about their own specialist region, can answer that question for a small fee.

Quickly, I have sourced a unique database of 500 spas that I own the IP to, written up in my brand style specification, based around what I need for my new service.

Travel bloggers and writers will need to become masters of destination information, not masters of prose (or link-building). There is money to be made there, but only if they collaborate via a central marketplace such as my idea above.

2. Multi-day itinerary based tours

Specialist tour operators are crying out for help promoting their products (and tailor-made tour booking services). Many of these tours are booked at 100-130 days prior to travel.

My hypothesis is that travel blogs are often read during the consumer research phase, which happens to correspond to the same time-frame that specialist tours are booked (versus, say, hotels or flights, which tend to be booked at a month or so prior to travel).

When you have travel bloggers writing inspiration oriented content and failing to monetise it, and you have specialist tour operators crying out for more help promoting their services, and both active in same 100-130 days prior to travel phase, then someone has to be able to create a business out of this to the benefit of both sides.

Any more?

There you go, travel bloggers, two clear opportunities for new startups to focus on monetising the skills and experience of the new travel blogging industry by providing solutions to the travel industry (rather than consumers).

Any other ideas I have missed?

NB: Image via Shutterstock.

• Those with grand ideas and execution to match
• Those with the ideas but where execution is not quite there
• Those who you wonder what they were smoking when they thought that idea was going to work.

The fourth category is the one that goes unnoticed

• The humble new business selling just a little bit better than their nearest competitors, but not setting the world on fire.

I feel for those entrepreneurs chasing the big dream with the hope of being backed by venture capital money.

VCs tempt entrepreneurs into the ultimate land-grab based on a new idea. This is generally in the hope that a new area has value that can be realised at a later date, rather than backing new businesses in existing sectors where VC level returns are harder to achieve, but perfectly good job-creating businesses can be created.

The incumbents may have left a few angel funding-sized holes in the big cheese of the travel industry – but $100 million plus valuation holes -where VCs can play – no – those holes are rare (or quickly closed by incumbents once they hear about a new startup with a great idea in their area).

So when someone comes to Tnooz and says “we are going to do this and it is going to be game changing” what are we meant to do?

For example, look at TripFab, which uses “The travel industry is going to crap its pants” as its tag line.

Now are we meant to say “thank goodness, this is what we have been waiting for and therefore they should lead the Tnooz news with every single functionality tweak they make”, or are we meant to double check that our subscription to our laundry service is up to date.

Shooting for the moon doesn’t mean you will reach the stars. Using this approach as a startup in the travel industry may mean you never leave the launch pad.

Then you also hear about the airline KLM, which has announced its intention to launch a social seating service. Passengers will be able to link their social media profile to their check-in information, and subsequently choose a seating partner based on the social media profiles of other passengers.

Now there is an intention/aspiration. But why should this intention be given any more likelihood of reality than a startup’s publicly stated aspiration?

Of course, being an incumbent and large scale supplier makes their statement more interesting – but what if KLM is just moving to using the Ryanair school of PR and announcing all sorts or ideas or nonsense for publicity’s sake (such as paying to pee on a plane – did that ever happen?) [NB: Ed - No, it did not]

For those who dream of being the next big thing in travel, the vast majority will fail to do so. But without that mindset, the confidence and the determination to succeed, you will fail, for sure.

So perhaps making big, aspirational, future-looking statements is simply the key that gets you entry to the top club – but it doesn’t make them succeed in their own right.

Perhaps we should learn to accept and love these statements as an outward sign of the dedication required to deliver on the dream. Doesn’t mean we should cover them on Tnooz though.

Here is to 2012, where Tnooz becomes more widely read than The New York Times. It’s an aspiration, right?

NB: Image via Shutterstock.

These services have all been good, but they are much like getting travel advice from a white-shirted accountant. Good, solid, reliable information but very flat and uninspiring.

What makes you want to go to a place to begin with? When you have chosen a place – what makes you want to explore further? The inspiration phase of leisure trip planning research has been by far the hardest for tech-based services to master.

Google has announced (and started sending out Beta invites to) a new service, known as Schemer, which attempts to compete in this gap.

Effectively it is local destination ideas based on tips from your (Google+) friends, celebrities (oh yes!) and professional destination content producers (ie. travel writers).

It uses content with the likes of Zagat, the review service it purchased in September this year.

From first look there doesn’t seem to be any commercialising of these experiences (nothing has an obvious price or is bookable) but it is as yet unlaunched and booking would be easy enough to add on later.

The travel industry companies most at risk from this move by Google are the 30 or so nascent person to person (P2P) tour guide marketplaces (that I reviewed back in September).

Many of these P2P services are based on individuals providing and consuming interesting destination experiences together.

With Google already having a Google+ social profile acting as the central glue, Schemer could move into this P2P tour guide area as the user could essentially see who it is booking from (and build trust).

Tie that in with Google Checkout and you have a powerful combination which most existing P2P tour guide marketplaces would struggle to compete with.

The second group of companies at risk from this move by Google is, well, everyone else.

If destination research moves to starting at Google Schemer rather than Google Search, then Google will be able to pitch flights, hotels and other travel services, without having to necessarily work within the confines of their existing web properties.

We are a long way from this though, of course – the service is yet to fully launch

Here is a walk-through by a writer from TheNextWeb:

And Google’s own, rather peculiar introduction to the service:

Until now much of the efforts of travel technologists has been in removing the leisure travel agent from the marketing and booking process.

Who needs brochures when you have video? Who needs staff when you can invest in a whizzy user interface and conversion funnel analysis?

This probably makes the remaining agents quite rightly wary of technology and travel technologists. Beware of geeks bearing gifts.

But can travel technologists help travel agents rather than just try to further obsolesce them?

Do we have an alternative proposal that might simultaneously solve the “selling the destination experience” problem (hard to do on a 2D computer screen) whilst retaining valuable front line human travel agents within the travel industry.

Inspired by the over consumption of alcohol and food I have an idea.

What do people do when they go out in the evening? At least in the UK they tend to go to a restaurant and that restaurant tends to present as an overseas experience. We all love Indian, Thai or Mexican restaurants in the UK.

But how do you go from someone being interested in a Mexican evening out to using that experience to promote booking a holiday to Mexico next year? If you do a deal with a Mexican restaurant, doesn’t this limit you to promoting Mexico – how are you going to sell Egypt?

Restaurant technology has the answer.

Imagine a restaurant that using digital projectors and other props could easily convert from presenting one country to another. Run an Egypt theme night one night and Mexican the next.

Use Inamo restaurant style interactive tables (E-Table Interactive) to present holiday options to the customers as they dine.

Have a button to call a destination expert to your table to talk more about what you could do on holiday. Or let the customer shortlist holiday options for further review later (at home).

Effectively a high street travel agent shop open during the day will now be a destination brandable evening experience. Not a brochure rack in sight. Importantly because the customer is also being entertained for the evening they are likely to pay to be marketed to…..

Perhaps travel agents can learn to love travel technologists after all.

As you might expect me to say, it’s not where the cool kids are – we all hang out in T&A… or tours and activities (before you ask)

Now, I have listed many of the T&A players previously in this HUGE list (with over 70 companies mentioned, including my own, TourCMS).

Within this niche the action at the moment is in the person-to-person (P2P) tour and experience marketplaces. These are where individuals offer services direct to consumers. A bit like AirBnB/Wimdu et al, but for tours.

Here are the 29 companies currently making moves in the sector (with a description in their own words). Our analysis follows…

• BeWelcome – “Meet locals worldwide”

• Gidsy (not yet launched) – “Gidsy is a community marketplace for authentic experiences. Besides booking fun stuff to do, anyone can host activities. Think unique walking tours guided by locals, nature hikes with wild cavemen and exclusive pop-up restaurants hosted by top chefs.”

• GuidedByALocal – “An online community of locals guides and travelers around the world”

• GuideMyTour (not yet launched) – “The site connects enthusiastic guides from all backgrounds with visitors who want an interactive exchange when they walk or visit.”

• Indie Tour Guide – “With the help from a certified local guide, travelers can gain insider access to their destination with one of kind, customized tours that address their interests and provide a richer travel experience”

• IGottaGuide – “Connecting you to professional and amateur tour guides for an authentic local experience” [TLabs Showcase - IGottaGuide]

• GuideHop (not yet launched) – “A place where professional guides, instructors, and locals can share their passions, find new ones, and make a few extra bucks along the way.”

• LeapLocal – “Putting travellers in touch with recommended local travel guides”

• LocalGuiding – “The place for booking unique travel tours and activities directly from local tour guides” [TLabs Showcase - LocalGuiding]

• Localyte – “Connects travelers with Localytes: local people and services in travel destinations”

• MyCreativeTours – “Don’t feel like a tourist, experience like a local”

• Omoly – “Represents a group of passionate guides who love to share his or her hobbies, interests, and life style with willing participants”

• Rent-a-Guide (German) – “Find Guides, Tours & Excursions”

• Shiroube – “Explore untapped local scenes with local guides”

• Skyara – “A marketplace to offer fun things to do, meet new people, and share experiences”

• Tourbie – “Personalizes your trip by connecting you with locals so you can have real, memorable experiences”

• ToursByLocals – “Take a private tour with a knowledgeable local person as your tour guide”

• Trav.ly – “A marketplace where savvy travelers and friendly guides connect via local experiences” [TLabs Showcase - Trave.ly]

• Tripbod (additional service, soon to be launched)  - “Connecting people who want to go on trips with local experts”

• TripColony – “What is the best way to travel? To have connections in the places you are visiting”

• TripFlock – “A planning and collaboration platform for travelers, travel people and travel businesses. TripFlock is not a web site. It’s part operating system, ecosystem, apps marketplace and desktop rolled into one very cool travel platform”

• Tripping – “Want to step off the beaten tourist path and step into local culture? You can use Tripping to meet friendly local people, all over the planet” [TLabs Showcase - Tripping]

• TripTrotting – “Meet up with locals to get a real taste of your travel destination or host like-minded travelers visiting your city” [TLabs Showcase - TripTrotting]

• Sidetour – “Authentic Experiences. Real People”

• Synotrip – “Whether you want to travel yourself, choose your own tour guide, or get a tailor-made tour, Synotrip is here to make it easier for you to plan your tour”

• Vayable – “Connects explorers with great people who want to share the things they love to do” – [TLabs Showcase - Vayable]

• Viator Tour Guides – “Book a private guide and customize your own sightseeing tour”

• WhosMyGuide – “Search, compare and connect with guides all around the world” [TLabs Showcase - WhosMyGuide]

• Yowtrip – “A network of city ambassadors. We connect you with locals at your next destination!”

Right. In other words: lots!

Now, six months ago I could count the number of companies in this sector on one hand. Now we have 29. Umm – big change, wouldn’t you say?

Okay, this is fresh, new, interesting and, at least to begin with, quite innovative. But before we get excited about things that are new and shiny, lets try some analysis.

How do they work?

Some target professional freelance tour guides, some recruit individuals off the street and some run a mixture. Some also feature individuals who, actually are “fronts” for established local specialist tour operators/experience providers. Not really individuals at all.

Another way to categorise these companies is whether they focus on just one region (eg New York) or have launched on a global basis.

Although interesting, it is not the most important part

What is critical is the model.

None take responsibility for the transaction. All pass through the transaction through to the ultimate supplier (the individual).

Money tends to flow via the central website (taking 10-20% or a “deposit” is paid to the website and the balance is paid to the supplier, the individual, on the ground).

But will this model work?

On the surface the model looks OK. However there are challenges that need to be overcome.

One such example is the narrowness of the seam of suppliers that these websites are fishing in. If you don’t have any suppliers, you won’t have anything to sell. (Reminder: I am planning a webinar on sucking eggs, all welcome)

At the high volume end, these P2P websites are not working with the traditional five-10 employee, local specialist experience/tour operators.

These operators can handle scale on days where demand is high. Individuals can probably sell two groups maximum a day. Selling as much as you can on the peak days helps balance those days when you sell nothing.

At the lower volume end, P2P websites are constrained by working with individuals who are prepared to pay for their own public liability insurance.

What, I hear you say? Yes, public liability insurance.

As per the New Orleans Tour Guides Association [good background reading], tour guides often need insurance for scenarios such as:

“You are leading a walking tour of the French Quarter. When leading the group across a street, a passing vehicle runs down and injures one of your guests”.

Insurance isn’t too expensive (I have seen a quote for £100 GBP ($160) per-year per-tour guide), but this certainly creates an overhead for the occasional, amateur, tour guide.

As per this report via the Telegraph (UK), one amateur tour guide was even quoted £600 ($1,000) for public liability insurance.

This is model-busting, especially for the occasional amateur tour guide wishing to sell an experience once a month where they may only make a few hundred dollars a year.

The P2P marketplaces themselves may not be liable for this, but these liabilities exist in the ecosystems they are creating and hence need to be covered by someone. Creating an ecosystem where your suppliers are not covered for their liabilities will, frankly, not be sustainable in the long term.

These public liability challenges also introduce issues with working with the existing (and new) tour and activity distribution players. I know of at least one which, until the public liability insurance issues are resolved, will not distribute this kind of product, ignoring the generally positive feelings towards the actual products themselves.

The majority of the amateur-focussed P2P marketplaces listed above fail to mention public liability insurance on their tour guide sign-up pages. They make it sound like anyone can offer a tour in their local city when actually this is not the case at all, at least not until they pay for insurance.

Wrap-up

So let’s take one step back. These marketplaces may have got the wrong SOLUTION but are absolutely addressing an existing consumer PROBLEM.

Consumers want in-destination experiences rather than generic bus tours. They want memories. They want stories they can share with friends and family on their return. They want something a little out of the ordinary.

Frankly, traditional in-destination tour operators don’t achieve this particularly well, although they do comply with local legislation and insurance requirements.

There are, on the whole, very competent, fresh thinking, web entrepreneurs behind these new P2P marketplaces, having correctly spotted this consumer problem, but have come up with an inappropriate solution that just can’t be sustained over the long term.

I believe ultimately this sector will end up with professionally delivered experiences rather than the focus being on the P2P aspect.

A few of the marketplaces listed above are already working with professionals hence will move to this quite naturally. The focus on experiences rather than tours is quite right.

P2P will probably be here to stay for accommodation, but for tours and experiences, things are not so clear.

Interesting times ahead.

Who and what are you (including personnel and backgrounds)?

We are David Cummins and Manyu Lui.

David was previously a venture capitalist at the Draper Fisher Jurvetson Growth Fund.  Prior to that, he lived in China (Beijing, Shanghai, Shenzhen) for four years and worked for two start-ups.  David speaks English, Mandarin, and a smattering of Shanghainese.

Manyu was previously a senior software engineer at IMVU, a leading 3D chat-based virtual world with more than 25 million registered users.  He originally hails from Hong Kong and speaks English, Cantonese, and Mandarin.

What financial support did you have to launch the business?

We raised some seed capital.

What problem are you trying to solve?

Trave.ly helps travellers to international destinations go beyond the guide books by enabling them to discover and book unique tours, activities, and experiences offered by real people.

Our initial geographic focus is on China, specifically Beijing and Shanghai.

We’re excited about China due to its growing popularity as a travel destination (58+ million people visited China in 2010), language and navigation challenges for Westerners, and our familiarity with the market.  We expect to roll out to additional cities in China and more countries around the world over time.

Describe the business, core products and services?

Trave.ly is a marketplace that connects travellers with local and expat guides offering unique tours, activities, and experiences.

Our guides are a collection of locals and expats who are living in and familiar with the destination city. We encourage guides to create tours around their interests and passions.

We have cooking, eating, shopping, photography, running, painting, art, Mahjong, Chinese language, and many other types of tours, activities, and experiences on the site today.

One of the most interesting tours we have on the site is a Soy Sauce Factory Tour, which enables travellers to visit a fully functioning soy sauce factory and learn how soy sauce is made the traditional way in China.

Travellers can browse tours, read reviews, communicate with tour guides, and book tours, activities, and experiences directly on our site in advance of their trip.  After booking their tour, travellers simply print out their tour voucher and give it to their tour guide.

This way, they don’t have to worry about cash or exchange rates on the day of the tour.  After the tour, travellers can leave reviews for future travellers to read.  Our tours start at $25.

Who are your key customers and users at launch?

Our target customers are non-Chinese speaking travellers to China who want unique different travel experiences. Our customers tend to be professional 25-45 year people that fall between budget and premium tour package travellers.

They are able to see the usual tourist sites on their own but are interested in going beyond the guide books to gain more unique local experiences in the cities they visit.

Did you have customers validate your idea before investors?

Having been to more than 30 countries and lived abroad ourselves, we’ve been both the traveller and the guide for family, friends, and friends of friends.  Tours and activities are the third largest segment in the travel industry, after hotel rooms and airline tickets, so it’s clear the market is there.

What is the business AND revenue model, strategy for profitability?

Travellers book their tours directly on our site using a credit card or PayPal.  After the tour occurs, we take a 15% commission and pay the rest of the money to the guide using PayPal.  As with any marketplace business, they key to profitability is scale.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• We are initially geographically focused on China.  This focus enables us to build up a large concentrated selection of tours for travellers to choose from, build close relationships with people powering tours listed on our site, and curate the tours, activities, and experiences on the site to ensure quality.

Weaknesses:

• Marketplaces are inherently difficult to build, but we’ve had good initial success building up the supply side of the marketplace.  As with any young company, we always want to move faster than our resources will allow.

Opportunities:

• We think that the future of travel is social and more personalized.  The tours and activities space on the Internet today is extremely fragmented and dominated by commodity style tours and activities.  The guide book industry has been around for decades and offers travellers little personalization.  We’re excited about the opportunity to help travellers who would have never considered themselves the “tour type” find fun unique things to do on their trips.

Threats:

• As a small company, the deck is always stacked against you.  The biggest challenge for us is finding efficient channels to consistently reach more travellers.

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

Many people have told us our idea won’t be successful due to the competitive nature of the travel space and inherent challenges in scaling marketplace businesses, while other people tell us they’ve been waiting a long time for a solution like Trave.ly.

Ultimately, we’ll let the broader market determine whether or not we’ll be successful.

What is your success metric 12 months from now?

We hope that more guides continue to list tours and more travellers are able to use Trave.ly to discover and book unique experiences that make their trips memorable.

We intend to roll-out our product to additional cities within China and countries around the world over the coming months.

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

The problem, unfortunately, is that so many of the errors mentioned in the follow-up Reprise articles are so preventable.

For example, why do travel startup entrepreneurs think they have the golden key to unlock a significant consumer problem that travellers have, when so many have failed when addressing the same problem before?

However wrong an entrepreneur subsequently realises they are, it is perhaps worth asking why did they start down the road in the first place? Why did they start a process that for many ultimately ends in pure pain and failure.

There are several drivers. Do any of these match your mindset?

1. Innovation

Oh for goodness sake, can travel industry conferences stop judging everything by how innovative something is. Really, entrepreneurs tend not to be wired to think about innovation.

Innovation as a term seems to be something a big corporate board says to a developer: “Oh go and build something that makes our brand look cool and innovative.”

Rubbish. Sooner we stop thinking about innovation the better. New/Untried/Different != Better for consumers.

2.  Disruption

Personally, I am a fan of disruption. But disruption means exactly that: creating chaos to the existing travel industry business models.

Perhaps that is why we do not hear much about disruptive travel companies in the travel business press as they take their advertising from, you guessed it, existing companies. Disruption can mean being seen as a travel industry outsider.

As an entrepreneur, disruption is an unlikely driver. You tend not to think about disruption – you think about problems. You don’t go out of your way to be disruptive but to deliver a solution in the way you think best. It that doesn’t match with how the existing industry works, so be it.

Me. I am not driven by disruption. It’s not a very positive thought. Lets discount this as a key entrepreneur driver.

3. Enjoyable

Yes, running a travel startup is enjoyable.  Your inbox is crammed with invites to speaking slots at global travel industry conferences and people follow you on Twitter because you are a travel industry celebrity. Who wouldn’t enjoy that?

Complete fallacy of course.

I have spent many Saturday nights at 10 pm when coding a solution to some edge case or replying to an email for someone who is upset with the service offered. If you think that is fun and enjoyable you really need to get out more.

Trust me, for most, running a travel startup is not enjoyable. Let’s discount this one!

4. Profit

There are some entrepreneurs who are quite happy just making money (yes, just that!)

Many of my clients are entrepreneurs and they setup perfectly sensible businesses selling travel services. Absolutely nothing wrong with that and, frankly, if you didn’t have people investing into independent hotels, new airline startups, setting up as tour operators, the industry would be a much greyer place.

Sadly though, most of these entrepreneurs are overlooked by ego-fuellers (trade press/travel industry conferences), hence building a business that makes money but doesn’t change the world is not seen as a valuable exercise.

Yes, making money is a sensible outcome for most entrepreneurs. Can everyone stop ignoring entrepreneurs who create valuable businesses just because they are not interesting enough.

5. This friggin sucks – fix it

I care very little about what other direct competitor companies are doing. The biggest challenge is solving a problem in the best way possible for the clients we currently have.

Simple.

These are the entrepreneurs we should value. These are the entrepreneurs who are looking to leave the world in a better place than before their input.

This is one reason when someone pitches a travel startup to me I don’t care too much about their solution but I get very interested in the problem they are looking to solve.

Focus on the problem.

Conclusion

Running a travel startup is an all embracing, immersive experience. If you are just striving for greed, profit or ego you are less likely to pull those 10pm evenings on a Saturday evening to solve your clients problems.

Would be great if the leading travel industry conferences would move away from innovation to a focus on what improves the industry or what makes a consumers life easier.

That would be a much more sustainable and healthy future for all entrepreneurs.

As I wrote recently, these new business models are certainly disrupting the conventional travel industry. But just because something is new, does it make it better? Was anything actually broken with the previous way of working?

So, lets compare a P2P approach versus how the conventional travel industry would approach the same problem:

1. Can you list a property that you don’t actually own?

With P2P it seems this is quite possible (See this story on Hacker News).

In the conventional travel industry the company that is principal would visit the supplier (yearly), even if overseas, and check that the property actually still exists.

At the same time, a basic heath and safety audit would be carried out as well as a check that the supplier is operating to best industry practice.

The traditional approach wins this one.

2. Who ensures that the product descriptions / images are correct?

With P2P the central website hasn’t any idea regarding the accuracy of the descriptions – well, not until a first customer reports back and comments via a review that all was not as described, by which time they will have had a poor customer experience.

In the traditional travel industry, descriptions/images are challenging to get right, too – however hotels/guest houses know they have to get this right and there are industry systems in place to distribute this content. It’s a fixed problem.

3. Will conventional travel websites wish to partner with P2P players?

Metasearch probably will want to work with P2P (as consumers tend to end up booking direct with suppliers anyway), but online travel agencies are probably less likely to integrate with P2P, primarily due to not wishing to mix an individual-provided service with a business-provided one.

This puts P2P at a disadvantage when working with the existing travel industry. At the moment the P2P players like to be seen as outside of the travel industry, so integration probably isn’t really a problem they are bothered about today.

However at the scale that some of these companies will need to work at in order to break even/attain scale suggested by their funding rounds, they will likely need to work with the conventional travel industry at some point because the industry has the necessary flow of travellers.

4. What are the protections against third party money laundering?

If anyone can list a property, does this introduce a money laundering risk?

The first defence against money laundering is “know your customer”. As a P2P marketplace you can have a situation where you neither know your customer nor your supplier.

In the conventional travel industry if you are transferring the money to a supplier that tends to be a business not an individual. Also tends to be a business you have regular contact with.

You might be money laundering (!) but at least you are not being used by a third party for money laundering without your knowledge…

5. Will P2P tour marketplaces lose their best performing suppliers?

There are 20+ tour guide P2P marketplaces. An individual selling via one of these marketplaces tends only to be bookable once on a particular day.

This approach is fine, but if that individual is in a popular destination they may be able to organise themselves to handle more than one booking a day.

Effectively they then become a tour operator rather than a tour guide. Tour operators (businesses) will have a different set of requirements both from a marketing and an operational perspective.

It actually could actually end up with a situation where a P2P tour marketplace loses their best performing suppliers as these suppliers “outgrow” the P2P platform.

Or perhaps an individual just doesn’t want to be running a tour every weekend but are happy to run a tour every couple of months.

Oddly, this builds a situation where the more successful the P2P tour marketplace is, the harder it will be to retain the individual nature of the suppliers (rather than working with specialist tour operators).

6. Do customers understand that they are buying from a person?

Some of these marketplaces take 100% of the booking revenue up front. In the customers mind this payment to the marketplace makes them believe they are booking with the marketplace.

When something goes wrong (eg. a customer turns up for a tour or accommodation and it isn’t ready, organised etc) the customer may as a result contact the marketplace for immediate resolution.

There will be little the marketplace can do as they don’t have any more knowledge or staff on the ground to fix the problem.

This can only end in a PR debacle as the customer will blame the marketplace yet the marketplace won’t have any capability to resolve it.

Interestingly, at least on eBay if a customer has a bad experience with an individual supplier, people are “trained” to know that it is an individual supplier they should be agitated with rather than eBay.

Also eBay does not have people turning up in the middle of the night at a distant destination and finding they don’t have any accommodation booked, so customer service does not need to handled in real time, 24 hours a day.

7. Are individuals permitted to rent their home/sell a tour?

In most countries the travel industry is a highly regulated industry. The regulation does tend to lock in existing industry structures and leave little room for business model innovation.

However, the rules are there and, until changed, they are the rules we all have to abide by.

For example, with accommodation rental, does the supplier have the right to rent their home? Does their home insurance cover sub-rental?

8. Will people providing accommodation/tours need to be insured?

If paying insurance becomes “necessary”, will that remove the fun, individualistic, accommodation? Will it remove all properties that are not permitted to be listed due to regulations/law, as they will be uninsurable etc?

Will individuals think twice about listing their property if they are prompted with a question about insurance (perhaps built into the listing side of the marketplace), as that will make them think about the downside?

9. Are the P2P marketplaces taking enough revenue share?

Take Airbnb – it takes about 10% or so. Is that sufficient to handle all the customer service questions that will be incoming? Is that sufficient for big customer facing marketing campaigns?

I expect there was a working assumption built into the business model that customer service would be handled directly by the individual property supplier, rather than the central marketplace. Not quite sure that that assumption will turn out to be correct.

Businesses on the other hand don’t mind paying a good % of revenue share, but only if it is a booking they would not otherwise have received.

10. What proportion of “bad” customer experiences are acceptable?

P2P is a high risk, high reward booking for a traveller. The products are mainly great – indeed much more attractive than those provided by the traditional travel industry. However with the great comes the occasional experience failure.

In the traditional travel industry products and services are carefully tuned. This means they are neither brilliant but equally they are never terrible either.

Will P2P marketplaces be able to handle the negative PR from a few poor customer experiences or will a few bad stories kill the concept?

Final question

P2P looks a really fun area to be innovating in within the travel industry. But will we still be talking about P2P in two years time?

For example, the recently loaded AirBnB has individuals with a room or property which it then promotes and sells to individual travellers.

One accusation aimed at these P2P sites is that individuals (on the supply side), generally, are not so great at keeping availability calendars correct.

The challenge is magnified when the same property is on multiple listing sites. When one booking is received, this requires the individual to log in to multiple websites and block the corresponding dates. Too much work!

A few years back a similar process was common in hotel distribution – that model failed as hoteliers did not log in to multiple extranets sufficiently regularly to keep data correct.

So, if it tends not to work with hotels with full time staff, then relying on the same approach when working with individuals is bound to be model-busting, or so was perceived as conventional wisdom.

Turns out conventional wisdom was wrong.

Step forward KeepMeBooked, a UK-based cloud hosted B&B/guesthouse booking platform. The company noticed that AirBnB use the iCal event format to import simple availability calendars.

Although iCal is designed to show events/calendar entries, Airbnb assume that any date not booked remains available. A neat hack.

Now an individual property owner can use a system like KeepMeBooked as their central booking diary and multiple listing sites can be automatically updated when any booking comes in. No more manual extranet updating work!

Is this groundbreaking? No. Innovative? No. But it is another piece of the jigsaw falling into place.

The important learning from this isn’t actually about calendar integrations at all (although that is rather neat) but about the nature of launching a large scale travel startup.

Airbnb has built a brand and consumer traction. It has built a supplier listing (with a few raised eyebrows as to quite how they did that). However, they never built any obvious foundations.

Conventional wisdom was to build system infrastructure/foundations first and go consumer-facing later. Airbnb has turned that on its head – it has gone with traction first, deal with problems of scale later.

Certainly worth reflecting next time you see a travel startup and you ask the dreaded question:

“How will you make that work at scale”?

NB: TLabs Showcase – KeepMeBooked and TLabs Reprise – KeepMeBooked 12 months on

NB2: Technical details of the functionality.

In short: Tnooz loves travel startups.

We also have lots of great coverage of the Phocuswright and EyeforTravel travel innovation and startup competitions, so it’s not just about Tnooz itself.

Now enter stage right: tech blog giant Techcrunch.

This week, Techcrunch Europe has taken a big swipe at travel startups. Quoting Europe editor Mike Butcher: “If I have to see another startup which wants to ‘aggregate travel experiences’ I will gnaw my right leg off.”

Ha!

Noooo – that is so wrong! Aggregating travel experiences is where all the action is in the travel industry! (well, alongside vacation rentals and hotel flash sales).

But, seriously, Butcher is right. If you read the detail of his post he isn’t really aiming at travel experience aggregator startups at all. What he is saying is that travel startup entrepreneurs should aim higher and look to disrupt the entire travel industry.

That indeed is a big challenge.

It’s tough to disrupt the entire travel industry as it is so vertically fragmented and so global, made up of many local marketplaces and procedures and legacy systems.

Most entrepreneurs that aim to disrupt actually end up creating a reasonable, fresh looking business, but do not change much how the industry works. This is by no means a failure, but not quite the industry changing startup that Butcher wants us all to strive for.

But disruption must be out there right? Here then are my top three areas where disruption is happening right now:

1. Room level hotel information

Before Room 77 [TLabs Showcase - Room 77], we had most of the hotel industry looking to propose the best HOTEL in a destination rather than the best ROOM in a property.

Although Room 77 isn’t the first, it has certainly been the first to bring to a wider attention the idea that room level information is a key driver to a hotel booking.

As a result of this disruption, others are introducing similar features.

2. Person-2-Person (P2P)

Plenty of disruption going on here. Want somewhere to stay? Go to someone’s home (not a hotel). Want a tour? Book from an individual (not a tour operator).

This is new disruption. None of the companies are currently from what we would think of as the regular travel industry. This area could be massive unless legislation from various national governments holds it back.

There are challenges though: for example, in vacation rentals there are plenty of tales of incorrect calendar data or tardy replies to availability requests. Perhaps, at scale, businesses are best placed to handle booking requests rather than individuals who may or may not be regularly available.

But yes, P2P would fall into the definition of travel industry disruption.

3. Go local

There are too many layers in the travel industry. For example, traditionally in tours you have three layers: source market travel agent, source market tour operator, destination market supplier/ground handler.

Each layer takes customer service, takes cost for cash flow etc, etc.

This is pointless. Disruption is coming from exposing the previously hidden local ground handlers (for tours) directly to source markets. That’s what we are doing with TourCMS for tours and others such as Tripbod are doing with local individuals.

Travel agents pretty much only existed because it was previously hard for consumers to contact these local businesses. Now it is easy using the web – the travel agent’s value diminishes and, therefore, this is a ripe sector for disruption.

Conclusion

Disruption is possible in the travel industry. There are even UK entrepreneurs aiming for big travel industry disruption, so it is not all about the buzzy Silicon Valley scene.

But aiming for big scale disruption is unnatural. Engineers tend to focus on the practical rather than the big vision and travel startups tend to be engineer-dominated – so we all tend to be a bit less bold than perhaps we should.

True disruption also requires change at the infrastructure layer of the travel industry – a tough, long-term, commitment perhaps beyond the resources of most startups.

Without solid foundations, a disruptive travel startup will look great for a day but won’t last a year as when it hits problems over scale, many of which often need a quick solution, there won’t be any quick answers.

Sadly, while travel startups are brainwashed to strive for innovation rather than building industry changing infrastructure, this situation is likely to continue.

Who and what are you (including personnel and backgrounds)?

• Gregoire Blond (25 years old) – graduated with a masters degree from the Toulouse Business School (France). Worked in the travel industry since 2005: safari guide in southern Africa, manager of luxury hotels in India, working in a travel agency. He continues to work as a freelance safari guide for French groups. Has lived in London since 2009.
• Simon Dujardin (26 years old) – an engineer, graduated from HEI Lille (France), has extensive experience in project management, from technical implementation to marketing. He lives and works in Lille, where the company is based.

What financial support did you have to launch the business?

We started the project with Euro 10,000 from our personal funds.

What problem are you trying to solve?

Who’sMyGuide was developed from a simple observation: it is easy for a traveler to purchase a flight ticket or book a hotel, but to find a personal guide is difficult and often requires booking through an intermediary.

Who’sMyGuide is a web directory that allows travelers to book their guides direct!

Describe the business, core products and services?

We work with three main clients:

• Freelance guides – our business model is Freemium, where self-employed guides can publish their profiles for free. Their profiles will go offline after the guide has been contacted three times. Guides can benefit from unlimited contacts by subscribing to yearly offers.
• Travel companies that employ guides – we offer tour operators, tourism offices, etc the opportunity advertise their guides on Who’sMyGuide. Guides have on their profiles information including description, logo, link to employer website – all contacts go through the employer reservation office. Guide profiles are sold on an annual basis.
• Advertisers – we offer personal advertising space on each guide page. We include companies with related products, such with hotels, car rental agencies, etc, to advertise on their personal audience.

Who are your key customers and users at launch?

At launch we are focusing on freelance guides that have a real need for online visibility. In order to start with guides all over the world, we are offering a one year subscription to the first five guides of each country.

Did you have customers validate your idea before investors?

We discussed with 50 different freelance guides through a mailing and phone survey. We also discussed with travel operators (big and small) at thee travel shows in London and Paris.

The vast majority of our contacts were thrilled by the concept and saw a real chance to increase their online visibility and direct bookings.

What is the business AND revenue model, strategy for profitability?

As mentioned above, our business model comes from annual membership from guides, employers and advertisers.

We need to start with a database of quality guides from all over the world. Because of the lack of competition on the guiding directory market, we aim to become the world’s leading guide search engine in the next three years with more than 6,000 guides registered for an annual turnover of £500,000 per year.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

• Good market knowledge.
• Founding partners synergy.

Weaknesses:

• Lack of experience in creating a company.

Opportunities:

• Lack of competition on the guides directory market.

Threats:

• Potential competitions from travel planners big players.

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

Travel agents, obviously, because we are in direct competition with them! A minority of old fashioned guides that don’t see the benefit to be visible online. Some professionals who consider everything on the internet should be free, or on a commission basis.

We have listened to them but we are confident that there is a real need from a large customer base of freelance guides and small and medium sized travel operators for whom the commission-based business model is not flexible enough for guides that want to manage the booking process (pricing, last minute booking…) from A to Z.

What is your success metric 12 months from now?

• 1 July 2011– 100 guides registered
• August 2011 – first revenue
• 1 September 2011 – 400 guides
• 1 March 2012 – 1,000 guides
• 1 July 2012 – 1,500 guides

NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

These incremental improvements fall into two categories: building the shop (including sourcing flight product) and marketing the shop (e.g. driving consumer traffic).

Skyscanner, one of Europe’s largest consumer-facing flight search utilities, revealed a couple of products that will assist with marketing its shop. This will help Skyscanner build on its 14.5 million unique visits per month (on web & mobile platforms combined) and 50 million monthly flight searches.

First up, is an updated iPhone app.

httpv://www.youtube.com/watch?v=5gscY1DVmLM

The key change from version 1 is a new “fly everywhere” search. Effectively you can run an open destination search and find where you could go and on what date the cheapest flight might be available. This is a little like the original Farecast concept (now incorporated into Bing Travel).

Skyscanner sources the data via 240 direct-connects with online travel agencies and airlines.

Living in the South of the UK (Southampton), I have 5 airports all within a couple of hundred miles. They are Southampton, Bristol, London Heathrow, London Gatwick and London Stansted.

The Skyscanner iPhone app now enables me to search outbound routes from all of these airports at once. However, this is only if I search using the full UK airport list.

Kayak still wears the crown for a multi-starting point flight search as you can explicitly state upto four airports to search from.

Although Kayak has a multi-starting point search, a single destination must be provided (for a flexible date search). So neither Kayak nor Skyscanner quite do what I want yet, although both are well ahead of others in this area.

Another Skyscanner announcement June 24 pertained to its new Facebook flight search tool.

This enables searches to be made within a Facebook page using a free text query. For example, a customer can post “London to Edinburgh on 29 June” and get a quote for the cheapest price for that route on that day.

This service is not an application. To activate it, all a user must do is “like” Skycanner Flight Search on Facebook. (But, be careful: The flight search is a separate profile and not to be confused with the main Skyscanner profile page.)

This new service is built on functionality that was initially trialled on Twitter (@flyscan). I had a play with it then and it certainly works, although it is a long way off from passing the Turing test. Fun though.

When it comes to marketing the shop, in a third development, Skyscanner announced it would open a Singapore-based operation in September.

Skyscanner already provide services (including the recent iPhone app) in 23 languages.

The new office will enable them to push on in Singapore, China, Indonesia, Japan, India and Malaysia, all countries where Skyscanner already is seeing good growth.

So that’s one and a half inches and a big step to the East….

Like a kid in a sweet shop, there are endless consumer and industry pain points all apparently crying out for a solution, whether it’s the somewhat irrational desire to run an airline or a firm belief in coming up with the “next big thing” in travel technology.

Whatever the case may be, the majority of these new companies are small, or at least have to start out as bit-players.

Of the 200 or so travel startups covered by Tnooz TLabs, only about a third have received any funding at all (of any substance). The remainder are privately funded or bootstrapped.

Circumstantial evidence would suggest that some of these companies are either struggling or have yet to feel the need to seek additional/larger investment. That by itself isn’t so much of a surprise – newly formed companies struggle regardless of the industry vertical they operate in.

But perhaps other factors are coming into play, at least in relation to travel startups. The three core challenges for the under-funded travel startup (looking for global market share) are:

1. Customer acquisition requires upfront investment

Even though longer term returns from growing a customer base can be demonstrated the money still needs to be found upfront. Buying Google traffic is costly (and shows no sign of reducing anytime soon).

2. Sometimes you need to get “on the ground” in different countries in order to sell your service to your partners / suppliers

This incurs real expenditure that a non-funded startup can struggle to meet.

3. Larger travel companies are unable/unwilling to work with you

Sometimes they believe (rightly or wrongly) that they can recreate what you have done themselves (especially if not a technically challenging scenario – such as trip planning).

Sometimes larger companies can’t work with smaller startups because the smaller startups just can’t handle the demand. I have seen big travel websites unable to work with smaller product suppliers because they just don’t have sufficient stock to handle a big company’s traffic.

So what happens next?

With some smaller startups in pain, with no obvious route to success, funding begins to look attractive.

Then there is the mid-funded set of travel startups – these take funding in the region of $2-15 million. To take that funding you have to consider that you have the potential to build a $100 million business.

The challenge this mid-funded set of startups have is that there aren’t really any travel industry sectors left that you could build a $100 million business WITHOUT taking market share from an incumbent travel technology company. They won’t let you take that market share without a fight.

So, now the startup is fighting with an incumbent. Suddenly that $2-15 million funding isn’t looking so much. In fact its looking positively insufficient.

Hence we are now seeing VC-led funding in the $50-$100 million and above range in some sectors, probably with the mantra of “if you are going to fight an incumbent, fight with sufficient force and power that you stand a chance of actually winning.”

The incumbents are big but they are slow. Half of the reason you need the $50-$100 million+ funding is to achieve your initial growth in 24 months. Speed is your ally.

Taking all this to the natural conclusion, is it therefore inevitable that the big plays from travel startups will now be heavily funded (when facing incumbents). The smaller funding plays just don’t have the ammunition now to deliver on their opportunities?

Is it now: “Go big or don’t bother”?

There are those who have worked previously in flights and hotels (who understand the travel industry, but not tours and activities) and those who come from a tour and activity background (but are coming fresh into travel distribution for the first time).

And then there are those with no industry experience at all, but – in that often refreshing and disruptive style – want to create something after finding a problem that needed solving.

All three types tend to make quite different assumptions about the challenges of the sector.

So here then, in no particular order, are my top five surprises that those coming from outside the industry or the flight and hotel sector need to consider.

1. The missing product data

In flights and hotels there are plenty of sources of transactional product data (descriptions, dates, prices, availability). Actually there are so many sources you can play one off against another and negotiate to get a better deal.

With tours and activities there is no data to build your new service on. You pretty much have to go out there and collect the data yourself.

This leaves aggregators and intermediaries either selling products (such as city based excursions and attractions) where availability isn’t an issue or they pass the consumer over to the supplier in some fashion (web traffic referral, enquiry lead via email etc).

2. The billboard effect doesn’t work quite the same way

Cornell University/Chris Anderson published a famous study outlining the billboard effect that occurs on Expedia. The analysis showed that when a hotel was listed on Expedia there was a 20% uplift in reservations (received via non-Expedia channels – eg. its own website, call centre etc) above and beyond the reservations generated on Expedia itself.

This impacts commission levels – eg. if Expedia generates 10% of bookings for a supplier at 15% commission, if there is a 20% billboard effect, the actual Expedia commission on the 10% of bookings is only 7% not 15%.

One problem with tours and activities is that the product names are very generic and tend to be based on destination names. This will mean that multiple suppliers will have similar sounding products – ie. multiple suppliers will see an uplift in reservations.

There is a billboard effect though if the supplier’s name is disclosed on the aggregator and intermediary website.

Anderson explains it here:

httpv://www.youtube.com/watch?v=nTv26PBig-o

3. No price comparison

Everyone’s products are different. In flights / hotels you can create a price comparison website as you can source exactly the same hotel and flight from multiple distribution channels.

With tours & activities the products are not directly comparable. Price comparison doesn’t exist. Metasearch doesn’t really exist either (its more of a meta-esque  idea search rather than a meta-product search)

4. Replicable products

If you approach one supplier in a region with a product organised by another there is quite a high chance that that supplier can replicate the same product.

In hotels you can’t approach a 3-star hotel in one location and say please can you be a 5-star hotel somewhere else. In tours (more so than in activities) this happens all the time.

5. Local vs non-local businesses

If you are selling a tour to Italy the end supplier (the tour operator legally responsible for the delivery of the service) can be either located in Italy or could be located anywhere in the world (eg. in the source market such as the United Kingdom).

Both though are considered to be the primary tour operator.

Gets messy quickly as you can find there are companies who are experts in a destination but are based no where near it. The local operators often have a version of the same product at vastly lower prices.

You start mixing up the two approaches on the same website and consumers will struggle with making product selection judgements (due to the price discrepancies between one tour and another).

Finally

It is part of the challenge of the sector that these differences exist between tours and activities versus flights and hotels.

Establishing a strategy and implementing technology that works for one travel sector doesn’t necessarily work for the tours/activities sector.

But hang on a second, is the idea achievable as a small startup?

Will consumers or the industry take to it in sufficient numbers for it to be a commercial success? Or will you just get plaudits at launch but six months later quietly close your doors when no one is looking?

Here are five themes that always seem to struggle.

It does not, however, necessarily mean that it is impossible to run a startup based on these models, simply that perhaps wannabe travel entrepreneurs should at least consider switching their focus to other areas where success is easier to come by.

1. Selling consumer leads to travel agents

There are so many of these startup companies around! It seems natural that agents will buy leads, but really they are a lot of work for the agent to handle – they don’t really want an email inbox full of “I want to go to Spain, what can you sell me” style questions.

That is why we all built websites in the first place, right?.

Now, this type of business has the ability to work when you sell such leads to the next layer down in the industry (eg. tour operators or suppliers) or when the lead is well focused (i.e. the lead includes some element of product selection and travel dates rather than just open ended unspecific requirements).

Suppliers have the margin (30-40% rather than an agents much smaller 5-15%) to afford staff time to dedicate to answering these emails properly.

The trick is to get the leads to the right suppliers, not in sending leads to agents that then have to work out which is the appropriate supplier.

Do that work and the lead starts to have value.

2. Trip inspiration/trip planning websites that are too focused on user interface

Who really is going to spend an hour fiddling around answering questions using a fancy UI hoping that at the end of it the website is going to come up with a wonderful, fully matching, trip plan?

There are travel products that are inherently inspirational. These are what you should focus on exposing to consumers. Product, product, product rather than UI, UI, UI.

Big caveat here, as noted philosopher Bertrand Russell once said: “Time you enjoy wasting, was not wasted.” So if you are going to have a user interface-oriented trip planning website, at least make it enjoyable! Easier to say than achieve though.

3. Two-sided marketplaces

A two sides marketplace is one where you both generate both supply and demand. A conventional business might be one where you are generating consumer demand, but selling another organisation’s supply.

The problem with two-sided marketplaces is that to grow them companies need to run the so-called hockey-stick growth curves on both sides at the same time, and at similar rates.

The worse case scenario is to end up with too much supply and insufficient demand (then suppliers get bored and leave, unless they have another reason to stay).

If you are starting a small travel startup then focus on a sector where you just need to achieve one hockeystick growth curve not two.

4. Solving a new consumer problem

If you are going to solve a consumer problem ensure it really is a problem that consumers have. Don’t invent a new consumer problem and then look to solve that.

Otherwise you have to both sell the idea, as well as sell your solution to the problem. Double the work.

One of the classic cases in the sector is the startup created primarily after the founders had a problem of their own when travelling, a relatively isolated issue rather than widespread.

Also, just because the problem exists doesn’t mean there is a business to be made in solving that problem. Gaps in the market hardly ever exist because you are doing something completely unheard of beforehand – but because others have entered and exited before you.

5. Small travel agents setting up flight/hotel booking websites

Don’t! It just isn’t necessary. It is a battle you cannot win versus the existing, larger and probably well-established online travel agents.

Even using simple technology doesn’t make it easy.

If it takes three hours to configure a hotel in a reservation system (including loading in a contract, finding images, creating a description etc) and you get one booking a month per hotel, then that three hours looks bad.

But that same three hours is necessary for a company which sells 20 bookings for that hotel per month. Much better ROI. Just not a game small travel agents can win.

As always, would love your feedback in the comments. Any models to add to or ones to subtract from this list?

Twelve entrepreneurs pitched. This is a quick roundup of which organisations took part and what their services are about.

Room 77 – Room views and reviews. Now at 500,000 hotel rooms in their system. If you were at the conference and missed their presentation then you missed out on a great behind the scenes look at how the sausage factory works to generate the room specific floor plans etc. Shortlisted into the final but didn’t win. [TLabs Showcase - Room 77]

Zonear – Custom mobile maps. Neat little solution for big events, festivals etc to create their own mobile maps. Can open the map from a QR code or specific wireless point. [TLabs Showcase - Zonear]

Email Vision – Email marketing. They have 600 clients in the travel industry but not much innovation on show in their pitch. Still a good business to be had selling tools to do the basics right, innovation doesn’t always equate to business success.

Pocket Guide – iPhone based audio city guide with a social twist. Lovely tech, you buy a guide, follow a route and stay informed. There are a lot of these city guide type applications and competition is fierce. One USP is that once you have followed your tour (and uploaded photos from each spot) the app creates an embeddable animation of your route – that you can share with friends via Facebook etc.

Trust You – Social semantic search. These guys can take a free-text hotel review (i.e. one written long hand by a consumer) and pick out the key aspects. This data can then be sold to hotels (as a tool) for their own social media / review monitoring or packaged to be included into hotel booking websites.  Initially created for hotel reviews future plans include moving to restaurant reviews then consumer electronics. You can play with their “magic box” on their website. [TLabs Showcase - TrustYou]

Fresh Creator – A SaaS model “build your own website” service for small hotels and guest houses (and take online bookings too). Looks nicely presented and well built. Demonstrated good traction in the presentation.

Get Your Guide – Tours and activities intermediary. Big, bold statements from Get Your Guide about overtaking Viator/Isango shortly (as measured by number of products on sale). Always have liked what Get Your Guide are doing and they present strongly. [TLabs Showcae - GetYourGuide]

A la carte maps – Maps. Real maps. Certainly an original pitch as part of the demonstration included how the map could be used as a rain hat (complete with co-presenter pouring water over second presenters head). I was kind of expecting the pitch to get into how the map has QR codes for special offers – or perhaps how it was printed on demand based around a travellers individual chosen tour – but no – its a waterproof paper map. Least has very simple social and UGC functionality as you can annotate the map (using a pen), share a map (by passing it to someone) and several people can read the map at the same time (by standing close to someone and looking over their shoulder). These are functions that most iPhone based mapping systems have failed to execute on. Nicely designed too.

Add To Trip – Social travel planning – a tool (few lines of JavaScript) you can add to an existing travel website to help friends and family plan together. Probably is a market for tools that can be built into existing sites so good chance of getting traction this one.

Ixaris – Temporary Visa / Mastercards (plus other payment services). One use is that you could only activate the card on the day of hotel check-in – stopping the hotel from charging you before you arrive….. Also if you are a consumer you can use the Ixaris payment solution to NOT pay the EU low cost airline credit card surcharges. Thats almost a business opportunity by itself and should have its own standalone website and brand….

DataCash – Payment gateway with local payment capability. For example, if I am a Brazilian and want to pay a UK-based travel service provider, I can pay via a Brazilian payment system. The UK based travel service provider only has to do one gateway integration (and doesn’t need to have a merchant account with the Brazilian merchant provider). Out of all the pitches this is the one company who I would use in my business as there is a very big need for this – especially for incoming tour operators with clients from around the world (Single source market travel companies (e.g. outbound agents) won’t find this so useful as could do a conventional payment gateway integration that better matches their specific source market)

SITA – Presented Malaysia Airlines MHBuddy, a Facebook app that has full booking, check-in and social seat pick. See previous Tnooz coverage from launch. Great to see the app demonstrated in real time.

And the winner is………… Trust You. Well done co-founder Benjamin Jost!

All these pitches together gave a great collective insight into what is coming in the travel industry (and what is already here!). Not quite sure why so many conference attendees missed what were undoubtedly the best sessions of the conference!

You can slice by product vertical (flights, hotels, tours, car hire, cruise etc) with each having its own annual conference, often many around the world.

Then you can slice by how the product is sold (online, retail agent, business travel, groups etc). Again, each slice has its own conference(s).

Then you can slice by topic – you will find distribution conferences, social media conferences, payments and fraud conferences, destination marketing conferences etc etc.

Chaos. In fact, you could easily spend your entire life just going to conferences and still never get the full picture.

But one theme runs through many of these conferences – the bigger companies get to speak and the smaller companies get to listen. Immediately the inference is that somehow due to company size they are somehow going to be correct, relevant or worth listening to.

Now, in the online world, many of the larger companies are either online travel agents or are intermediaries of some kind. The smaller companies doing the listening tend to be the suppliers.

This has the unnatural effect that much of the discussion at the leading travel industry conferences about social, local, mobile etc, is from the perspective of an agent or intermediary.

This leads to problems as I will explain:

What problems do B2C intermediaries solve?

A travel product intermediary (an entity between the consumer and the supplier) solves three key problems:

• Search/suggest - surfacing, suggesting and letting consumers compare products.
• Trust - is it safe for the consumer to book? (Often solved by the intermediary providing a booking mechanism where they take the responsibility for getting the booking information to the supplier)
• Distance – historically an agent in one country could sell a distant destination far easier than the consumer could contact that remote hotel themselves.

In flights and hotels, sizeable intermediaries have become market-dominant.

Can you solve the problems intermediaries solve, but in another way?

As the old adage goes: you are not a competitor if you have the same solution but if you are solving the same problem….

So lets look at the three challenges that intermediaries solve again:

• Distance - the web solves the distance problem once and for all. If one website is a click away that is the distance problem solved.
• Search / suggest - a non transactional metasearch can solve this problem quite effectively. Or perhaps even a vertical search solution on a leading mainstream search site. We do need a layer of search/suggest travel websites but they don’t need to be handling the transaction in order to be rewarded.
• Trust - one of the words that is always bandied around when talking about social is that it helps build trust. This is accepted now and if you say this at a conference you may as well be saying the great thing about lightbulbs is they help you see in the dark. We are now beyond discussing trust-building through social media.

So, can social media lead us to a point where we don’t need intermediaries at all? Could it actually happen?

For sure, this debate will not get aired when travel industry speaking slots on social topics are heavily populated by intermediaries as they will want to steer clear of how social media potentially creates significant long term risk for their enterprises.

Is this also why Glenn Fogel, head of worldwide strategy and planning for Priceline, said overnight at the No Vacancy Sydney conference that hotels shouldn’t invest in social media and why he considers Facebook a waste of time?

Fogel is a well respected thinker within the industry and maybe he is not a social denier (like his conference statement may initially make him out to be), but he has instead spotted the long term risk, and is trying to mitigate it?

The rise of social is a supplier centric story, not one driven by intermediaries.

Opportunities

If this hypothesis is correct then it is not all doom and gloom for the intermediaries. There are opportunities as well as obstacles.

For example, how do we measure supplier trust using social mechanisms? Could someone devise a Klout for travel suppliers measuring product trust rather than influence? Would it help to see transaction data to help create that score?

If this happens, I expect it to happen in tours/activities first, rather than flights/hotels etc). Two reasons:

• The barrier to entry to setup as a tour guide/tour operator is much lower than to setup as an airline/hotel, hence there are more untrustworthy suppliers. This leads to a greater chance that a consumer, on their first transaction with that company, will look for strong trust signals prior to booking  (hence revenue could be generated from running a trust system as the consumer will likely value the information and act on it).
• Flight sales/hotel sales intermediaries are defending against the long term rise of the supplier. In tours/activities we hardly have any intermediaries to start with, so anything new would just have to solve a consumer problem rather than take on incumbents at the same time.

What do you think? Could socially measured trust along with the web decimate the need for travel third party distribution?

Indeed, are intermediaries a dying breed?

Entrepreneurs tend to be passionate people and suggesting someone is wrong or their vision could be improved is the fastest way to get yourself considered as negative, arrogant or worse.

Having said that, there are still some common themes that I use to evaluate whether a proposed business, in particular in the tours/activities/inspiration sector, makes sense.

[Feel free to throw stones in my direction]

1. Inbound trumps outbound IF trust can be generated between customer and incoming supplier

For example UK customers will book straight with a NZ based company (agent/operator) if going to NZ (rather than an outbound, UK based, travel agent).

2. Suppliers trump agents/distributors

This is especially the case when selling complex multi-day tours (hence metasearch more likely to win long term vs distributed transactions where the sale takes place on a 3rd party website)

3. Curation trumps aggregation

Its a very low barrier to entry to setup as a tour guide or a tour operator (much lower than to setup a hotel or an airline). Curation therefore is key.

Curation requires product/destination knowledge to be done right. If you are going to aggregate you need to have the balls to say when a supplier or product is rubbish (or use consumer reviews to do that for you)

4. Don’t overcomplicate inspiration functionality on your website

The product is inherently inspirational – let it shine. Instead focus on tools that aid product comparision and let the product do the inspiration rather than the UI. Video works too.

5. Customers rarely travel to the same destination regularly

Hence CRM and long term relationship building using social layers much less useful than in chain hotels / airlines (where a longer term multi transaction relationship can be built up).

Tough therefore to build a communitiy around your website (NOTE: Tough, not impossible)

6. In multi-day tours, efficiency trumps automation - in day tours, automation trumps efficiency

Understand that they are not the same and require a quite different approach technically, marketing wise and in how you can create partnerships for onward distribution.

For example automation indicates commoditised product, efficiency is much more about human tailor making services in a clever way.

7. Be aware of agent requirements

Agents of small tour operators (who will create a sale every few weeks) will never learn your product sufficiently to have confidence to sell without contacting you.

Therefore when planning an agent interface, unless they are a high volume agent, consider their needs just like a consumers coming to a product for the first time.

8. Don’t launch a startup without thinking about the industry foundations on which it is built

Very easy to build a website in a month that looks great but has stale / poor / limited data or doesn’t have an automated feedback loop to keep data constantly correct.

Data is the rock on which you can build a startup with value. Better to have a smaller number of products where you have great data on than hundreds of products where it is just a listing.

You can build a business without solid foundations, but a funded startup needs to solve a problem in a way that scales in order to attain the ultimate value that taking funding needs.

9. Don’t get distracted by products that never sell

This sector is unique in that you can create products (eg. tour itineraries) that never sell. They sit there on websites and don’t do much (except attract a few search engine visitors who then buy your core tours).

Airlines, hotels etc when they are featured on travel websites tend to only list products that exist! Bear that in mind when counting tours on a website etc or conducting market research into a new destination.

10. Don’t reinvent the wheel

The hotel/airline distribution verticals have already addressed many of the distribution issues that we are just hitting in tours/activities.

Not enough people in tours/activities have spent any time in hotel/airline distribution so there does tend to be quite a bit of wheel invention going on….

Summing up…

These rules may not be right for every situation but breaking them should be a conscious and considered decision rather than made accidentally.

What other fundamental rules have I missed?

In the intermediary layer of this sector, deals have been struck between those who own the consumer and generally a singe intermediary (eg. the recently announced deal between TripAdvisor and GetYourGuide).

No intermediaries have all the product, hence when these bigger deals are announced only a subset of end suppliers are involved (with the other suppliers in the same destination often locked out).

The reason for this is because intermediaries, historically at least, have contracted their product manually and only needed to work with a few suppliers in each destination to attain good global coverage.

The game has now moved to the next logical layer, with the launch of Pocketvillage. Formed by five young entrepreneurs from Germany, Pocketvillage is a metasearch for tours and activities.

The partner list reads like the who’s who of the sector. Now a consumer can go to a single website and search all the silos that existed previously in one place.

Live on the site today are Intrepid Travel, GAP Adventures, responsibletravel.com, Urban Adventures, Tripbod, TourCMS (disclosure), GetYourGuide, Viator, AirBNB. Many more intermediary partners announced. Flights are provided by Kayak via a standard affiliate partnership.

Here is a clip of the launch at ITB:

httpv://www.youtube.com/watch?v=JaHJxdjVFOM

Linking up with all these websites has been a fair technical challenge. Here we talk to Jann Kleen (CTO) about OpenTravel standards in the sector:

httpv://www.youtube.com/watch?v=tiYF0eWS47I

The core question that Pocketvillage has to address is what is it going to do with all the ingredients it now has at its disposal.

Will it try to make a fruit salad (each ingredient retains its individual taste and can be recognized as separate by the consumer) or will it make a blended fruit smoothie?

Will be interesting to watch how they grapple with this core positioning decision.