Open Travel Exchange was created in late 2010 as an affordable distribution system with an initial focus on the hostel community, complete with reservation confirmation receipts, sales and reservation reports, inventory management, seasonal pricing and package deals.
Since hostels already earn commission on booking tours and other activities, why shouldn't they have the tools to earn commission on booking their guests' next hostel?
Although initial focus is on hostels, Open Travel Exchange also accommodates others accommodation, such as smaller, family-owned hotels, B&B's and posadas, by connecting them to travel agencies. In short, the types of properties long ignored by the big distribution systems.
Once booked, the customer pays a reservation deposit to the travel agent (or hostel), and then pays the balance on arrival.
The four-strong team is led by managing director Brant Finley who spent the past eight years working as a technology consultant for small and family-owned hotels in Latin America. Other key personnel include lead developer Brent Lee, Leonardo Inzunza and Nicolas Davila who head up sales and marketing.
To date the venture is self-funded although it has now begun to look for new funds after its limited beta launch.
Open Travel Exchange is initially focusing on Latin America where it estimates a market size of more than 100,000 properties, with many multiples of that worldwide.
The team is keeping an eye on existing big distribution services which could turn out to be rivals if they decided to go after this market.
Other 'affordable' solutions exist that provide various levels of channel management and GDS connectivity, but they have virtually no market reach in developing economies, are too complicated and remain beyond the reach of smaller, lower cost properties.
Revenue will be drawn from flat monthly rates based on the property’s size as well as an API platform allowing others to develop add-on products, which could be anything from comprehensive property management systems to customizable receipts.
The plan is to keep costs low by focusing on the core system, making it easy to use while adding significant value. If more sophisticated customers want to add on new features developed by others, then OTE is happy to accommodate that and make money doing so.
Q&A with managing director Brant Finley:
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?
Hostels work with other hostels and travel agents work with the smaller and family owned hotels—and they all work with tour operators. Our customers have already formed the basis for partner networks. Open Travel Exchange provides our customers with the capabilities to easily and efficiently work within their already existing partner networks, increasing the effectiveness of current revenue sources and providing opportunities for new ones.
We have invested a lot of time watching, listening, and talking to everyone involved in the reservation process, from the owners and managers, to the receptionists and guests.
For example, we learned that one of the major problems that hostels have is high employee turnover. Any new system must be quickly understood, easy to use, and intuitive for receptionists, as a major management problem is having to continually train new employees.
Receptionists are key in receiving and making new reservations, updating availability, booking tours and serving as the cashier. At the end of it all, hostels just want a simple, functional system that makes life easier and that provides new growth opportunities.
A combination of our understanding of our customers’ needs and taking advantage of their already existing networks is both pretty special and effective.
Why should people or companies use your startup?
OTE offers its customers three things critical to their revenue growth and operational cost management:
1) Reservation management (incoming and outbound)
2) Comprehensive inventory and price management
3) New and expandable profit centers
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
In the travel industry, there are many participants involved in making a vacation product (hotels, travel agents, vendors, tour operators and others). In order to present a seamless product, all participants must work together on various levels, and each is a very important part of a concise network. Those networks already exist and our customers have a strong incentive to strengthen the networks by inviting their partners to join OTE. Each participant’s quality input is critical and OTE has made it very easy for each to participate.
What other options have you considered for the business and the team if the original vision fails?
There are so many under-served needs in the travel industry, particularly in developing countries, that even if the original vision fails, we’re certain that other opportunities will present themselves. Actually, some already have and we have incorporated them into our long term strategic planning.
What mistakes have you made in the past in business and how have you learned from them?
One thing we’ve learned is that adding more features does not necessarily result in a more desirable product; there can be elegance in simplicity. By concentrating on the core elements that the customer cares about most, it is easier to develop a solid system that the customer will use and pay for. Learning this has and will keep our costs down, ensure a quality product and pave the way for the Open Travel Exchange API to allow for third party development for add-ons.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Two major things are wrong with those who serve the market we’re targeting with OTE.
- They don’t create practical products because they don’t really understand the true needs (or don’t care enough to) of the very large market that is made up of the smaller hospitality providers.
- They haven’t found a cost effective way to sell and market their products, which are either too complicated or just not very good.
At OTE, we believe that we’ve not only created the right product for the right market, but have also solved the problem of the high costs of selling and marketing to that market.
Tnooz view:
Starting with a focus on one region is a good strategy especially as the team seems to have experience of Latin America.
The concept of aggregating what is a really fragmented sector is also sound. As and when Open Travel Exchange gets some traction the team may want to think about integrating it with existing travel agency systems as most travel consultants want to access all systems from a single point.
The team highlights the fact that the hostels and small, family-owned accommodation sector has been 'long ignored' but for how much longer? Global distribution giants and OTAs are beginning to take action on that front and bring in more independent properties. There's still a long way to go but demand is there.
In addition, if you agree that the hotel distribution landscape is due for a shake-up then there are already a few players, albeit with slightly different angles, grappling for space.
Snap poll:
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NB: TLabs Showcase is part of the wider TLabs project from Tnooz.