After 30 years working in online travel PointsHound founders Peter Van Dorn and Chris Boyd decided to find a more flexible way for frequent travellers to collect and maximise airline loyalty miles.
The pair, who most recently worked at Switchfly, jumped in full-time after creating a rough prototype for friends and family, and launched a private beta at the end of October 2012. The site received more than 10,000 new user sign-ups in less than six weeks and the startup has just closed a seed funding round.
PointsHound's target market is frequent travellers. The startup estimates there are eight million elite-level frequent travellers in the US today who participate in multiple loyalty programs. PointsHound points to data showing these travellers make about 13 hotel bookings a year, at $300 per stay which means a market size of about $30bn. The number increases significantly if you include non-elite travellers and non-US consumers.
Competition comes from many angles given the number of places to book hotels online but PointsHound says its 'sweet spot' is frequent travellers who want to maximize their points collection and have the flexibility to choose what and how they earn across a wide selection of price-competitive hotel options.
Revenue will be generated revenue from hotel sales and the company is integrating higher margin hotel inventory with its revenue share on these sales increasing with volume. The startup is also operating on a team of two, as well as contractors and advisers, and says it has scaled the business using open source technologies and automation.
Q&A with co-founder Peter Van Dorn
Describe what your start-up does, what problem it solves (differently to what is already out there) and for whom?
PointsHound is a loyalty points-centric booking engine for frequent travellers. Currently we allow our users to earn miles on over 100,000 hotels around the world in a growing roster of frequent flier currencies. We are the first e-commerce business to address the complexity of the current loyalty landscape: we offer frequent travelers the flexibility to choose where they earn, what they earn, and how they earn in a clean, straightforward user interface.
Why should people or companies use your startup?
Consumers should use PointsHound to earn more of the loyalty currencies they value.
Loyalty programs should partner with PointsHound to generate revenue through the sale of their proprietary currencies. This is an important revenue stream for many loyalty programs, especially frequent flyer programs, and we are on track to be a significant partner in this regard.
Finally, suppliers use PointsHound to sell unsold rooms while protecting their price points.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
We are testing user acquisition in the same types of online media that other e-commerce businesses rely on: search, display, meta-search, and so on. But, because our target market is heavily concentrated, word-of-mouth and social media has been incredibly powerful so far and will remain a key focus.
How did your initial idea evolve? Were there changes/any pivots along the way? What other options have you considered for the business if the original vision fails?
No pivots but we’re constantly re-prioritizing our product development road-map based on user and partner feedback. One example is our recent launch of a rate type that enables members of hotel frequent guest programs to earn credit towards their elite status while still earning frequent flyer miles funded by PointsHound. This was always on our road-map but we pulled it way forward following feedback from business travellers accustomed to elite status at major hotel chains.
We’ve been pretty focused on trying to keep pace with the business and haven’t considered a plan B. We definitely see an opportunity outside of travel both in terms of the loyalty programs we work with and the products we sell, but haven’t yet had a chance to test how big an expansion in that direction could be.
Where do you see yourselves in 3 years time, what specific challenges do you hope to have overcome?
In three years PointsHound will be a single storefront that offers loyalty program members all over the world the ability to earn the virtual currency of their choice, in both travel and non-travel programs. These currencies will be earnable on a range of travel products, including hotels, and non-travel products.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Given that the average frequent traveller belongs to something like 18 different loyalty programs and is active in eight, it’s just too overwhelming to keep track of all the one-off promotions that come and go. These travelers need simple tools that allow them the flexibility to choose how they earn and reliably maximize their earning potential so they can get the most out of the programs they belong to.
Tnooz view:
Loyalty schemes have needed some new life breathed into them for some time. There are a number of initiatives already out there such as the ezRez/PayPal/MileagePlus scheme to turn miles into digital currency to pay for products and services. United Airlines' MileagePlus also has a Hotwire partnership for members to use their miles to get unpublished hotel rates.
Also, if Hotwire is already doing it, other large online travel agencies will be watching carefully and in the same way, that they've all jumped on the same-day hotel booking wagon, they could jump on this.
There are already other startups making headway including RocketMiles which is based on a similar business model and is rumoured to be on the receiving end of much larger funding.
Anyway, the point is that there are so many, travel and non-travel, loyalty schemes that consumers participate in, more or less actively. Bringing a bunch of them together and enabling people to earn more miles/points can only alleviate some of the frustration.
Challenges, as the startup points out, might be around getting to the right people - those elite status frequent travellers as well as the issue around road warriors collecting more miles than they can actually spend. However, extending the service out to non-travel products and services could solve this issue.
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