FareHarbor claims a fast rise as a reservations tool for tours and activities
From its start in early 2013, FareHarbor, which sells reservation software to tours and activities suppliers, chose not to be an aggregator or to have a direct-to-consumer offering.
The company began as a family operation based in Hawaii. But in recent months, the Honolulu-headquartered startup has picked up steam. Since August, it has almost doubled the number of clients it says uses its online reservation management tool, to 2,000 suppliers.
In that time, FareHarbor has also scaled up its number of full-time employees from 75 to 100.
Over the next 12 months, it plans to spend between $15 million and $20 million on its clients report products and improving the user experience for its mobile-friendly web application, plus its iPhone app for FareHarbor operators.
The family business is funding its expenditures out of its revenue growth. It hasn’t raised outside capital. Its growth has come from landing deals like a September one in which hundreds of affiliated Segway tour operators in the US adopted the reservation platform.
The company has a distributed workforce, with central offices in Denver and San Francisco (two cities where CEO Lawrence Hester splits his time); a sales team based in Boston; a business development team in Minnesota (that’s led by Hester’s father); and a central office in Honolulu (that’s led by Hester’s brother).
To learn the backstory, we caught up by phone with the CEO.
Tnooz: What is FareHarbor’s model?
Lawrence Hester: Our focus has always been on helping our clients distribute their products through as many channels as possible. The customers that book on Veltra.com, say, can actually receive a live and confirmed booking with our clients. Same thing with Viator.
It’s been challenging to decide where we should focus our development resources in terms of building and integrating our APIs, given all of the movement in the aggregation world.
Tnooz: Who do you see as your competitors?
Hester: Our true competitor really is pen-and-paper. About 70% of tour operators in the US — a group we estimate to number about 30,000 — don’t seem to be using any software system. They’re still using reservation requests or PayPal.
Anecdotally, when our sales teams report back, they say they don’t run into a lot of competitors very often.
Tnooz: You say you’re the leader in tours and activities. By what metric?
Hester: Everybody has their own number, but in terms of our internal research, we’re working with the most number of accounts from the back-end perspective, specifically, and focused on the US, only. We just surpassed 2,000 tour operators as customers. That’s just a slice of the 30,000 tour operators we estimate are out there in the US, but we think we have the biggest chunk of those using a reservation platform tool.
The thing that has gotten a little bit confusing is when people are working both as an aggregator and a back-end, what number they’re producing, in terms of client accounts.
Tnooz: What’s one of the misconceptions about your sector?
Hester: A lot of the recent industry talk makes it sound like reservation tools are this new thing, just because of the invention of cloud services. But the sector isn’t new.
There are lot of competitors that have been around for 15, 20, even 25+ years. Those are the guys we really focus on, because they still have so much functionality, and they’re still doing very well today.
Tnooz: But surely you are also dealing with many customers who are familiar with the other reservation tools out there?
Hester: Sometimes when we talk to potential customers, the response that we’ll hear is, “I tried 3 booking softwares and you all suck.”
We get it. For some of the tech providers we’re competing against, if a supplier wants to re-schedule somebody, their system would force them to refund the payment and then put them on a different time and then recharge that customer’s card. Our software skips those extra steps. But that takes a while to explain in a sales pitch.
Tnooz: What else makes your product stand out?
Hester: We are offering the lowest credit card percentage charge for processing a transaction of any of our competitors.
Tnooz: How has your company achieved product/market fit, to the extent it has?
Hester: The reason we have been able to be successful is we started in a place like Hawaii, where, from a functionality perspective, you need to be incredibly complex, with an enterprise-level of functionality, accrual-based accounting, lots of customization, to compete with the traditional players.
Tnooz: What’s an example, please?
Hester: Rebooking is important. Not long after we signed our first client, we became its reservationists for a while, to learn what challenges it had operationally. It was a crash course in the reality of operations. We immediately went back to our developers to change how we handled the rebooking of passengers when an activity has to be cancelled, among other things.
We’re proud that today, rebooking in a situation like that via FareHarbor is a one-click functionality.
We’ve similarly spend a lot of time interacting with other accounts. Our developers have sat behind check-in booths to make sure everything is working properly. It’s really been suppliers-telling-us-what-we-need-to-build type atmosphere. We want our features to make intuitive sense to a supplier going about their typical business workflow.
Tnooz: How do you stand out from the other software providers in the market?
Hester: Customization is critical. We allow a lot of it. Especially in Hawaii, starting there, there’s a word called “Kama’aina”, it means local. One of the most common calls we received when we were answering the phones for that catamaran company was, “Do you have a Kama’aina discount?”
If we didn’t build the product in Hawaii or were a third-party company without representatives there, it would’ve been really difficult to answer that question….
Tnooz: It sounds like you’re addressing the point that activities aren’t like standardized hotel rooms. There can be a lot of variation in the product. Doesn’t that risk “mission creep” where developers add lots of bespoke things and it gets too complicated to use or has too many one-off variations?
Hester: The reality is that the best suppliers are just crushing it on the fundamentals, so our product is built around those fundamentals.
We focus on practicalities like letting suppliers run invoices for re-sellers through our tool. We really want to get the basics right.
Tnooz: Are you at a point where raising institutional capital would help accelerate growth or allow you to capture more additional opportunities faster?
Hester: Our spending will all come from our product sales. The most important thing for me is that in the next 6 months is to ask our top clients how are customer service team is doing, so that we don’t lose that focus despite our rapid growth.
It would be scary to me to add additional funding and just go nuts, because we might lose focus on what really got us here. We’re still managing how to scale up successfully.
Tnooz: What’s your revenue model?
Hester: The way we work, we charge a convenience fee of the customers booking online with our clients. The fee ranges between 6% and 10%…. That fee structure really incentivizes us to help our clients grow their businesses and save money.
Tnooz: You are still hiring for several positions on the technical side and some more on the customer support side. When there’s so much going on in San Francisco, Denver, Boston, etc., why should star talent go to work for FareHarbor instead of a company that’s better known?
Hester: We give technical talent the ability to have an immediate impact an organization and to work with a group that are really excited about our clients and about working here.
Everybody from a new customer support agent to somebody working in our onboarding team or sales team has an ability to immediately impact the organization. If they see something product-wise that would really help us, they can make a suggestion directly to the developers, there isn’t a wall. They can hit me up if they need to.
Not to mention, if you love surfing, we’ve got a heavy contention of surfers. In fact our CTO is out at the beach every single morning before 6 A.M. You have an opportunity to go surfing. If it comes to it, I think he’ll even teach you.
Bigger picture is family. We truly are a family business.
Tnooz: How has being a family business made FareHarbor’s company culture distinctive?
Hester: Let me use an example to try to explain. This past week, we onboarded quite a large account. We had to transfer over 1,500 reservations, 1,500 future reservations. These are all reservations that we could have input programmatically, but we want to make sure the process is perfect.
We like to do it by hand. At midnight, Denver time, about 2 A.M. on the East Coast, 3/4 of the company was online helping with reservations.
The people who were helping were the main people, from the head of our mainland office to myself to our CTO to the head of our Hawaii sales team to a new employee. It’s that type of environment where nobody is too big for their britches here.
It goes back to the old days, where my brother Zach and I were the sales team on customer service. We did it all, and we don’t want to get away from that.
Tnooz: What about distribution? When you get to scale, some say it is more about industry politics than about innovativeness.
Hester: In terms of meeting industry leaders at places like Viator, we’re making all of those connections. Our clients have introduced us, enabled us to make those connections.
Tnooz: Much has been said about tours and activities in the past couple of years — ever since TripAdvisor plunked down $200 million for Viator. How do you see the market?
Hester: Speaking of the industry at large, we think that some of our competitors have made their models much too simple to conform to how suppliers actually run their operations. The reality is that a lot of these suppliers operate incredibly complex businesses.
There is a huge variation in the way they operate, in terms of offering commissions to their retail. Will customers want packed lunches, what are the shoe sizes of customers for equipment rentals, etc.
From our experience, the way people treat commissions varies around the US and Hawaii in significant ways, too.
We aim to allow for a lot of customization, which we can help our clients set up. There has been an emphasis that one system works at all. But that’s not the reality. There are too many complexities between different tour providers and their relationships with aggregators.
Tnooz: It seems like a theme of your answers is that it’s important for you to try to keep things real.
Hester: Every time I see my brother Zach at Hawaii, I can’t believe that I used to sleep on his 21-year-old girlfriend’s couch when we started this business, and now we actually have offices and a thriving national operation. It’s humbling.
Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.