Startup pitch: Priceline founder opens Upside to reward budget-minded business travelers
Jay Walker perfected the concept of name-your-own-price when he launched Priceline in the late 1990s.
He has returned to launch another travel startup, Upside, that rewards business travelers with gift cards (typically $100 or $200), if they are willing to be flexible in their travel plans and save costs (typically 15%) for their companies by buying flight-and-hotel packages.
The startup is the merchant of record and provider of customer service for any purchased trip.
Upside negotiates opaque discounts from suppliers. It only sells packages, so the customer doesn’t know whether, say, the hotel or the airline is the supplier doing the discounting off of publicly available rates.
But the traveler can select which airlines and hotels it is willing to use.
Unlike with the original blind-bidding model of Priceline, Upside reveals the name of the hotel and airline prior to asking a customer to purchase, enabling the customer to vet its quality via TripAdvisor, Routehappy, or another source.
To book the travel, you play a game of (about) 20 questions, along the lines of, “Are you willing to fly out of Newark? It’s worth $60 in savings?” and “Are you willing to stay 3 miles from the convention center? That’s $40 in savings.”
Both the site and the app has map-based search. A customer will be able to drop a pin on the map to show where he or she wants their hotel to be near.
Upside recommends a package and reveals the total price plus a specific value of gift cards redeemable at a select list of participating retailers and other national merchants, such as Amazon, Target, and Exxon. The gift cards are delivered to the mobile app.
The company provides the travel buyer an expense report that shows a snapshot of what fare and lodging prices were available at the moment you bought your package for a similar itinerary. A customer can show the industry snapshot to their boss to prove the savings.
Walker told Tnooz that his company’s data analytics system ingests 500 million records a night from Sabre and Expedia to provide a comprehensive shadow system of price-comparison data via a mobile app and website.
The company is still in testing, with limited user access over the summer.
A Q&A with Walker:
1. What problem does your business solve?
This is not about, “I want to fly Delta and I want to stay at the Marriott.” If you want to do those things, you need to go to Delta.com or Marriott.com or go to an OTA.
This is about small employers trying to make sure their employees don’t bust their travel budgets, and about hotel and airline suppliers being willing to clear excess inventory via discounts as long as the discounts are hidden in a total package price.
2. Names of founders, their management roles, and number of full-time paid staff?
Scott Case is CTO. (He was Priceline’s original CTO.)
The Washington, DC., startup has about about 50 employees, and says it will have plus another 100 in a call center in the Philippines by its full launch. In the meantime, BCD is an operating partner and will help provide call center service.
3. Funding arrangements?
We do have an outside group of A-list investors as well as myself, but we haven’t really talked about our investor base.
4. Revenue model?
We do provide 100% customer service so each package we charge a $35 charge upfront. We tell you, “This is the charge and it covers all of your customer service. So we don’t charge you by the call or etc. etc.”
5. Why do you think the pain point you’re solving is painful enough that customers are willing to pay for your solution?
Upside’s target customer is unmanaged or lightly managed business travelers planning US-originating trips.
That’s not everybody, but it’s certainly a lot of people. When you’re talking about unmanaged travel, you’re talking about probably half or more of the entire business travel customer base.
Unlike other companies that try to incentivize good behavior by travelers, we don’t sell software to companies, we sell travel using what we call “a flexibility engine”.
6. External validation?
We have a very long list of people who have already requested invites.
At launch of Upside, it is a direct to the traveler product. There are no booking tools. There are no expense account reporting tools. There are no duty-of-care issues. There’s no corporate policy enforcement. In short, Upside is designed for the unmanaged traveler, the do-it-yourself travel booker at small- and medium-sized business.
Over time, it says it will be adding those other services.
What are the tax implications for the rewards?
Tnooz asked about the possible tax implications of receiving gift cards as a reward. Upside argued that the IRS, the US’s taxation authority, has basically said that anything you receive for being a business travel buyer, even within a reimbursed travel environment, is not consider taxable by the IRS currently.
And answering 20 questions may be a big ask for some business travelers eager to just book a trip and be done with it.
That said, Upside will save profile information to help speed up your repeat purchases, such as TSA PreCheck number or frequent flyer numbers. That level of personalization could make the tool addictive for a certain segment of traveler eager to see, in Walker’s words, “how much their flexibility is worth.”
Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.