3 Reasons it Sucks to Launch a Startup in Travel (And Why You Should Do it Anyway)
Spoiler alert: Starting a company in the travel industry is hard. 96% of travel companies fail in the first 5 years (as opposed to the 88% cross-industry standard).
Luckily, success in the travel space is worth the toil. It’s an exhilarating industry with a large market (11% of the global GDP), and it’s almost guaranteed to never go out of style.
The members of our travel startup community at Voyager HQ shared some of the biggest obstacles they face, why those obstacles exist, and some strategies to surmount them. The good news is: Startups can plan for and overcome the toughest barriers-to-entry with creative approaches.
1) Gaining Traction in B2C (Business-to-Consumer)
If you’re a founder in travel, you’ve already proven you’re up for a challenge. To really test your limits, try launching a new travel product for a consumer market.
It’s a tough racket: Inspiration, itinerary and destination content were the three travel verticals that saw the most new startups close their doors from 2005–2017, according to Phocuswright’s The State of Travel Startups 2017.
The difficulty begins with customer acquisition. CAC (Customer acquisition costs) are massive in the travel space. Airlines, OTAs and meta searches already compete fiercely for the attention, and later loyalty, of travel buyers.
This differs from other industries mainly in the area of retention. Leisure travelers in the sought-after U.S. market tend to take one trip per year, if at all. And when they do come back around, they remain loyal to the lowest price above anything else.
One approach is to pursue partnership with brands outside the travel space that already have an established audience. HOST did this when they partnered with dating app Bumble to fuel buzz around their October launch in Manhattan’s East Village.
“Partnering with Bumble helped us to reach our target customer faster (i.e.,g millenials) — it also helped us build a positive branding association between our product and an aspirational brand that has spent years building customer loyalty, trust, and recognition,” says HOST Co-Founder Jeff Tomashow.
Clever packaging can also play a role in distinguishing a brand. Startups like Hitlist and SkyHi have achieved this by purposely building their products to embody a lifestyle rather than a singular purchase.
The last option, and probably the least sexy choice, is to simply not go to B2C at all. Consumer products can choose to white label, effectively going B2B2C with a more established company or brand.
2) Finding (and Keeping) Technical Talent.
If you are building a tech company without a technical co-founder, you’re probably already feeling the pain of missing a key component to your team.
Startups with at least two founders carry the best odds of success. Co-founders keep each other engaged in the process, supply different viewpoints and approaches to problems, and ideally contribute complementary skillsets.
If you don’t have a technical lead, it can easily become a company’s biggest pain point.
It’s a hard sell to entice a sought-after software engineer into a high-risk market like travel. And the systems in travel that developers need to integrate with aren’t exactly easy.
For context: legacy GDS systems were first developed in the 20th century to allow travel agents to book reservations…through the phone. The same systems are largely still used today! This is what developers in the travel space have to work with.
The real solution for a founder is to build a business model and brand that will attract someone you want to work with. Someone who is truly invested in your project is more likely to stick around for the long haul or when things get tough, so keep culture fit in mind even when searching for a technical role.
Your advantage as a travel startup is that you’re offering a stake in something disruptive during an exciting time in a sexy industry. Make it known!
There’s no secret sauce to source tech talent from (there’s a perpetual shortage), but you can start with the Voyager HQ job board to seek out developers particularly interested in the travel space.
3) Getting to the right contact at a large hotel group or airline.
The B2B sales cycle in travel can take years, and there’s a lot at stake — the business being shared among fewer players than you can count on one hand. It means that a lot of startups end up knocking on the doors of Marriott and Delta hoping to get their product seen by the right person.
Here are some specific sales tactics that Voyager HQ’s founders have used with success:
- Be concise in your outreach. If you can’t explain in one sentence why a hotel manager should spend 15 minutes talking to you, then your voicemail or lengthy email isn’t going to matter.
- Consider brand standards. Many corporate brands are restricted to using pre-selected vendors. Assess whether it’s better strategy to go direct to corporate HQ or target individual properties.
- Go for volume. The inconvenient fact is you need to reach out to a lot (a lot) of people in order to get business. Business development professionals in our community report making about 70 calls per day to hotel leads.
- Keep an eye on the time. Identify target contacts at large brands or hotel chains and make sure you’re reaching out according to their time zone, not yours.
- Empower champions. All of them. It’s not always the highest ranking employee that is going to move your relationship forward, so be sure to get to know the team. Other champions you activate can have the ear of someone at the company who can make a partnership happen.
As you may have seen in our last post, the club environment at Voyager HQ was designed to enable conversation around common problems and circulate solutions throughout the community with ease. We help travel founders in New York City and elsewhere overcome pitfalls through cooperation. Let us know how we can help you on your Voyage!
