SteadyFare sells airline ticket price guarantees, like a next generation FarecastNewsBy Sean O'Neil | September 3, 2012Share This article was originally published on US startup SteadyFare is a service that aims to help travelers decide when to buy a nonrefundable, international airplane ticket, given how airfares go up and down all the time.The company allows customers pay a fee to lock in a price found on its site for up to a month. Its price guarantee is the most flexible one any company has yet offered.Next-generation FarecastIn a search tool that echoes Bing Travel's Price Predictor, SteadyFare mines historical trends to create a chart of how fares have risen and fallen and what a reasonable fare might be. The chart could help a US leisure traveler decide whether he or she ought to book an international flight now, or wait.Yet unlike Bing's price-charting tool (pioneered by Farecast), SteadyFare's charting tool is astonishingly flexible on how you can estimate the price range for a vacation. It allows a user to choose a range of dates for departure or return.For instance, on a Denver to London ticket, you could search for a departure window of the first week of October and a return window of the last week of the month, and see price trends for tickets over that period on average.More interestingly, SteadyFare touts a B2C product. This is a price guarantee service that is similar to United's FareLock and FlightNetwork's Price Drop Protection services.For a fee, customers are protected against fare increases for a broadly defined itinerary. This is, effectively, buying an insurance policy against the risk of unforseen fare hikes.SteadyFare spares a customer from spending more than today's price for the ticket, holding a good price for either two weeks or four weeks. Of course, a customer may pay less if the fare drops.The site focuses on US-to-overseas routes, like Dallas to Shanghai. It doesn't cover domestic routes and entirely non-US routes for its price guarantees.Uniquely, a traveler doesn’t have to choose a precise flight number on a particular date to grab a guarantee on an airfare.The fee for the price guarantee varies, though $35 is typical. Customers save by opting for a guarantee on a particular flight instead of over a more flexible itinerary.The fee is nearly always cheaper than the $75-$250 change fees many US airlines charge to for non-refundable tickets.The company is being built as part of the Seedstartup Accelerator program in Dubai and will make a presentation at Demo Day on September 20. It is in the middle of raising its next round of funding.Q&A with co-founder Jack Connor, speaking on behalf of his partners Brandon Collins and Ryan Houck:How is the way you are solving this problem more special or effective than previous attempts you or the market has seen before and how different do you have to be to succeed?Well, what we’re putting out there has some significant differences to airfare locking services already on the market.First, there isn’t much restriction to the length of time we can hold an airfare other than price-to-market fit, since longer holding periods tend to be more expensive, and we want to keep prices attractive.Also, our flexible departure/return feature is also new, allowing you, the customer, to pick a range of dates to depart or return on so that you don’t have to pin your exact travel schedule when you lock in an airfare. This seems pretty cool since I’ve had to pay $200-$250 change fees because of scheduling issues.Other than a refundable ticket, which can cost more than double a non-refundable ticket, there isn’t really anything I know of out on the market that provides this kind of flexibility.As for how different we have to be to succeed, it’s hard to say. In 2010 the top 20 US airlines made $2.9 billion on ticket change and cancellations fees, so there’s definitely a customer need for a better, easier, cheaper way to deal with these problems.It’s something I would buy.Why should people or companies use your startup?Basically, I think that our product is something that can definitely be of use to a lot of travelers who might not have the luxury to purchase their airline tickets far in advance when prices are low.Keep in mind, this product is not for everyone and, in fact, we want to encourage people who know exactly when they want to travel to purchase the lowest priced ticket on somewhere like Kayak, or sign up for a price alert system from Yapta or somewhere. Go get that deal, they’re out there.However, if you don’t know whether or not you can travel, or even when you can travel, then come check us out and lock in an airfare.What we’re trying to offer is peace of mind while you plan your trip; you have enough to worry about without having to sweat airfare price hikes while you sort out your travel plans.We say plan your trip in peace. Take your time. We’ll make sure your price is there for you when you’re ready.Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?Since we’re looking to license our product to online travel agents we’re actually relying more on a business development, angled sales channel than any kind of traditional marketing.However, we are running our beta-test directly through our website, so anyone travelers interested in checking out our service come by and drop us a line.What other options have you considered for the business and the team if the original vision fails?If online travel agents or other industry platforms for purchasing tickets don’t show any interest in our product, plan B is to try and sell this product ourselves through a standalone website.This is going to be inherently difficult as the travel industry B2C market is incredibly crowded and marketing/customer acquisition is outrageously expensive.You can have a great product in the travel industry but competing for customers is brutal, which is why we strayed away from that idea in the first place.However, we think we have a really good product, so if these existing travel sales platforms don’t like what we have to offer we’ll try and go it alone.Others have succeeded in this space and I do think we have a great and substantially different product, so even in a worst-case scenario I’d like to put it out there and see if we can make some noise.If that doesn’t work then I don’t know, maybe importing designer suits or something? We’re going to focus on our product and core business plan for the moment, and if it becomes obvious we need to pivot we’ll take it from there.What mistakes have you made in the past in business and how have you learned from them?Where to start? Of all the mistakes that startups tend to make, we’ve made our share. We’ve focused on the wrong things at the wrong time, such as user interface when we should have been working on more important technical issues.We spent over a month on one version of our algorithm only to trash it and start with something totally different which works way better.Luckily for us, we are in an accelerator program. Through the great mentors and our fellow entrepreneurs we’ve been able to catch some of these problems before they got out of control.I can’t recommend the program enough just for the people you work with; it’s really amazing and has been a huge benefit to SteadyFare.What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?Can I rant for a second? Why is the travel industry one of the only ones which is business-to-consumer, but which has aggressively non-transparent pricing?There’s no reason why an ordinary person should have to speculate on airfares just to buy a ticket to see their family, or to get back to school, or any of the other million reasons people fly.Yet that’s what we do every time we buy a ticket. Is the price going to go up, is the price going to go down? Who knows. There’s almost nothing else like it out there; a consumer-facing industry that forces buyers to speculate on such an ordinary purchase.Needless to say, I’m not a supporter. You know what though? Maybe it’s just me. I don’t really gamble, I don’t like haggling, and I hate having to guess whether or not I’m getting a good price on an airline ticket.And I love to travel, I’ve been in five countries in the last twelve months alone, yet buying airline tickets is one of my least favourite things to do. So basically, for the people like us out there, we’re a startup that brings some level of price transparency to the travel industry.Tnooz view: Measuring market size for SteadyFare's price guarantees is tricky. Much depends on the appetite of leisure travelers for a unfamiliar concept. The company notes that, in 2010, the top 20 US airlines made $2.9 billion on ticket change and cancellations fees. The founders say that its product helps customers avoid paying such fees, so one can infer that its market size could reach up to $2.9 billion. On the other hand, there is the actual experience of companies in this field. Bing Travel, previously Farecast, failed to gain traction with its (simpler to understand) Fare Guard product, and dropped it. That failure underlines a broader point that it can be hard to get leisure travelers to adopt to new travel search methods. SteadyFare is targeting leisure travelers, but leisure travelers book international trips infrequently. There's only a small audience of US leisure travelers who book often enough that they consider it worth their time to learn savvier methods of booking tickets that simply going to Expedia. Kayak, for instance, struggled in its early years to introduce consumers to the concept of metasearch as an alternative to an OTA search. So will SteadyFare be a concept too far beyond the threshold of customer interest? A lot depends on the partnerships it forms. If independent travel agencies can profit by marking-up the cost of the service, they'll have an incentive to push the product and do the heavy work of finding customers and educating them about the product. Another challenge facing SteadyFare is pricing. What it is essentially selling is an option, like an option to buy a barrel of oil at a certain price one year from now. While the price for an option on the cost of a barrel of oil next year is set by the collective wisdom of thousands of market participants, SteadyFare has to rely on the cleverness of its three founders in getting their algorithm right. Otherwise, the startup might fail to set its dynamic fees high enough to cover potential costs. To say this differently, think of the startup as an insurer. An insurer has to make sure it can pay out any claims in the event of a surpise, such as an act of God, that leads to a flood of claims. United's Fare Guard is limited to a much narrower range of eventualities, such as a specific flight number being guaranteed for a maximum of one week. SteadyFare is much more open-ended. But if SteadyFare's algorithms are right, profitability could be high. The product is essentially a warranty, like the insurance policy sold by many stories on consumer electronics. Warranty Week, an industry publication, estimates that of the billions in premiums charged consumers for warranties on vehicles and consumer electronics, half went back to the stores that sold them as a cut. In another caveat, some airlines might not allow services like SteadyFare to access their flight data. A data hole like that would leave a gap in SteadyFare's ability to chart market pricing. Other coverage gaps include fares offered by opaque sites, such as Priceline, and consolidators, like Vayama. Such gaps would make the product more difficult to explain to consumers. Ditto questions about whether airport preference and airline preference are included in a price guarantee. Example: Travelers loyal to United flights out of Newark, for instance, may not like locking in a fare price if it risks flying Al Italia out of JFK instead. In short, SteadyFare is entering a tough arena. It will have to punch above its weight. But to end on an optimistic note: Farecast was purchased by Microsoft for a healthy sum. SteadyFare doesn't have to be the perfect product. It merely has to meet a consumer need effectively enough to scale up and get an attractive market position for other players in the industry to value.Share this quote Snap poll: [poll id="33"]Video:NB:TLabs Showcase is part of the wider TLabs project from Tnooz.