Can consumer travel startups make it without being bought?
But behind these behemoths of travel stand hundreds (if not thousands) of startup attempts to hit it big with consumers over the years.
Some have made it and now stand shoulder-to-shoulder with the big brands. But for the majority of attempts, the only way to truly reach a critical mass of consumers has been what many founders dream about: the exit to a bigger company.
Let’s rewind a bit to an earlier era – an era where the big travel brands listed above were just in their infancy. Gaining customers via advertising online was still relatively cheap compared to today.
In a few cases, the brand was online early enough to have to convince customers to “trust” the process of buying travel online. In all cases, the process of acquiring customers was incredibly different to what it is today.
These brands – led by their amazing teams – trail-blazed their respective categories and, with a good helping of capital and luck, ended up where they are today.
But are stories like the above even possible anymore? Can a consumer-facing travel startup go from unknown to household brand?
On the surface, it looks to be a steep uphill battle. No matter how well a startup is funded, its search engine campaigns will likely be eclipsed by the likes of Expedia, which spends a reported $5.9 million a month on Google SEM alone.
Viral campaigns? Hipmunk, which used incredibly effective re-targeting campaigns to create buzz amongst the tech crowd, is still nowhere near a household brand.
The “build a great product and they will come” approach? The startup ecosphere is unfortunately littered with the cadavers of great products the public never got to know about. Reaching consumers is, in a word, hard.
But before we get too pessimistic, let’s take a look at some well-known consumer travel startups from recent years:
Solving the pain-point of managing travel plans was clearly a success with business travelers, who still make up the majority of the service’s user base.
A great result for a team with impeccable pedigree (Hotwire, anyone?). But could TripIt ever have been a bigger consumer brand on its own?
One of the most successful travel startups to emerge in recent years, the community marketplace for accommodations is by all accounts connecting with consumers.
Having raised $120 million at a reported $1 billion+ valuation, AirBnb has turned from startup to acquirer of startups.
One could argue they already stand shoulder-to-shoulder with some of the giants above.
One of the first travel startups to use big data, Farecast predicted whether airfare would rise or fall for a consumer’s trip.
The fare prediction feature is still a central part of what is now Bing travel. But what would have become of the site without Microsoft’s audience?
The clear leader in vacation rentals is an amazing story by any standard. Growing from its founding in 2005 to an IPO in 2011 and a current valuation of $2 billion is quite a feat.
Even more interesting was its approach to rolling up the then very fragmented vacation rental market by raising more than $400 million, buying the most important players, and combining them into one.
In essence, HomeAway skipped the struggling startup phase and became the acquirer almost right away.
Risky? You bet. Successful? Obviously.
As one of Europe’s most prominent metasearch players, Skyscanner has over 14 million users a month and an aggressive expansion plan in Asia.
With only £2.5 million in funding, Skyscanner has built an impressive brand in Europe and is posed for further growth.
It stands as perhaps the best example that there is still hope for entrepreneurs to build a real consumer travel brand from the ground up.
This list is an admittedly very small sample of consumer travel sites, but it does show that it’s certainly possible to build a big consumer brand without the resources of a behemoth behind it.
But does an acquisition actually help build broader reach?
This is one of the more difficult questions to answer. In many acquisitions, the original website is rarely left standing on its own.
For example, Microsoft took less than a month to integrate Farecast into what was then Live Search. TripIt’s traffic has been relatively flat since it’s acquisition, though its mobile usage has been increasing.
Companies acquired by some of the big travel brands seem to be faring better: Away.com has remained largely independent since its acquisition by Cendant (now Orbitz) and is still generating a great amount of traffic.
The magic formula
As outlined above, being acquired doesn’t always help startups find wider reach. Nor does remaining solo mean eternal life as an unknown travel site.
What then, is the magic formula to make it? Like most startups, it all depends on team, timing, product, and a whole bunch of luck.
Alex Kremer is co-founder and head of product at Redeam, an electronic ticketing platform serving the tours & activities industry. He was previously Senior Vice President of Partnerships at Nor1, a leading hospitality merchandising provider. He joined Nor1 after it acquired Flextrip, a B2B tours & activities distribution network he co-founded. Alex is a 15-year veteran of technology startup companies, previously co-founding Cruvee, a business intelligence company for the wine industry where he led Business Development. Prior to that, he co-founded FanAxis, one of the world's first fan club management and merchandising firms in the music and entertainment industries. Alex is based in Boulder, Colorado. Follow him on Twitter at axk.