Opaque search, blind bookings - models which have found their way in to the travel lexicon in recent years, not least from the likes of Priceline with its Name Your Own Price system.
GetGoing, a San Francisco-based startup which is about to draw the curtains back on its product after featuring in the YCombinator programme over the summer of 2012, aims to capitalise on such trends with its own take:
The service asks consumers to pick two flights to two different destinations that they might be interested in (eg. someone who wants to go to Europe from New York, selecting London and Paris as two alternatives). Users see and control the details of the flight, including arrival and departure times, flight duration, and the number of stops.
As soon as the customer identifies the two flight itineraries and commits to purchase, GetGoing books the ticket and reveals the selected destination.
The process, GetGoing says, allows it to exclude travellers needing to get to a particular city (nearly all travellers out there today), while "providing incremental revenue to suppliers by offering discounts to a segment of the market that is the most price sensitive".
The site claims:
"Our approach does not try to alter existing consumer behavior: it is already a natural tendency to price-compare across multiple city pairs when looking to spend the truly discretionary dollars. Thus, we simply created a product that helps the suppliers to sell more seats and allows the consumers to travel more often."
The company has some high profile backing in the form of an undisclosed amount from Lightbank (venture capital firm from the founders of Groupon) and Yuri Milner/DST (an investor in Facebook, Zynga, Linkedin, Twitter, Groupon, and Airbnb), as well as additional capital from its original, unnamed seed investors.
It has three co-founders, Alek Vernitsky (CEO), Ilya Gluhovsky (CTO) and Alek Strygin (COO), alongside Eli Rosenberg (head of product) and Alexey Rostapshov (VP of strategic partnerships), with a further 15 people on the team.
During the beta phase for the site, users will not be charged a fee for their reservations, but this will eventually be the primary revenue model.
GetGoing says it wants to dispel "conventional wisdom" that there are no margins in selling air tickets if a product comes along that "benefits both airlines and customers alike".
Q&A with CEO Alek Vernitsky:
How is the way you are solving this problem more special or effective than previous attempts you or the market has seen before and how different do you have to be to succeed?
The ability to differentiate between business and leisure travellers is an important issue in airline revenue management. Traditionally, airlines make most of their profit from business travellers, with entire teams dedicated to forecasting demand for full-fare business travel and holding seats for these passengers.
Once business demand for a flight is determined, the rest of the seats can be discounted to significantly more price-sensitive leisure travellers. The difficult issue is determining when someone is travelling for business versus pleasure.
With technology making pricing more transparent to the consumer, it has become progressively more difficult to price discriminate.
The traditional indicators – Saturday night stay, advance purchase restrictions, channel discrimination – are less accurate in the world of unmanaged business travel and metasearch engines.
The efficacy of opaque models, such as Priceline’s NYOP, which requires a consumer to bid on travel and find out exact times of the flights after the booking, has also been questioned.
Not only is the model inconvenient for consumers, who can’t control the details of their flight, but the unmanaged business travellers are effectively able to take advantage of the discounts, cannibalizing revenue.
Our model is a fantastic addition to the other sophisticated revenue management tools that airlines have in their disposal. Obviously, there is a tremendous benefit to the consumer from not hiding the characteristics of the flight (eg., duration, the number of stops, arrival and departure times).
Combined with cheaper airfare, we are able to reach a wide segment of consumers that currently direct their discretionary income towards a “staycation” or trips by car, train, or boat.
We also constructed a fence that guarantees that business travellers (as well as VFR and most existing leisure) are not taking advantage of the discount fares – the sole element of the itinerary on which a business traveller is not flexible is the ability to reach a specific destination, which is precisely what our model prevents.
Why should people or companies use your startup?
From a consumer standpoint, there are several important benefits. First, we offer great deals on airfare. We negotiate these deals directly with the airlines, and the reason we are able to offer cheaper fares is because of the benefits we provide to our airline partners.
We have an absolutely awesome search-and-discovery mechanism. A consumer can find the best deals to Europe, Asia, skiing, or the beach quickly and easily – there is no need to plug in multiple airports to find an affordable flight.
We also do not ask consumers to change their behavior in order to get a discount – many studies have shown that price-sensitive consumers are already searching and considering multiple destinations before choosing one (e.g., PhoCusWright’s The Future of Travel Search, February 2012).
Nor are we a flash sale site, where a deal can be available one minute but not the next – we provide a consistent shopping experience and results that are relevant to a particular traveller.
For airlines, we are building a perfect complement to their existing distribution channels. First, our model effectively guarantees that any discounted airfare sold via GetGoing does not make its way to the majority of existing customers – someone who should pay the full price to travel to a specific destination.
Every other way of discounting the airlines currently have – including the limited Twitter sales – potentially cannibalizes the high-paying premium segment.
Second, our model allows the airlines that have lower load factors to secondary vacation destinations to effectively promote these destinations to consumers who otherwise would not have thought of searching for them.
For instance, a consumer thinking of a Europe vacation from New York may only search London, Paris or Madrid, and will fail to discover a cheap flight to Berlin, Zurich, or Milan. We effectively get consumers to consider alternatives, helping airlines promote secondary destinations or new routes.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
We’ve discovered that our unusual model makes for a good conversation – we’ve built an active community on Facebook within weeks! So far, we put all of our energy into listening carefully to the initial feedback and developing a product that works really well for consumers.
In the meantime, we are raising a large investment round to support an integrated consumer marketing campaign in North America for starters, and we are building out the in-house marketing and PR team. We have some thoughts on how to tackle consumer acquisition that we are not prepared to share just yet.
What other options have you considered for the business and the team if the original vision fails?
All of us here are passionate about travel, and all of our ideas revolve around travel. The founders really enjoy sailing, and San Francisco is a perfect place for that.
So, if everything else fails, we are opening a yacht club!
What mistakes have you made in the past in business and how have you learned from them?
Our biggest strategic mistake to date was failing to anticipate the hiring needs and foresee the lead time for finding the right people to join the company.
This has probably resulted in a couple of months of delays. We have corrected this by dedicating a portion of our weekly schedule to interview people for positions that may open up in the future, even if we are not ready to hire them right now.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Travel is a platform business, where companies like ours connect suppliers with consumers. What’s unique about travel is that a lot of companies fail to serve both sides of the equation fairly and focus on buyers at the expense of the suppliers.
We think this is short-sighted. We try to focus on long-term relationships at the expense of short-term gains. We believe that to build a solid business foundation, a platform company needs to deliver well-articulated value to both parties, and we work really hard to do just that.
On the one hand the GetGoing model and idea sounds rather complicated, but then again many in the industry often scratch their heads over anything to do with opaque or blind bookings.
Clearly GetGoing has managed to convince a healthy array of backers that there is something in its strategy and the usual questions for any consumer-facing startup about customer acquisition appear to have been addressed.
Whether its funding should be (or will have to be) used primarily for marketing is one of the perennial questions for travel startups given the black hole that hundreds of thousands of dollars often find themselves being poured into.
But GetGoing will obviously need, well, get going quickly with some traction and secure loyal users (and the subsequent word of mouth) and out of beta mode to start earning revenue.
Similar to HotelTonight a few years back, which seemingly created an entirely new model out of nothing, there is a chance that GetGoing may have struck on something with huge potential here.
While the background to the idea is sound (airlines fly 70 million empty seats every year), the biggest question with the opaque model is always around risk and potential market size - are there enough consumers around willing to take that jump into a blind booking or, indeed, actively searching for product in that way in the first place.
NB:TLabs Showcase is part of the wider TLabs project from Tnooz.