STARTUP STAGE: Bacarai wants to automate online sales of group air travel

Bacarai

Bacarai is creating a marketplace to bring group airfare online and add efficiencies – and upsell opportunities for airlines – to the process. The system functions through artificial intelligence-powered agents known as BacaBots that work on behalf of participating airlines to manage inventory, eliminate duplicate bookings, provide dynamic pricing and more. 

 

Bacarai’s founders have experience in the group airfare sector, so that’s the initial focus for the company. But they say they intend for the AI platform to expand in the future to improve the group and meetings business for hotels. 

Describe both the business and technology aspects of your startup.

Bacarai is a travel technology company that uses independently evolving artificial intelligence agents to automate an airline’s group travel program. This will allow airlines to distribute group contracts in a central marketplace, finally allowing customers to shop for group offers online.

The technology will not only make the sales process easier through automation, it will model all the nuances of group contract terms and pricing. Independent AI agents will learn to manage inventory, eliminate duplicate bookings, provide dynamic pricing and terms on group contracts, and act in the best interest of their airline because they will be owned and managed in the airline’s native system. This allows airlines ultimate control and flexibility over their group program, all while protecting their data.

What inspired you to create this company?

Our founding team created the Air Travel Group, INC magazine’s fastest-growing travel company of 2017. The Air Travel Group was a travel management company that specialized in booking group airfare, and we ultimately grew sick of calling airlines to call and shop for airfare. Everything is available online, and we thought it was time our clients could purchase group airfare online. So, we decided to take action.

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

• Strengths: Our technology is built on a powerful new framework that allows disconnected systems to interoperate seamlessly. Since each of our AI agents evolves independently, every entity that owns an agent owns all their data and can transact with other agents within our marketplace.
  
  Since this is a new form of AI, and we are one of the only companies in the United States that works exclusively within the group airfare arena, we anticipate being first to market. This solution addresses a real need within the airline industry, and it arrives at a time when airlines are looking for and embracing new technologies.
• Weaknesses: We don’t have airline systems knowledge, which means we have to rely on partnerships to model airline data schemes and processes.
• Opportunities: There is currently no entity that is offering the airlines the ability to automate their group programs and distribute group contracts online. We anticipate being first to market.
• Threats: Airlines can develop their own group portals, as Lufthansa has done. While this makes the distribution of group airfare easier, it does not solve the main pain point. Unless there is a marketplace where customers can shop (i.e., price compare) for group airfare, they will continue to hold space on multiple carriers and cancel their contracts. An online portal only addresses one half of the problem; Bacarai solves both sides of the equation.
  
  In addition, the problem, solution and technology all require some education, since group airfare is such a niche market. We have to take the time to explain some of the nuances of the booking process to investors and sometimes even to the airline representatives themselves!
  
  There are also some people who don’t believe our AI can model more complex processes, like revenue management, but this iteration of technology can model almost any process in the world. Human nature still grapples with technology’s rapid advancement, but we hope our demo (due out late this year) will reassure any skeptics.

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

Group airfare isn’t sold online. Can you think of anything you have wanted to purchase that you had to place a call to buy? Customers of group travel have a fragmented and time‐consuming shopping experience. They have to call each airline (yes, on the phone) just to find out how much it will cost to buy their product. If you had to do this every day, it might get a little old.

The pain points are even worse for airlines. Not only do they have to operate a call center for one product, but it affects their overall business. The lack of a central marketplace is one reason why 50 to 70% of all group contracts are cancelled, which is terrible for inventory management.

Additionally, this process equates to huge opportunity costs. Airlines can’t exercise their ability to serve dynamic pricing or upsell perks (like lounge access or seat upgrades) on their group product, two initiatives that are a current focal point in the industry.

Obviously, both sides experience significant inefficiencies.

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

Our primary customers are our airline partners. Since we have an intimate understanding of an airline’s pain points, we have developed our solution to alleviate their biggest problems. Bacarai will reduce inventory spoilage and provide alternate streams of revenue for airlines that are currently nonexistent on the millions of group flights they sell.

Our hope is that once we accept one airline into our marketplace, others will follow, since they will receive a competitive advantage with online bookings. Once we have most airlines on-boarded into our marketplace, duplicate bookings, spoilage and wasted hours on the phone will be practically eliminated. 

Bacarai is a rare solution because it truly does benefit everybody in the industry. The more people that join our platform, the better it will be for all.

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

Instead of establishing a need, we have identified a real problem.

Group airfare accounts for over $20 billion in annual sales in the U.S. alone. The current process for booking group airfare is tedious and wasteful. Operators needing group space have to call each airline over the phone to shop for prices, which takes up both parties’ time and resources. This is an even worse process for the airlines, because as operators shop, they “hold” inventory with each carrier - and then cancel the space they don’t need days or months later. This creates inventory and revenue management problems for airlines, who need every bit of revenue they can get.

Over 20 million people fly using group contracts each year, and an online shopping portal (think the “Expedia” for group airfare) would provide a more convenient shopping experience.

More importantly, our AI would eliminate duplicate bookings - which would save airlines millions of dollars in lost revenue. Once airlines join our marketplace, operators will be redirected to go online to book flights, so our customer base will be built in, requiring no acquisition on our end.

How and when will you make money?

We will have a working demo by the end of 2018 and a prototype by early 2019.

The first iteration of our marketplace will consist of airlines and group tour operators. Operators will pay a monthly subscription fee to shop in our ecosystem and consumers will pay a minimal flat fee per ticket sold.

Since our acquisition costs will be minimal, we anticipate generating profits soon after opening our marketplace. To put it in perspective, an airline like United sells over three million group tickets per year, which would provide us with over $16 million in profit. If just 10% of the current travel agent market joined our platform, we anticipate making $1.5 million per year. 

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

Our team has what we consider the one‐two punch. First‐hand experience in the group travel industry and solid leadership skills.

Co‐founders Eric Peterson and Kenny Totten have already built a successful company for group travel - winning the title of fastest-growing travel company on the INC magazine 500 list in 2017. Within the niche market of group airfare, both understand the nuances of the aviation industry, specifically when it comes to the group travel market.

In addition to business acumen and industry expertise, our team’s prior leadership experience rounds out the company. Cait Busscher comes from eight years with the Walt Disney Company. Her various roles included operational management, training and development, and public affairs, which she’ll use to develop company culture, promote Bacarai’s public image and foster employee satisfaction.

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

Waiting to get started! Our team had been working on Bacarai for almost a year, and our idea seemed to outpace our timeline. We hadn’t heard anybody else talk a group travel solution, and we knew the airline industry was proactively seeking solutions to enhance the customer experience and boost their profit margins - so the Bacarai solution was timely.

However, as is the case with startups, it can sometimes be a waiting game. While we had had a lot of interest from some of the biggest names in aviation, we needed a technical partnership with an airline in order to model their processes and train our technology.

But, we are happy to announce, we recently agreed to work with a major U.S. airline, and we can finally get started! After many meetings, one forward‐thinking company has decided to allow us to train our AI within their systems. After months of pitching and creating content, we have finally started our journey. We know there will be other twists and turns along the way, but it’s all part of the process. If you’ve ever started a company, you will understand the dual emotions of excitement and frustration you might feel at any given moment.

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

Group airfare is a niche market and we are one of the few companies working in this arena. This fact, combined with the exclusive use of our patented self‐evolving AI technology, means we will be first to market with our solution.

The solution is also timely. Now, more than ever, customers are demanding more from airlines while expecting to pay less. Airlines are stretched thin and operating within very small profit margins, so the entire industry is actively seeking solutions that will enhance their customer experience and their bottom line. Our solution will do both and will arrive to market at a time when the airline industry is embracing new technologies more than ever before.

We do believe in the strength of our well‐rounded team - prior success as a small business is a strong indicator of a startup’s future success. Our technical team are leaders within the AI industry, and we possess strong leadership skills to create a thriving company.

Finally, the underlying technology has far‐reaching applications. We are starting with group airfare - it is in our wheelhouse, and we can rely on our prior relationships; but our goal is to use our technology for all areas within the group travel industry. Any process that can be modeled can be managed by our AI technology and almost any travel provider can join our online ecosystem. This means Bacarai has the ability to be supremely scalable.