Tours and activities are clearly getting a lot of attention in the startup community. It ticks many of the boxes that investors are looking for - fragmentation, spectacular growth potential, a global customer base across all demographics, disruptability (if such a word exists).
But the global online travel giants have already swooped down on the first phase of tours and activities businesses, meaning any startup in the sector has fierce competition when it comes to marketing budgets. They also need to find a niche.
Localyoo is undeterred and is bringing in another concept which has investors salivating - the sharing economy. In its case, it is locals sharing their knowledge and expertise with visitors.
But Localyoo is more than just a mechanism to introduce visitors to Paris interested in street art to a local who knows where the real gems can be found - it thinks it has found a way to monetise the platform via partnerships with hotels.
Here's a Q&A with one of its co-founders - Oded Nevo.
Tell us how you founded the company, why and what made you decide to jump in and create the business.
My co-founder and I felt that sharing economy is a huge thing which also holds great business opportunities and we wanted to join the revolution. We also love to travel and search for local experiences and we figured that building a marketplace of local things to do where everybody will be able to suggest local experiences makes a lot of sense.
We wanted to change and improve the existing supply of the traditional tours and activities industry and will also make tours and activities much more accessible.
We also saw that hoteliers are looking to provide their customers with personalised and local experiences and we thought that integrating tours and activities into their digital services will enhance their offering with ultra-local experiences and eventually will increase their customer’s loyalty.
Size of the team, names of founders, management roles and key personnel?
We are two founders me Oded Nevo acting as the CPO & CMO and my co-founder Giora Bar-Sakai the CEO.
We are both holds a lot of experience in building new products. My partner is a serial entrepreneur who built two companies while I have been working a lot of years on innovative web and mobile products in successful startups and enterprises.
Funding arrangements?
We had a first round of seed money from a successful internet company who believed in the team and helped us to build the product, find our first clients and business partners, and now we are working on our Series A.
Estimation of market size?
According to a Phocuswright research, there was about 50 million guided tours in Europe alone during 2013, worth some $10 billion.
Apart from tours and activities per se, we see our marketplace as a platform for generating engaging content that can be provided for hoteliers that can increase brand loyalty and generate more revenues.
So we are also looking at the entire hospitality business.
Competition?
We are mainly looking at companies like Vayable and GetYourGuide when it comes to the messaging and the value proposition for the customers. However, we are more focused on partnerships with hoteliers trying to help them build more engaging products in the changing environment of hospitality.
Revenue model and strategy for profitability?
As a marketplace we take a 20% commission from each transaction. We are also planning to charge hoteliers for using our content and services as white label.
What problem does the business solve?
We identified two problems in the market-place. For users - travellers - we help them to find great things to do and experience places in a personal and unique way, while for our service providers - the guides or experts - we provide an additional route to market for their service and bring them new customers.
Also, we can help hoteliers whose guests want the local and personal experiences.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
We started as a marketplace for tours and activities, but after talking to people in the hospitality business we realised that this kind of service could provide a valuable marketing tool to enhance hotels guests experience by making it more local and personal.
Why should people or companies use the business?
When you travel, you always look for great things to do and we believe this is common to everyone. The problem is that you are not aware of all of the options. But if the hotel you are staying at can connect you with a local who can show you what you are interested in, this is surely something guests would be interested in and what hoteliers can deliver as a service.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
It will be mainly through B2B co-operation, big hotel brands who wants to suggest local experiences to their clients in addition to their traditional services.
Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
We see the company as a preferred partner for hotels, wanting to add value to their customers via the sharing economy of tours and activities. The main challenge is to have a lot of engaging supply and top notch service that will make the experience personal and genuine.
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
Most tours and activities are booked the old fashion way - in the lobby via the concierge, at a kiosk in a tourist hotspot or in response to a direct approach in the street. .
Also, there are a lot of misconceptions about "guided tours" and lot of our potential customers still think in terms of the guy in the hat with the “licensed guide” lanyard and branded umbrella.
Bottom line is that it only makes sense to have a marketplace of tours where everyone can suggest really great experiences and everyone can get easy access to search and find a variety of local things to do.
Meanwhile, big hotel brands need to be up to date with the latest trends in hospitality - specifically the way to use the sharing economy to provide local and personal experiences to their guests.
What other technology company (in or outside of travel) would you consider yourselves most closely aligned to in terms of culture and style... and why?
We are trying to follow the principals of “lean startup” and develop a “lean culture” the concepts of “eliminating waste”, “continuous improvement” and “respect for people” makes a lot of sense and we love to learn about other companies who implement the “lean culture” into their company such as Dropbox.
Which company would be the best fit to buy your startup, and why?
I don’t think about it at this stage, we are focusing on making our product better and our customers happier.
Describe your startup in three words?
Discover local experiences
Here's LocalYoo's Vine submission.
Tnooz take
Localyoo is at an interesting crossover of a number of verticals - tours and activities, sharing economy and hotels. On a number of levels the idea seems to have merit. On the demand side, from personal experience it would have enhanced my travel experience if the hotel reception desk when we visited Milan could introduce me to someone who knew where the flea markets were rather than try to point it out on a hardcopy map.
Supply-wise, in the same way that the sharing economy has given people the chance to change careers by becoming a driver or a landlord, then signing up as an expert might appeal to some.
Whether or not this equates to a viable business model is another thing. As Oded says, having engaging supply and top-quality service is a must, and if Localyoo's experts can reach the parts of a city that other guides cannot reach then it might start to get traction in the direct-to-consumer segment.
But the interesting potential here is the link-up with hotels. Referencing back to my Milan experience, would knowing that hotel A could hook me up with an expert have persuaded me to book it rather than hotel B? How much value would the hotel place on this service?
The potential growth in the tours and activities sector is beyond doubt, and within that local experts do have a role to play. It will be interesting to watch LocalYoo and see whether the B2B or B2C side of the business takes off.