STARTUP STAGE: Arise's distributed network wants to help hotels bypass intermediaries

Arise

Winner of the Phocuswright’s 2018 Battleground competition, Arise’s blockchain-based technology is designed to help hotels bypass travel intermediaries to connect directly to distribution partners.

Having previously worked at a cloud-based PMS, co-founder and CEO Nadim El Manawy says he and his partner, Alex Lamb, started the company after hearing hotels’ frustration with OTA distribution models.

Describe both the business and technology aspects of your startup.

Arise is a blockchain-based distributed network for hotels and the ecosystem of products and services around them.

The difficulty of connecting to and establishing agreements with hotels has allowed a few large intermediate networks to dominate hotel connectivity, and they take a large cut of hotel revenue for their service.

Our network aims to be the most direct, efficient and transparent path for data to flow between hotels and connected industry partners, bypassing existing intermediaries (affiliate networks, wholesalers, switches, GDSs) while providing superior flexibility.

Our technology allows us to provide this connectivity free of charge and significantly increase profitability for both hotels and distribution partners for the bookings they already produce.

We’re creating a single auditable source of truth that all connected network participants can rely on. Once this is in place, we will begin to be able to automate commission negotiation and payment processes.

What inspired you to create this company?

Both my co-founder, Alex, and I previously worked for a cloud-based property management system. Many of the hotels we worked with were very vocal about how a few online travel agencies were controlling their distribution and how much they were paying in commissions and fees.

We also saw how the fragmentation of the PMS space and old technology used by existing intermediate networks was making it difficult for travel companies to gain access to hotel data.

We starting thinking about how we could use new technology to fix many of these problems, allowing new travel companies to grow faster while helping the industry move forward.

Give us your SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the company.

Strengths:

• A good understanding of the current travel distribution technology landscape thanks to our previous experience building and selling a cloud-based property management system.
  

  We’re building something hotels and travel companies have been hoping for and that is necessary for the industry to truly move forward.

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• Technology that allows us to provide better connectivity at a much lower operating cost than existing networks.
• We’re very developer focused, making the deployment of our network and the adoption of our technology by other industry partners as easy as possible.

Weaknesses:

• Relationships with larger chains need to be built, as we were primarily involved with independent small to midsize hotels and groups prior to starting Arise.
• We’re a very young company and some established travel industry players could be doubtful until we grow bigger.

Opportunities:

• Hotels want to be less dependent on the few large OTAs and reduce the overall amount they pay in commissions.
• The majority of travel companies selling hotels rooms rely on intermediaries to access hotel data and give away a lot of their profit as a result. They’re looking for a more direct path for hotel connectivity to increase their profit on the bookings they already produce.
• Using our network as a source of truth for rate and booking data will allow us to automate business processes that used to be impossible for connected partners.

Threats:

• Even though our network is a win-win for both hotels and companies wanting to transact with them, it’s a marketplace, and those don’t get built overnight.
• Our model could be threatening to established players in the space, and they will throw their weight around to defend their position.

What are the travel pain points you are trying to alleviate from both the customer and the industry perspective?

Directly accessing real-time hotel data and establishing agreements with hotels is hard. Most travel companies currently have no other choice than to connect to intermediate networks that are inefficient and expensive. This is preventing smaller travel companies from growing and limits industry innovation.

Another pain point is the lack of transparency in today's networks, which also causes the problem of onward distribution when hotels aren't aware of where their inventory ends up or who is actually producing their bookings.

Being able to share data and transact in a more direct, efficient and transparent way will make it possible for travel companies to try out different features and business models, which will make travel smoother and less expensive for the traveler.

So you've got the product, now how will you get lots of customers?

To start, by solving specific problems industry players face today, such as commission tracking and reconciliation between travel management companies and hotels. By focusing on specific use cases, we’ll be able to demonstrate that our technology works and is a win-win for all parties involved.

Once proven, we can leverage the network effect of the connectivity we provide to fuel growth.

Tell us what process you've gone through to establish a genuine need for your company and the size of the addressable market.

Anyone who’s involved in the travel industry knows that there is a need to modernize travel distribution infrastructure.

At our previous company we stopped counting the requests for connectivity we were receiving from travel tech companies because we didn’t have the resources to allocate to build and maintain custom connections to products that would only be used by a few of our customers.

We saw how frustrating this experience was for the hotels who wanted to try new products and services to increase their revenue, and also travel tech companies who had innovative solutions to real problems but weren’t successful because they couldn’t get access to the data they needed to operate.

How and when will you make money?

We automate the commission negotiation and payment processes between parties on the network. We’ll make money by keeping a percentage of the commission our network automatically transfers between hotels and distributors. We’ll make money once the first booking produced entirely from data stored on the network is completed successfully.

What are the backgrounds and previous achievements of the founding team, and why do you have what it takes to succeed with this business?

Both my co-founder, Alex, and I were among the first employees at a cloud-based property management system company in San Francisco. Alex was head of the engineering team and I led sales and partnerships for the company.

Working so closely with hotels has given us a good understanding of the operations side of the industry while also experiencing the challenges that travel tech companies face when they’re searching for initial growth and traction.

What's been the most difficult part of founding the business so far?

Changing the way people think about connectivity in the industry. Most people in the industry have built a mental model that revolves around all these centralized systems connecting to each other in a linear chain. Our shift to a decentralized model completely changes how connectivity looks, and it can take a little while before people realize what that means for the future.

We believe it will be similar to the rise of peer-to-peer technology like Napster in the early 2000s. Previously, music distribution was tightly controlled by a few large companies. Artists signed away a huge portion of the revenue from album sales to have their music played on the radio and put on store shelves. Once peer-to-peer technology gained adoption, the cost of distributing and accessing music dropped to zero. Independent artists were able to share music with their fans directly, bypassing the existing distribution channels and intermediaries.

Now 15 years later, anyone can produce music and make it available to billions of people for free. Artists have more power in the industry and listeners have hundreds of ways to access the music they love. Decentralized distribution technology was the spark that completely reshaped the music industry for the better.

Generally, travel startups face a fairly tough time making an impact ‐ so why are you going to be one of lucky ones?

We’re building something hotels and travel companies have been hoping for and that is necessary for the industry to truly move forward.

We are very familiar with how things are currently pieced together behind the scenes and we know how to apply new technology to fix the current connectivity and distribution landscape.

We're not building something that needs to compete against the massive marketing budgets of OTAs. We'll measure our success based on the success our partners have bringing new and innovative travel products to market.

How come you don’t mention often that you are using blockchain?

Blockchain is a technology we use to provide a solution for the industry, but blockchain isn't THE solution for the industry. There's more to it than just putting information on a distributed ledger and pushing for adoption of a token (which isn’t our plan).