PhocusWire has four core areas of focus: Startups, Distribution, Technologyand Online.
In this analysis for the PhocusWire Forecast 2018, we look at the world of emerging businesses and the opportunities and challenges that they face.
Startups
The notion that business-to-business travel startups have a far higher chance of succeeding than consumer-facing businesses is nothing new.
Just look through the roll call of previous winners of Phocuswright’s various Innovation awards since 2008, and B2B brands dominate proceedings.
For every triumphant SilverRail Technologies (later sold to Expedia Inc), BD4Travel, ReviewPro (now at Shiji) or Revinate, there are numerous social-led trip-planning sites, flash sales brands and metasearch engines that have come and gone faster than you can say “business model?”
Yet we are now witnessing a shift in the travel startup landscape that builds on that earlier idea that B2B trumps B2C – a move that comes with a maturing of the wider industry.
There are a number of elements in play.
Not seismic but significant
This change was felt acutely at The Phocuswright Conference 2017, when tour and activity ticketing and voucher technology company Redeam scooped a trio of awards.
Praised throughout the event for its attempt at fixing some of the “plumbing” in the industry, Redeam is a prime example of a business that has spent a long time understanding the complexity of a particular problem and creating a solution for it.
It may go on to bigger and better things than just winning awards at travel conferences, but its sharp focus on a single issue should be a blueprint for others to mimic (not least because so many travel startups do not).
Such work on the digital mechanics of the industry, rather than optimistically attempting to create a new B2C service, is fairly critical right now.
The State of Travel Startups 2017
The continued tightening of investment into seed and lower-level rounds for startups – a cross-industry phenomenon – is one of a number of indicators that the startup community is reaching some degree of maturity.
This is no more apparent than in the travel, tourism and hospitality sector.
It will take more than a neat idea to unseat the giants of the B2C world in travel, as the levels of marketing spend required to capture the eyeballs of consumers are, well, eye-watering (Expedia Inc and the Priceline Group spent a miserly $8 billion between them in 2016).
Sure, there are areas of the industry that have not yet hit the peak saturation levels experienced in web-based, consumer services for hotels, flights or car rental, such as the opportunities that potentially still reside in tours and activities or cruise, to name two.
Investors have now realized this (some will ask why did it take so long) and are now far more prudent with their investments into early stage businesses, especially those hell-bent on trying to challenge the status quo.
Cheerleaders for the startup scene will no doubt lament the days when it often felt like there was free and easy money for new businesses – yet the alternative view is that it’s just reality catching up with ambition.
Another factor to consider is that the last wave of truly disruptive businesses – Airbnb and Uber – may have initially inspired a plethora of similar businesses to follow suit but, now, their respective successes and scale have seemingly shut the door behind them.
Investors want and need something else to get their teeth into (Joel Cutler: “Tell me something that I can't understand.”).
Genuine opportunities
Despite a maturing of the wider digital travel sector, and the impact that it then has on the startup ecosystem, there are a plenty of prospects available.
In fact, there is a growing sense that as one chapter closes, another opens.
Cheerleaders for the startup scene will no doubt lament the days when it often felt like there was free and easy money for new businesses – yet the alternative view is that it’s just reality catching up with ambition.
The growth of a brand such as Airbnb has, in turn, created an environment around it that allows for new digital B2B brands to emerge (as Redeam has for attractions), such as concierge platforms, guest services and distribution management.
These opportunities didn’t exist half a decade ago.
Disruption, innovation, call it what you like – it may not be the next Airbnb or Uber or their networks of support services that give hope to the travel startup movement.
It is perhaps most likely going to come from advances in genuine technology, not the web services that support them or the way that consumers interact with a new product.
This is also not the rather playful world of augmented or virtual reality-led interfaces – but, instead, the appliance of new science in digital engineering, customer data collection and profiling using machine learning.
Travel startups that are starting to crack that code and provide a tool or platform that, essentially, every brand will eventually need, will be the ones that create value and ultimately win.