Startup pitch: Virgo says "book a hotel, get a free airport ride"

No matter what your astrological sign is, Virgo, a new US travel service, has an offer for you: "Book a hotel, get a free ride."

The new brand is a pivot for a startup team that, in 2012, built Guestmob, a semi-opaque hotel-booking platform that used predictive-pricing algorithms to deliver a Hotwire-style service. (See the Tnooz's profile of Guestmob).

Guestmob's co-founders say they learned that hotels did not offer price discounts consistently enough to wow customers -- a problem Hotwire itself has been struggling with.

Less than a year ago, Guestmob restarted as Virgo, a membership-based club for access to vacation packages.

Virgo bundles products (starting with hotels) in packages that include relevant perks. Its first perk is free transportation to and from the airport, with every Virgo booking, starting with black car service at three airports: San Francisco, San Jose, and Oakland.

Users must pay an annual fee of $99 to get access to deals. They can then select from over 270,000 hotels worldwide at standard rates, such as those found on Expedia, Booking, Kayak, and Hotels.com, and over 90,000 hotels at hidden prices.

Virgo is an app for Apple devices. An Android version is in the works.

Virgo has made a Vine to illustrate its premise:

Q&A with CEO Yann Ngongang:

Tell us how you founded the company, why and what made you decide to jump in and create the business.

We’ve been inspired by Amazon and its Prime program.

Instead of burning dollars on advertising like many online travel agencies (OTAs) do today, Amazon invests massively in offline services (shipping, distribution, call centers) to deliver a delightful experience and engender customer loyalty.

We’re taking a similar approach: free shipping is to e-commerce what free airport ride is in e-travel.

Size of the team, names of founders, management roles and key personnel?

Yann Ngongang, co-founder/ ceo, product lead (Built VIMS/e-Smog, a company that built a reservation and pricing system for auto stations.) Damien Keller, co-founder/ vp hotel ops (former director of sales and marketing, Orchard Hotel and the Orchard Garden hotel, a sister property) Robert Barone, co-founder/ vp marketing (co-founder and marketing director of Mintbox) Total team of 7

Funding arrangements? Seed funded, not publicly announced.

Estimation of market size?

Our initial market includes: frequent travelers (>3 hotel bookings/yr) who fly to/from SF Bay area airports.

Conservatively, that is a nearly $1b a year opportunity in gross bookings. As we scale Virgo to more metro areas, the market will expand significantly.

Competition?

We’re somewhere between Amex, Priceline.

Revenue model and strategy for profitability?

Virgo charges an annual fee of $99. We earn money from both the membership fees and the hotel booking merchant commissions.

What problem does the business solve?

We’re 1,000% focused on removing frictions from travel.

By bundling hotel booking with airport transfers, we take the cost and hassle of airport transportation away from the customer.

How did the initial idea evolve and were there changes/any pivots along the way in the early stages? - Earlier, our team built Guestmob, a smart opaque booking focused on price. - We realized price is not enough to wow customers, but certain offline services could. Yes price matters, but for many travelers there are still too many friction points, affecting their decision making, and most of those friction points are offline. - We focused on a small loyal customer base, and figured out how to deliver these services profitably - We rebuilt a model combining travel products & perks to take the hassle out of travel

Why should people or companies use the business?

The Virgo app is very simple: we assume the user has done some research (on Kayak, TripAdvisor, Google, etc) and knows her hotel, dates, and market price.

We offer the same hotels, at the same prices (sometimes better), and a free transfer to AND from the airport. That is an industry first.

For anyone who travels and books a hotel at least twice a year for personal or business purposes, Virgo is a no-brainer. The membership fee pays for itself by the second booking. It’s that simple.

Someone traveling once-a-month can save up to $1,000 in Uber a year, and nearly as much in airport parking fees, by using Virgo and using our airport transfer.

What is the strategy for raising awareness and the customer/user acquisition? - Deliver an awesome offering, with lots of value - Ensure customers are wowed and come back often - Let satisfied customers spread the word - We've hired PR firm FKPR

What we will not do, and burn money on online marketing and add to the cacophony of loud promises of discounts. We prefer to invest our dollars on things that make a difference for customers.

Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?

We’ve said we’re a travel agency, offering products (hotels now), and perks (airport transfers now) to take the hassle out of travel. Expect us to push out more markets (beyond San Francisco Bay hotels), more perks, and more products.

What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?

Travel innovation has stalled, because it is too focused on bits, not atoms.

Mobile and web startups, even the heavily funded ones, are having a hard time, scaling consistently. They’re iterating on slick designs, button colors, or booking gimmicks.

On the flip side, the large incumbents’ idea of innovation is to pour increasing amounts of capital in online marketing. None of those online iterations, or bit-based, adds any value to consumers, they just add to the cacophony.

The industry is not paying enough attention to consumers’ pains, frustrations and even humiliation while traveling.

Those are the offline issues, or atom-based, that matter and drive consumers’ decisions.

Think about it, the most talked about recent innovation in travel is not an app, but a little device called a knee defender….

Online and mobile travel companies have yet to resolve the friction points (e.g., blind bookings, prepaid rates with strict restrictions, long list of irrelevant hotels, etc.). The travel industry could learn from Airbnb, Uber, and Postmates.

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?

The Amazon or Zappos approach to investing for the customer are true inspirations. Virgin America is a favorite as well.

Tnooz view:

Virgo may have found an opportunity lurking in everyone else's blind spot by thinking of models outside of travel. Other verticals have been more innovative and can serve as models for travel startups. Over time, the young company may have to fine-tune its membership pricing. Once they have market fit, they'll need to identify who their core customers are and cater to them rather than get distracted by trying to lost of different things. Mass-marketing to consumers is difficult. GetGoing, a Y Combinator graduate that also thought it has a way out of the opaque-pricing trap by adding an element of surprise, eventually opted for a B2B pivot. That said the big money and the accolades are still in the consumer market. We recommend "The Hacker's Guide to User Acquisition." We wish Virgo the best of luck.