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
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
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
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.
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.