THE DESTINATION CONSUMPTION FRONTIER
Part IV. Expanding the Experience Catalogue
Gaetano Crupi is the Co-founder and CEO of Cabin Technologies, the tech-enabled long-distance mobility company solving intercity travel. In this four-part series, he presents an overview of how technology will affect intercity transportation and how we live.
TL;DR When Large-format A-EVs lower long-distance mobility price, time and friction, all the latent destination demand being fueled by the experience economy will finally be untapped. The increase in travel frequency will lead to a race for destination catalogue including the creation of completely new experiences and destinations.
SERIES RECAP
In the first three parts of the series, I covered how large-format autonomous electric vehicles (A-EV) will enable a massive increase in travel frequency by making long-distance mobility an (1) affordable, (2) timeless and (3) 1-click behavior.
Whenever there is a significant increase in consumption, businesses need to understand how to provide more inventory, content, SKUs, etc. to consume. As the experience economy continues to grow, how can we increase the number of experiences and places people can access?
A LAGGING SUPPLY-SIDE SHIFT
Whenever Tom and I speak at events, there is always an enthusiastic group of twenty-somethings that stay back to share their excitement. More than the product or technology, what connects is the long-term vision of regional living. That connection is not a mistake. Cabin began as Tom’s and my lifestyle aspiration. Every subsequent member of the Cabin team shares the same dream of a multi-city life; of traveling to more places more often.
At the core, Cabin is the byproduct of a generational demand-side shift in need of a technical supply-side solution.
In Part III of the series, I examined how tech-enabled supply-side shifts allowed Netflix and Amazon to create increases in consumption frequency. In both cases, what followed was catalogue expansion. Amazon kept adding verticals and Netflix pursued an aggressive original content strategy. When people consume more, you need more things for them to consume.
However, when it comes to destination consumption, we are already seeing a significant demand-side shift. Inexpensive, comfortable and convenient long-distance mobility will pour gasoline on the trend, not ignite it.
We are going to need more destinations.
YOU CAN TAKE IT WITH YOU
When people ask us “why now”, why build this company now, they are surprised by our response. Most expect an A-EV answer — and that is a core piece of our long-term strategy (as detailed throughout this series). However, the reason to build a highway train system today, is because of (a) structural decay (which I covered in the second post) and smartphones shifting consumer behavior.
When it comes to smartphones, it is not a coincidence that “mobility” and “mobile” share their etymology: smartphones revolutionize travel. With a smartphone in your hand, you can arrive to any major city in the world and within seconds access point-to-point transportation, workspace, living space, restaurants and even get a date. You can be an instantaneous local.
With smartphones, we have unprecedented access to variable infrastructure. Your monthly bank statement is a laundry list of subscriptions and micro-transactions. Every time a new business model provides more consumption flexibility, the easier it is to just go. Once upon a time, you were pinned down by your DirecTV subscription but now you can take your Sling membership anywhere. You used to have a five-year office lease but now you wake up and choose a WeWork to pop into.
From Uber to Airbnb, the last decade has been a decade of transforming fixed costs into variable costs and then putting those variable cost decisions in your pocket. This has irreversibly changed consumer behavior and has rocked what once appeared to be intractable industries. In relation to mobility, the writing on the wall is clear. Mary Meeker’s report was not a surprise: “People are buying fewer cars, keeping them longer, and shifting transportation spend to rideshares.’
The personally-owned automobile, a symbol of teenage freedom has become a Gen Z nuisance. Lease payments, parking and driving all take a toll on your pocket book and screen time. The idea of driving 500 miles just so you can have access to your car is starting to feel rather foolish (unless your car is your home, #vanlife).
I don’t believe this trend heralds Detroit’s doom (they’ll figure something out). I do believe it further highlights the progression toward freedom from fixed costs. Even work flexibility is becoming table-stakes for employers rather than an enticing benefit. Productivity is no longer limited to the four walls of a cubicle. As video calling quality continues to improve and AR / VR starts to mature from toys to tools, work flexibility will only increase.
In the past 100 years, we have seen the exodus from the city to the suburbs, a subsequent decay of city centers, and now the current re-urbanization and gentrification of those same cities. Mobility, telecommunications and real estate have all impacted and limited those decisions. We might be on the cusp of finally providing people with AND lifestyle decisions rather than OR lifestyle decision. Nothing could be more enticing for a generation that values flexibility.
INSTAGRAMABLE CONSUMPTION
Smartphones have not only increased flexibility and access to experiences, they have also increased the social pressure to live more flexibly and consume more experiences. It’s a not-so-virtuous cycle that is expanding demand in the experience economy. Keeping up with the Joneses is no longer limited to your neighbor.
The new thing to show off is not a Louis Vuitton bag but rather a post of your trip to Vietnam. I have friends who only Instagram when they are on vacation. Experience FOMO is real. Just like fake watches and bags, there is even an industry now for fake vacations. Services like “Fake a Vacation” and “Krome Photos” will photoshop a perfect picture of you on top of a mountain to post online and make your friends jealous.
Economist Thorstein Veblen introduced the concept of “Conspicuous Consumption” in 1899 to describe a behavior prevalent in the newly rich families of the second industrial revolution. In summary, conspicuous consumption is spending money on luxury items that can be publicly displayed in order to maintain or attain social standing. Everything from a Range Rover to a Rolex to horse-back riding lessons can be conspicuous goods and services as long as others see you consuming them.
Smartphones provide everyone in the world with a camera and global broadcasting system. By taking (and manipulating) a picture, you can have anyone watch you consume anything. By digitizing experiences, apps like Instagram enable asynchronous conspicuous consumption. Something you did years ago in a different country can have the same effect on a new friend as a new watch. Your Instagram history has a compounding conspicuous consumption effect, making it very hard to delete.
This is the psychological dark side to the experience economy. However, I still believe that traveling more often has a massive net positive effect over the endless screen time of the attention economy. Whether you agree with my optimism or not, traveling a few times a month might be the new consumerism bar.
THEY’RE HERE
The demand-side shift in how and where people want to spend their time has already begun. From Instagramable consumption to van life to digital nomads to micro-vacations, multi-city living is a quintessential lifestyle aspiration for millennials and Gen Z. We don’t want a mortgage, we want flexibility; we want adventure. 72% of Millennials say they would rather spend money on experiences over goods. This shift toward the experience economy is already impacting businesses.
“Companies understand that immersive, “in real life” moments are harder for technology to displace, and that pristine customer service and beautifully designed interfaces are competitive advantages. Consumers, meanwhile, seem to be forgoing stuff for adventures: Experience-related spending in recent years grew more than four times faster than spending on goods, according to a McKinsey study of U.S. Bureau of Economic Analysis data.” (FastCompany)
Vacation days have not caught up unless you fully commit to a simpler lifestyle. People are cramming more experiences into the same 365 days per year through work flexibility and shorter travel. Since the 1990s, we are moving toward shorter but more frequent trips. This also leads to a reduction in distance covered. Going to Europe for two days doesn’t make that much sense. Across the board, domestic travel and particularly road trips are on the rise.
If you want to consume more experiences within the same amount of time, you leave the city but stay in your region.
The road trip as a lifestyle has seen a resurgence over the past decade; the van life trend and RV vacations are also appealing to a larger and larger percentage of the population.
The RV market is targeted to reach $75B by 2025. A-EV will only accelerate this trend. A-EV recreational vehicles will likely appeal to even more people since they will not have to deal with parking, servicing, driving, etc. When A-EV massively increases travel frequency, where will people go?
FIRST TIER, SECOND TIER, FRONTIER
In the third part of the series I covered how digital decision-making has affected our consumption patterns. Based on my experience in the entertainment world, I believe destination consumption will follow a similar evolution to online media as it becomes increasingly treated like content to be consumed.
FIRST COMES THE EVERGREEN CONTENT
The first phase is about listing what already works, the evergreen content, and trying to capture market share. In media, this meant digitizing the classics, the blockbusters, the evergreen series (think “Friends”) and trying to move cable behavior to online behavior. This is the easiest sell. One of Netflix’s biggest wins was its ability to lock-up so much streaming content before the studios developed a streaming strategy. Only now are the likes of Disney and Warner taking their content off the service once contracts expire.
On the destination side, the first content to secure are your major cities like San Francisco, New York, Chicago, Los Angeles, Washington DC, etc. These cities have steady demand and population density, so you have to have them. These are also the most competitive markets since they already have major airports and even rail.
These are also the destinations that will benefit the most from next generation fixed track (hyperloop, high speed rail, etc.) and electric aircraft. Regardless of form factor, long-distance mobility companies need to have these destinations as part of their catalogue for their customers, and they provide steady revenue.
SECOND TIER, SECOND LIFE
The next bucket are destinations that are already liked and visited, but not as often because of accessibility. From a destination perspective, these are the 2nd tier (or even 3rd tier) cities and seasonal destinations that are harder and more expensive to get to because these places lack the population density or passenger flow for heavy infrastructure.
In the content world, these are the high-quality but more niche films and series that find second life, or even first life, online. This is existing content that finds a wider audience because it’s finally more accessible. When I first signed up for Netflix’s DVD service, this was my primary use case: Battlestar Galactica and the Criterion collection. This is when user data and recommendations start to play. As you record user patterns, you can start recommending non-obvious destinations.
Even before A-EV, there is a massive opportunity to access these cities either because flights are expensive, flights are too short or rail is not an option. Examples include San Francisco to Santa Barbara or even San Francisco to Sacramento (too short to fly, yet still kills your day when you drive).
FRONTIER: DESTINATION CREATION
This is where it gets very interesting. This is Youtube. This is original content. When you start shifting cost curves (price, opportunity, decision-making, etc.), human behavior is very unpredictable. For long-distance mobility, this may mean completely new behaviors like 24-hour vacations (more on that below), unviable real estate developments that are suddenly in the black or even entire cities that appear and disappear in a week.
We have already seen this at Cabin with 24-hour vacations. During our pilot, the team needed to experience our product and interact with guests as much as possible, so every month or so we would all go down to LA for the day and come back the following evening. After you do this a few times, LA starts to feel like a second home and you form routines and habits; favorite coffee shops, gym classes, etc. You start going to LA for a single meeting or dinner. You start seeing old friends more often. You start thinking of LA as your other home.
What will people do once they can pop up 500 miles away on a daily basis? Enough guest data may even help inform what type of destinations to build. Hopefully we’ll get more high-quality, “The Queen” destinations and not a bunch of filler content.
GROUND RULES
In summary, reductions in ticket cost, opportunity cost and decision cost allow for quick destination “buy” decisions. This massive decrease in friction leads to an order of magnitude increase in destination consumption; the “binge” behavior.
What follows is an inventory problem.
- How can you start thinking about destinations like you think about content?
- How do you onboard destinations as quickly as possible?
- How do you curate destinations?
- How do you respond to variable destination demand?
- How do you create new destinations?
For Tom and I, this fundamental question of destination supply and demand is at the heart of why we started Cabin. Highways are already built. Large-format A-EV vehicles are not only the least expensive and most convenient method of transport, they are also the quietest and cleanest. That means that we can open service into Yellowstone or the heart of Paris without moving a single blade of grass or upsetting anyone’s views (or ears).
No airports, no tunnels, no rail stations, no airspace and no noise pollution means that onboarding new destinations is a matter of days instead of years.
The marginal cost of adding destination catalogue is negligible. If you think about places as content, ground wins the inventory game.
That is not to say that I am not excited about hyperloop, eVTOL and suborbital flights. I am a strong believer in multimodal transportation: certain pieces of infrastructure are perfect for certain use cases. I will be first in line to go from downtown SF to Palo Alto in a flying car. I can’t wait to travel from Philadelphia to New York on hyperloop. One day I hope to afford a flight to Tokyo in an hour, complete with panoramic views of Earth’s curvature. From December to March, I want to fall asleep every single Friday in the city and wake up on a mountain Saturday morning.
The demand-side shift in destination consumption has already started and will only accelerate over time. Large-format A-EV enables the supply-side to catch-up.
MACRO-MOBILITY
Micro-mobility, robotaxis and drones might change my commute, however large-format A-EV will allow me to live anywhere and everywhere. Macro-mobility will finally give me multi-city living. Macro-mobility will give me ultimate lifestyle flexibility.
This dream is what gets me up in the morning and why at Cabin we devote our precious time to building this future. When A-EV lowers long-distance mobility price, time and friction, all the latent destination demand being fueled by the experience economy will finally be untapped.
Of all possible human experiences, from places to activities to restaurants to even personal interactions, we currently access a tiny fraction within a 20 minute drive.
If the experience economy is only going to expand, macro-mobility will be its growth platform.
As an entrepreneur and, more importantly, as a consumer, I can’t think of anything more exciting.
ABOUT GAETANO CRUPI: Obsessed with building teams and organizations, Gaetano currently serves as the CEO of Cabin. Previously, Gaetano was the COO of Betable and founder of Machina Pictures. Gaetano was nominated for a Grammy in 2013 for his work with Foster the People and also produced Beyonce’s “Move Your Body” video for Michelle Obama’s “Let’s Move!”project. Before becoming a producer, Gaetano was a consumer and retail investment banker at Goldman Sachs in New York. Gaetano is an alumni of Wharton and the Stanford Graduate School of Business. Having grown up in Brazil, Venezuela, Canada and United States, Gaetano speaks three languages fluently, and lives to explore.
