Startup pitch: Distribusion wants to be the GDS for buses
Hotels, flights and car-hire all sit within the systems of the global distributions so why not intercity bus travel?
This is the idea behind Germany-based Distribusion and while the team originally wanted to offer a platform for affordable bus connections, it soon came to the realisation that there was a broader problem to tackle – that of enabling bus operators to tap into the various distribution channels.
Key team members, based in Bonn and Berlin, include co-founder and chief executive Julian Hauck and co-founder and chief marketing officer Johannes Thunert.
So far, Distribusion has raised a ‘seven-digit investment’ as well as funds from angel investors.
Signs for the intercity bus market in Germany look positive, according to the team, with a market value of Euro 17 million in 2012 to Euro 160 million in 2013, post liberalisation and almost Euro 300 million in 2014. Further growth is anticipated from estimates of Euro 600 million at the low end to several billion at the top end.
In Europe there are other potentially more lucrative markets to explore as despite the growth in the German market, rail is the more dominant transport because of the efficiency of the network.
Distribusion is eyeing up Turkey and Spain as large potential markets each with more than Euro 3 billion in bus sales annually while the UK, Balkans and Baltic states are also seen as attractive markets.
Looking further afield, the company sees emerging markets in the Americas and Southeast Asia also ripe for development especially as intercity bus transport is still the main way to get around. Meanwhile, in the US, the use of intercity buses is also rising.
The startup says it has no direct competition and it is interested in partnering with some of the B2C companies including Busbud and Clickbus.
(Editor’s note – after publishing this post, Voyenbus came forward to point out that it is also a global bus distributor and that it distributes via Sabre.)
While the existing global distribution giants – Amadeus, Travelport and Sabre – have been making moves into ground transportation, it has been more along the lines of airport transfers and limousine-type services.
Distribusion hopes to make money via transaction fees from bus operators as well as data services and systems to help operators manage and sell their inventory.
What problem does the business solve?
Distribusion wants to make possible for buses what has long been standard practice for other modes of transportation.
You can easily book a flight at any travel agency or website around the world, but this is not possible for intercity bus tickets. We want to change that and make distribution of bus products as simple and cost-efficient as possible.
Up until now, travel agencies and OTAs have had to connect to various providers and maintain multiple reservation systems. We are offering a one-stop solution with all intercity bus products from a single source with the highest quality data. This reduces the retail costs of booking and fulfillment processes, and enables retailers to offer bus tickets for multiple providers.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
The key shift in the evolution of Distribusion was the change from a metasearch in the early stages to its current form as a Global Distribution System for intercity buses.
Why should people or companies use the business?
Distribusion offers different value prepositions to our two main customer segments.
For bus operators, we provide an avenue for increasing overall utilization and attracting customers from all around the world through a major increase in the number of sales channels available.
They can also benefit from affordable distribution costs with no implementation fees, and can reduce the additional cost associated with partner management or payment processes.
Bus operators maintain full control over their data and will have our advanced technology at their fingertips.
For major sales channels, Distribusion is a one-stop solution for intercity bus sales, featuring reliable high-quality data. Integration costs will be much lower, and so will partner management and processing cost. By expanding the product portfolio into the under-serviced intercity bus market, sales are sure to increase.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
The main method of raising awareness of Distribusion is simply through direct sales, expanding our operation and acquiring new customers by increasing sales volume.
We also run well-established metasearch consumer brands such as FahrtenFuchs. These metasearch brands present a useful avenue for approaching bus operators and incorporating them into Distribusion’s GDS, particularly as we have developed different metasearch brands in different countries.
Additionally, trade fairs and conferences have proven to be useful venues for fostering collaboration with operators, OTAs and major GDSs.
Where do you see the company in three years’ time and what specific challenges do you anticipate having to overcome?
In three years’ time, we want to have established a GDS that has the majority of the European intercity bus market covered, and want to have already entered major bus markets in North and South America as well as in Asia. In terms of our technological development, we hope to offer bus operators the best possible solutions to increase their total sales volume and hope to have successfully connected the intercity bus market to OTAs and travel resellers.
The major challenge is to scale up both sides of the business model at the same time. A key aspect of our business model is to collaborate with as many bus operators as possible while creating partnerships with major OTAs. The issue here is that bus operators will be more keen to work together as we increase our sales channels, while sales channels such as the OTAs will themselves want to see plenty of bus operators on board before setting up a partnership. Thus, the key to mitigating this challenge is to scale both or these market segments at the same time, ensuring steady and sustainable growth.
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
In our view there’s nothing wrong with the industry as it is, we just think there’s a missing link in the intercity bus market that has existed for years in several other markets. If we had to pick one problem, it would be that the intercity bus market is still highly fragmented, which often makes it complex and cumbersome to book bus tickets and enjoy affordable, convenient travel.
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?
Especially taking into account culture and style, we consider ourselves to be in the same mould as Kayak. Despite being the clear world leader in metasearches, Kayak still leads innovation in the online travel market and is always striving to develop and improve its product. It’s refreshing to see how it maintains a startup mentality and constantly looks for ways to improve its functionality. It is a B2C platform but it keep a strong focus on itsechnology, and this kind of focus is also a driving force behind Distribusion.
Which company would be the best fit to buy your startup?
A major GDS, such as Amadeus or Sabre, would be the most obvious candidate to buy Distribusion. Doing so would provide them with a high-quality, ready made sales channel for intercity buses.
Describe your startup in three words.
Amadeus for buses.
Distribusion seems like a great idea – a single repository combining information from bus operators all over the globe ready to integrate with the various travel distribution channels out there.
The startup seems to have done its research in terms of market potential in Europe and the rest of the world. So, why hasn’t anyone done it before? It’s probably difficult to get the information from the operators and turn it into meaningful data that can be presented in the same format on one platform.
That in itself could be a huge under-taking and require a great deal of resource.
Also, as rightly pointed out by the startup above, it needs to build scale at both ends simultaneously. It needs a volume of online travel agencies, metasearch services and other distribution parties on one side and bus operators on the other to get both elements to meet in the middle.
Maybe another reason no one, such as the GDSs, have tackled it, is because although there may be a need to aggregate the information, the existing companies have traditionally come from a corporate angle.
A further reason might be that efforts most recently have been focused on rail investment generally as well as integration, from a tech point of view, with multiple startups – B2C and B2B – coming to market.
That’s not to say they won’t turn their attention to intercity buses as the next part of the jigsaw. Amadeus is already involved in a scoping initiative in Europe around multi-modal transport.
All the GDS are looking at non-air initiatives as a means of future revenue so Distribusion could be well-positioned going forward especially if it can gain momentum quickly.
Linda Fox is deputy editor for Tnooz. For the past eight years she has worked as a freelance journalist across a range of B2B titles including Travolution, ABTA Magazine, Travelmole and the Business Travel Magazine.
In this time she has also undertaken corporate projects for a number of high profile travel technology, travel management and research companies.
Prior to her freelance career she covered hotels and technology news for Travel Trade Gazette for seven years. Linda joined TTG from Caterer & Hotelkeeper where she worked on the features desk for more than five years.