cleverlayover main pic
2 years ago
 

Startup Pitch: CleverLayover finds connecting flights to save money

CleverLayover is a startup created by six students at Harvard Business School. It launched to the public in April and has picked up a lot of interest in the mainstream media travel pages.

The proposition is fairly simple – CleverLayover will save you money on international flights by creating an itinerary from non-partner airlines which includes changes, connections or layovers.

Like most start-ups the business was borne as a result of the founders’ own travel frustrations. In particular they noted that if they booked flights from the US to Europe which connected the trans-Atlantic leg with a low-cost carrier the savings could be impressive.

So for someone in New York visiting London, JFK to London Heathrow direct might be significantly more expensive than Newark-to-Paris CDG followed by CDG to Gatwick.

While it might be possible to do this manually, CleverLayover is able to automate this. The user will be redirected to the booking page of the carrier, or the OTA, or the meta where the bookings take place. CleverLayover then pockets the commission on the sale.

Before the Q&A, here’s CleverLayover’s Vine…

Tell us how you founded the company, why and what made you decide to jump in and create the business.
We were travel hackers ourselves. We had consistently seen savings by finding layovers and booking through non-partner airlines. However, this involved spending hours searching different combinations manually. From our initial test, we saw that over 70% of routes had savings. So, we decided to build a product around our hack.

Size of the team, names of founders, management roles and key personnel?
We have six founders. All of us are students at Harvard Business School.

  • Phil Hu- handles the product
  • John McGugan- handles data gathering and analyses
  • Matias Sulzberger- handles digital marketing
  • Louisa Xu- handles social media and finance
  • Mike Anello- handles partnerships
  • Kaushik Anand- handles communications and social media

Funding arrangements?
We have created the product and picked up 20,000 users with less than $1,000 spent. Our initial funding came from the school as we were started this as a class project.

Estimation of market size?
Air travel search is a $150 billion opportunity in the US alone. Finding the cheapest price is the most fundamental value proposition here. We believe that we would be able to target this large market with our unique solution – finding the cheapest price between any two cities

Competition?
While no other site does exactly what we do (we find cheaper tickets than any other site today), we see metasearch engines and online travel agents such as Kayak, Skyscanner, Priceline, Expedia, Travelocity as our main competitors.

Revenue model and strategy for profitability?
We get commissions from the booking sites for every ticket booked. Currently, we also sell insurance (to ensure customers don’t miss connections). In future, we will sell car and hotel bookings to provide a holistic travel experience.

What problem does the business solve?
CleverLayover finds the cheapest air ticket between any two cities by finding a layover and looking for tickets through non-partner airlines.

How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
We initially thought of this as a niche business for the budget traveller. However, from our  conversations with both users and experts on the industry, we realize that finding the cheapest price is the most powerful value proposition in travel search and can help us become the destination for travel bookings in future. So, we added one way trips, insurance and hotels/cars to our site now.

Why should people or companies use the business?
30% of our searches result in savings compared with any other travel search site. On these searches, the customer saves over $200 which they can put to better use during their travel.

What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
We are seeing high engagement on our Facebook page where we upload a cheaper way of traveling to popular cities everyday. We are also running contests to get customers to find the cheapest price and tweet about it. Soon we will start blogging about different ways to travel and save money in order to build a community of travelers In conclusion, we want to build our traffic primarily through word of mouth and organic methods rather than expensive SEM.

Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
We expect to reach over 10 million users and $100 million in bookings in three years. Our main challenge will be in customer experience – we do not want the customers facing any hassle because they are transferring via non-partner airlines. We want to partner with some low cost carriers and insurance companies for this.

What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
While the travel search space has seen a lot of companies, most of them have innovated in meta search and in the user interface. In the last decade, no one has worked on the heart of the problem – innovating in the search functionality. We do that and are hence able to bring down air travel prices by $200 or more per booking.

On the other hand, while airline alliances provide great benefits for customers, we think there’s an opportunity to provide value outside of those clusters. Before CleverLayover, no solution was providing this value to customers.

What other technology company (in or outside of travel) would you consider yourselves most closely aligned to in terms of culture and style… and why?
In terms of business strategy, we would consider ourselves very close to Uber and Airbnb. We solve a similar inefficiency in demand-supply allocation as they did in their respective markets to bring down the pricing levels.

Which company would be the best fit to buy your startup?
Any of the companies looking at travel search- Google, Priceline/Kayak, Expedia, Skyscanner, Momondo etc

Describe your startup in three words
Hack your travel

Tnooz View

There is a tendency in the travel start-up ecosystem for businesses to try too hard to solve a problem which doesn’t really exist or to jump on whatever buzzword bandwagon is rolling into town.

CleverLayover does not fall into this trap. “Saving money” is a basic proposition which most travellers understand and would like to be a part of.

Assuming that CleverLayover’s claim that “[its] users find savings averaging $200 per trip on one in every three searches” is correct, the business might come unstuck on other, more practical issues.

For starters, there is a value versus price conundrum. I might indeed save $X00 by flying from A to B via C rather than flying directly from A to B, but there could be additional costs incurred as a result which might eat into the savings.

Users will also need to quantify how much their time is worth – if A to B via C adds ten hours to my journey is the saving worth it?

And then there is the inconsistency of hand luggage entitlements.  And the variation in charges or not for hold luggage. Flying on non-partner airlines means that you have to carry your luggage around the airport. If the A to C leg is cancelled, then the C to B will need to changed, again incurring a fee. What happens if C to B is cancelled and the hotel at B has been paid for in advance on a no refunds basis?

For consumers, the bottom line will be that value versus price conundrum. Maybe a Harvard graduate planning a long trip to Europe and with time on their hands will accept the potential inconveniences for the pleasure of saving a few hundred dollars; a thirtysomething lawyer with limited free time, planning a long weekend away to celebrate a significant birthday, might not want to risk spending a night in Terminal 3 for the sake of saving the aforementioned few hundred dollars.

As a business, CleverLayover’s success will depend on how many people put saving money above the potential inconveniences. The user experience on the site is excellent so there will be a lot of traffic to the site as travellers look for bargains. How many of those then end up booking is the big question.

 

 

 

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Martin Cowen

About the Writer :: Martin Cowen

Martin Cowen is contributing editor for Tnooz and is based in the UK. Besides reporting and editing, he also oversees our sponsored content initiative and works directly with clients to produce articles and reports.

For the past several years he has worked as a freelance writer, specialising in B2B distribution and technology.

Before freelancing, from 2000-2008, he was launch editor for e-tid.com, the first online-only B2B daily news service for the UK travel sector.

 

Comments

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  1. Gudmundur Mar

    Good idea… but Dohop.com has been doing this since they started (10 years ago?) Don’t understand why they don’t get more attention.

     
    • Kevin May

      Kevin May

      @gudmundur – maybe because they hadn’t told us about it? 🙂

       
  2. karl ziegler

    The idea is ok and if hopper got 20 mio $ ( sic ) investor can provide some to them too … BUT do not forget that lowc cost airlines in Europe let you 1 single luggage for a 10 kg max weight and 55 x 40 x 25 that is absolutely nothing and a small ( very small ) hand bag, and if your weight is more then 10 kg is an outrageous fee . and this i is where the service can be a trick. Guys we want you to coop with us !

     
  3. Timothy O'Neil-Dunne

    Heddi
    Yes that is correct (sorry could not paste this into your reply).

    Caveat emptor on hacker fares and this situation. Unless there is remedial coverage for this type of activity then you can easily be SOL on the service recovery. Hence my comments.

    Cheers

    Timothy

     
    • Heddi Cundle

      That’s a serious buyer beware issue. Thanks for the clarification 🙂

       
      • Timothy O'Neil-Dunne

        The airline (and travel in general) product is one of the most complex in the world. How we as an industry put so many barriers in front of our customers is cause of continual amazement for me. But then it becomes some of the fun we get from it. Either that or we are sick masochists 😉

        Cheers

        Timothy

         
        • Heddi Cundle

          Well, my objective is to simplify this complexity. But interestingly, a few weeks ago a customer said he felt myTab was ‘too’ easy to use and he felt a bit disconnected. He was so used to the familiarity of frustratingly hunting prices on multi sites for hours, he needed to reset his purchasing patterns!

           
  4. Timothy O'Neil-Dunne

    This is a tough area.
    The students have opted to avoid the issue of a service guarantee with a somewhat less than complete insurance policy (from where I can tell.) That they dont actually book exposes the reality of air fare results…. IE that the results are never guaranteed and are really just a pile of caches that may or may not be relevant as Heidi pointed out. That anyone can find cheaper flights is not a secret. Road warriors know this dodge (and many others) and the ones to avoid as well. The tradeoff of the absolutely lowest fare assumption vs the inconvenience and risk can be good for some but clearly not all.
    Will this become the Uber of flights? Nope. Someone will find it interesting and with the pedigree that HBS provides some investor might even want to take a flyer (pardon the pun) to the team. But in the end can you fulfill and provide a customer assurance of the reliability of the results? Nope nada… That is the Achilles heel of this idea. When/if the airlines and/or the other sellers change their ability to give assurance to the results this might change. That will occur when hell freezes over. Moreover NDC based shopping will make this type of comparison shopping harder to provide with the unbundling of the airline product.

    Still its a nice idea and I wish them well with it.

    Cheers

     
    • Heddi Cundle

      Hi Timothy, it’s Heddi, not Heidi – everyone gets it wrong 🙂 I actually like what they’re doing but agree, the flow is lacking to create the end result. But if you’re going to create a travel booking portal, it needs to work. Not just the search but the actual end booking result – or the whole process is futile as they’re selling an idea but not a booking platform. Layover travel isn’t my forte but I’d be interested to hear your thoughts on how the changes in connecting flights will affect this start up i.e. flight times amended, causing the second leg to be jeopardized through time-conflicting connections. Adding to this, if the $200 saving results in zero room to amend a booking, it may cost the traveler more cash in the long run.

       
      • Timothy O'Neil-Dunne

        Heddi… so sorry. I know you! so its where fingers and brain dont cooperate!

        The meta search sites have some of this functionality for example Skyscanner has its NPT (non-protected transfers). As soon as the user is confronted with two booking buttons – they run a mile. Putting the risk on the customers head becomes a burden most (if not the vast majority) do not wish to take on.

        The booking bit is frankly very hard. My team in VaultPAD has extensive experience in doing this and its not easy. The legal, commercial and operational issues far outweigh the technology issues. I fly a good number of miles a year and missed connections and service recovery is a hot button for me.

        Cheers

        Timothy

         
        • Heddi Cundle

          Hi Timothy – yes, that’s me! Ok, so for eg: the customer uses CleverLayover, saving $200 vs other OTA’s/meta’s. They need to click/confirm the first leg, then click/confirm the second leg. But now if the flights change departure/arrival time and the connections don’t match, the customer is now having to spend more $ to achieve their travel destination. Because (if what you’re saying is what I think I’m reading), the two clicks aren’t a done, combined partnership between the two flights – each is its own identity and not responsible for the other. So the only person losing out is the customer, correct?

           
    • Phil Hu

      Thanks for the thoughts, Timothy! We fully acknowledge the current limitations–right now users are choosing between paying $200 more or taking a risk of missing the connection. Though we don’t currently provide support other than allowing you to lengthen your layover to reduce the risk, ultimately we’re building the business toward making this a better experience. We want to help people find value!

       
  5. shreyoshi

    I agree with the points made by Martin, I feel market maturity to be one of the major factors in the success of this model, price sensitivity is a key factor in under-penetrated travel markets, case in point, a lot of VFR traffic from India to north america is highly price sensitive and at times they do take random combinations of flights to reach. So origin country & TG based marketing has to be carefully thought through by the CleverLayover team as the risk of undertaking the combinations could snowball into spoiling someone’s trip.

     
    • Phil Hu

      Absolutely, though we’re working to insure layovers to make the experience as mainstream as possible!

       
  6. Heddi Cundle

    I tested the site and for SFO – MAN return, it provided dozens of results (most not including cheaper price comparisons). I clicked the 1st one, which routed me to momondo.com, which then routed me to air.faregeek.com which then asked me to confirm my flight to Dublin at different times than I requested. Ultimately I’d be spending 3 hours on searches trying to get this system to actually give me what I wanted. Which goes back to the same issue in travel: lengthy pre-booking price frustration, of which myTab’s solved (15 minutes from search-to-book as our customers are cash rich so price isn’t a focus). I was hoping that CleverLayover would be a potentially good integration partner for myTab yet but based on the experience I encountered, it’s actually opposing our objectives through sheer errors & time inefficiency. Bit of a pity 🙁

     
    • Heddi Cundle

      Just added ‘notify of follow up comments’

       
    • Phil Hu

      Hi Heddi, We’re sorry about that experience. We’re definitely aware of the frustration around the booking experience–right now we’ve only been working to optimize our initial search, but we’re looking into which booking partners would be easiest to use as well.

      Thanks for your feedback–we’re a young company, but we love user feedback and will act on it!

       
      • Heddi Cundle

        But isn’t the whole experience then shattered when you’ve only focused on the initial search? Because then the life cycle is incomplete, which defies the start-to-finish objective. Look forward to hearing more when this is fixed as the potential could work well within myTab’s vision as a cost & time effective additional feature. 🙂

         
        • Phil Hu

          We don’t disagree, which is why we’re working hard on all parts of the experience! At the heart of it, we’re just a bunch of people frustrated with the current travel experience and working to change it. One step at a time, but look forward to some big moves 🙂

           
  7. Justin C

    What’s the link to the website?

     
    • Phil Hu

      We do something different from Skiplagged–you finish your entire itinerary, and you’re allowed to book two different flights!

       
 
 

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