News | DistributionStartup pitch: Poshpacker defines a niche with affordable, design-minded accommodationsThis article was originally published onBy Nick Vivion | October 28, 2013 Millenial travelers continue to be ripe targets for marketers, but if the price point of a particular offering is not right, there's really no point in targeting Millenials.And it's not just price: this particular cohort are looking for value that also includes a consideration of user experience and design. They not only want a reasonable price, but they want to get well-deployed services and a modern design aesthetic to boot.A new travel startup called the Poshpacker is laser-targeting the design-minded, budget-conscious traveler with a global design hostel/hotel search tool. The site focuses on accommodations priced at less than $100 per night.Co-founded by Tania Cruz Morales and Anna Kojzar, the startup is advised by Bob Neher and received $30k in funding out of the four month program at Hatch.The startup is currently fundraising $500k to license a booking engine technology and hire a support team to directly facilitate booking transactions via the search engine, so users can have end-to-end service for the accommodation booking needs.A short Vine video describing the concept is followed by the Tnooz Q&A with the Poshpacker co-founders.Tell us how you founded the company, why and what made you decide to jump in and create the business.The inspiration behind The Poshpacker came to us while travelling in Europe a few years ago. We were going to The Canary Islands and were looking for an original and cool place to stay that wasn’t sketchy or expensive.After researching online, reading guidebooks, and asking around we finally took a chance on the little information we had and decided on a spot near the beach. It ended up being a great choice and we couldn’t believe how nice it was and how little we paid.We thought that there had to be way more places like that, but wished that they were easier to find and access. That’s why we started our company, to help people find the best places to stay without having to pay a fortune.What is your estimation of market size?The millennial travel market (ages 18-30+) is worth a total of $165B comprised of 1.8B Millennial travellers around the world going on 196M trips per year*. We expect to capture 25% of this market (1 out of 4 millennials could be a "poshpacker").Accommodation expenses equal 18% of the travel market. Thus, of the $165B total, $29.7B is spent on accommodation. We therefore estimate our total market to be at $7.4B and growing.Please describe your competition.Hostelworld- inventory- www.hostelworld.com/WeHostels- mobile- www.wehostels.com/HotelTonight- last minute booking- www.hoteltonight.comExpedia + Booking.com - OTA's www.expedia.com, www.booking.comDesign Hotels- upscale/luxury hotels www.designhotels.comAirbnb (indirect)- alternative to hotels & hostels - www.airbnb.com/What is your revenue model and strategy for profitability? The current revenue plan is through a booking system, where we will charge a percentage to the hotels & hostels for booking their rooms. We've already been approached by a number of hotels and hostels ready to sign on.Additional revenue streams include: click-based and affiliate advertising, service fee, and hotelier membership yearly fee.Next steps are to put in place a design consultancy to transform other hotels and hostels into poshpacker picks.What problem does the business solve?The Poshpacker addresses the problem of finding safe, chic and affordable accommodations.Customers spend 7+ hours researching and visiting various websites to take a guess in picking out a place that in the end may not live up to their expectations. We help users save time, money and disappointment from researching, booking and accessing reliable and safe budget accommodations worldwide.How did the initial idea evolve and were there changes/any pivots along the way in the early stages?The initial idea for The Poshpacker evolved from a 100-page business plan for an MBA project into a lean stripped down MVP.Early on we tested out the idea of a “accommodation concierge” for a flat fee of $100, where you would name a city and we would provide you with 2 or 3 Poshpacker Picks (luxury hostels/design hotels) that you would then choose from, through an opaque booking model.However, we pivoted from that model because our market didn’t respond to it very positively. Since our market is heavily millennial driven, we found that they prefer to book instantly and know what they are getting beforehand. With this in mind, we realized that we were missing a booking engine that allows customers to know what are they booking and to do it instantly. Why should people or companies use the business?People should use The Poshpacker if they want to have a hip and “high-end-like” travel experience without having to pay a fortune.Companies should use The Poshpacker to save money as a source to find affordable hip hotels for their millennial business traveller employees.Hoteliers should use The Poshpacker as a marketing tool to showcase their business and to differentiate themselves as part of a new travel movement.What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?Part of our strategy includes education on the advances and segmentation within budget accommodation. We use social media to educate customers about the “poshpacking” trend and to share innovative things that hostels and hotels are doing to become “posh.”Our current marketing strategy is to encourage our Poshpacker picks to display our Poshpacker logo on their homepage websites (such as Palmers Lodge in London, Jodanga in Bolivia, Podshare Los Angeles, MNL Boutique in Manila, etc.) We also promote hip and cool events in hotspots worldwide as part of our marketing strategy.Our name, "Poshpacker" is already utilized as a new traveller category. There are currently more average monthly searches for Poshpacker than for luxury hostels.Travel bloggers are an integral part of our marketing. They are spreading the word of our hotels and brand worldwide by sharing their experiences first hand.To maintain our customers and acquire new ones, we deliver consistent experiences, maintain accurate information and pay close attention to customer's feedback.Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?We envision The Poshpacker as the preferred and number one source for affluent millennial’s accommodation booking in three years time and leaders in this niche market. We expect to become a leading life-style travel brand.The major challenges we anticipate having to overcome is gaining preferred quality inventory, keeping up with customer’s demand (our hotels and hostels sell quickly) and the learning curve in transitioning some of our hotelier partners from spreadsheets onto a booking system (which is in progress).What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?The definition of contemporary luxury in regards to travel and hospitality is changing, especially for the “creative class.”We see that design conscious budget accommodation rivals many of the high end/ traditional boutique accommodation options and we want people to experience this new form of “rough” or “low-touch luxury”. There aren’t many startups catering to this profitable niche that caters to the affordable luxury trend.“One niche that has not been satisfied where hospitality is concerned is economy mixed in with design magic.” Liliana Dumitru-Steffens.We believe that everyone deserves to have a hip and high-end like travel experience without having to pay a fortune. By not having to pay much for a cool hotel, people could spend more on experiences or travel for a longer period of time. Travelling can transform people lives, and transform the social and economical of communities focussed on the tourism market.What other technology company would you consider yourselves most closely aligned to in terms of culture and style... and why?We like to see ourselves as the Mr. & Mrs. Smith for millennials. We appreciate their curation and focus on the overall experience. We’re also big fans of Tablet Hotels and Design Hotels. They are forward thinking, simple & clean and strive to provide unique & original options and selections.*United Nations World Tourism OrganizationTnooz view:Poshpacker does indeed seem to have created their own niche - an especially difficult feat, given that almost every niche has been done to death.The concept of providing direct access to design hostels and hotels that don't break the bank is extremely viable, as brands like Generator Hostels gain traction and increasingly define the market for affordable design accommodations. This means that there will be more competitors entering the market, who will be looking for alternative means of distribution and access to the communities that are most likely to stay with them while they travel.Poshpacker is ideally positioned to take advantage of this. Right now, before they build out the booking engine, the company should be focused on building community through their website and social media channels. By sharing travel tips, design inspiration and other relevant tidbits to the community, they can build an active and engaged community poised to book hotels directly with the Poshpacker.In addition, as the appeal of generic hotels dwindles among the newest generation of travelers, this niche is only set to grow over time.NB: Couple lounging image courtesy Shutterstock.