TLabs Showcase - BrokepackerNewsBy Kevin May | July 23, 2010Share This article was originally published on TLabs Showcase focus on startups featuring Australia-based backpacker deals site Brokepacker.Who and what are you (including personnel and backgrounds)?Over a backpacking career spanning close to seven years Kevin Lippy had been directly responsible for… not much really, and was more than content with simply being well-traveled. That was until one day when his promising backpacking days came crashing down in one foul swoop when he ran out of money and had no other choice but to go home!He had officially become a “brokepacker”. Kevin simply knew that he had to do more to help save other backpackers from suffering the same fate as he did.So he founded Brokepacker, a website purely dedicated to offering the greatest discounts and deals on backpacker accommodation, travel and transport.A short time later, fellow Brokepacker Dean Ginsberg who has experience in digital marketing, business development, strategy and design, returned home in dire need of a job to repay his backpacking debts.As Brokepackers, Kevin and Dean both truly understand how much backpackers value discounts, because every single dollar saved is a dollar that can contribute to another experience, another adventure and ultimately another day.What financial support did you have to launch the business?We are self-financed. We just tell people that our staple diet of noodles and tomato sauce is part of our strategy to delve into the mindset and psyche of our backpacker target audience.What problem are you trying to solve?For backpackers we live by our company motto: Saving You From Home.For operators:Having to contend with seasonal demand and volatile fluctuations in backpacker numbers, the majority of operators in the backpacking industry have some unused capacity (distressed stock) during most months of the year.Brokepacker allows these operators to offload a limited amount of their unutilized inventory at a discounted rate.Another issue is that the backpacking industry is made up of thousands of small independent operators, the majority of which do not have the brand awareness or marketing budgets to promote themselves on any other points besides price.Brokepacker serves as more than just a booking engine for these operators as it essentially provides an affordable marketing solution where they can inexpensively differentiate the products and services they offer.Describe the business, core products and services?Brokepacker utilises its own purpose built pricing model (Innovation Patent Application 201000090) to distribute the discounts it offers, which are bundled together into ‘deal sets’ and are available on a first come, first served basis.The discounts are distributed so that: No discounts on Brokepacker are less than 25% off - we believe anything less is not a big enough call to action, especially as we generally sell low ticket items.All discounts within a deal set are distributed unevenly to allow for some significant teaser discounts which offer as much as 70% off. Part of our value proposition is that once all the individual discounts within a deal set are sold out, the product/ service can then be purchased at the market rate.This can either be booked directly through brokepacker.com or by linking a user to the operators own booking engine where they can offer more detailed information and receive bookings commission free.Restricting the amount of discounts offered per listing, allows us to offer the most competitive discounts. It also allows us to incentivise those who get in early as opposed to rewarding those who book late (which is the opposite of what a lot of lastminute-style discounting sites do).The system is built so that operators can autonomously manage their own deal set listings in line with the amount of distressed capacity they have at any given point in time.Who are your key customers and users at launch?Price conscious, potential “brokepackers" age 18-30 wanting to prolong their travels in Australia. In this way the Brokepacker concept is market driven as it appeals to the overwhelming majority of backpackers who are typically and unashamedly frugal as they seek to get the most bang for their (limited) buck.Did you have customers validate your idea?Its pretty intuitive that besides sex and beer, discounts are the most sought after commodity by backpackers. So was it entirely necessary for me to move into a backpacker hostel a couple of months prior to our launch to validate this notion? Absolutely!Sure, at first even I thought I was uneccesary, but in hindsight it was probably the greatest business decision I have made to date. So much so that I haven’t exactly moved out yet.Living in and amongst real backpackers on ground level has provided me with a level of insight and understanding about my target market that far outweighs anything I could have possibly achieved from sitting in an office behind a desktop.It’s also pretty handy for sales leads and spreading the word of mouth about the project, which is great considering it will take some time to get substantial online traction. At times it does prove to be difficult environment to run a business (so I do go home occasionally).The most interesting thing I have learned so far is that a significant portion of backpackers are equally appreciative when it comes to “value-adding” as they are with discounting.In this way we are continually seeking to adapt our strategy to not only offer distressed stock at reduced prices but also to offer value-adding products.What is the business AND revenue model, strategy for profitability?Brokepacker’s primary source of revenue is commissions earned from deal sets sold. Being that it is free to list on Brokepacker, our model is based on the premise that we only make money once the businesses that list with us make money.We also promote listings that do not do not utilise our pricing model. These may include operators who want to advertise their own special deals or certain types of operators who simply do not fit our pricing model, an example being backpacker bars.We also run marketing and social media based campaigns through brokepacker.com on behalf of operators on an ad-hoc basis.SWOT analysis – strengths, weaknesses, opportunities and threats?Strengths: Brokepacker is first to market as a website purely focused on deals and discounts in the Australian backpacking industry. Our custom built pricing model and unique system design was built with simplicity and automation in mind. Brokepacker’s marketing strategies are more targeted to a younger, more social and web-savvy 18‐30 year old independent backpacker audience. Being on ground level amongst backpackers provides us with a unique edge to directly reach our audience Weaknesses: We are a small team with minimal start up capital. We truly see this as more of a challenge then a weakness as we have to be extremely scrupulous with every single dollar of our marketing spend. We simply cannot afford to be reckless at this stage and need to be creative in our promotional strategy. The good news is that we wholeheartedly believe that it is now easier than ever to reach our audience without requiring a prohibitively massive capital base. Opportunities: At present there is no website in the industry that acts a one-stop-shop for a backpacker’s every need including accommodation, activities, tours and transport. The hostel segment is covered (i.e. Hostelworld, Hostelbookers) but in terms of booking tours, travel packages and car rentals as well, you still need to navigate through numerous individual websites. Brokepacker bridges this gap, by allowing all segments of the backpacking industry to list. Threats: Discounting in the backpacker accommodation sector is a widely debated topic in our industry, and there are a faction of operators who believe that any type of discounting is bad news because it drives down yields and consequently hampers product development and inward investment. We need to disassociate from being irrational discounters and let the market know that we provide a solution for operators to sell there excess capacity as opposed to their entire capacity at a discounted rate.Who advised you your idea isn't going to be successful and why didn't you listen to them?Nobody has ever categorically stated that Brokepacker would not be successful; however if someone ever did then the last thing we would do is not listen to them.We would want to understand exactly why they held this belief and on what specific grounds do they think that the idea is going to fail?We would then thoroughly assess their point of view and if there is any merit whatsoever in their argument we’d do whatever was necessary to mitigate those reasons. We are never too proud to learn, fairly flexible and constantly adapting our strategy.What is your success metric 12 months from now?If in 12 months from now we could walk into any backpacker internet terminal along the east coast of Australia and have a good chance of seeing someone on Brokepacker we will be over the moon.No doubt this will certainly be a challenge considering how transient our target market is - after all the average backpacker comes to Australia for under two months.Achieving that amount of market recognition and brand awareness will require the continual engagement of new backpackers through word of mouth referrals.Another success metric will be defined by the amount of operators we have listed on Brokepacker, as we will only increase this in line with demand.TLabs Showcase is part of the wider TLabs project from Tnooz.