Terry Jones has had a long history in travel. His resume
includes work as a travel agent, 24 years at American Airlines, launching and
serving as CEO of Travelocity, helping to found Kayak and - most recently - serving
as chairman of WayBlazer.
That company, which offered artificial
intelligence-powered search, discovery and shopping for travel websites and
apps, announced recently it is shutting down, saying, “ …and after four years of
investment, the short answer is the next round of funding did not materialize.”
Following this news, we reached out to Jones. While he was
unable to share more details about what went wrong at WayBlazer, he did
give insights into how the travel startup landscape has changed over the
years and what it looks like today, as well as offer advice
for entrepreneurs.
Looking back on the
22 years since you founded Travelocity, how has the travel startup environment
changed?
Travelocity and Expedia - the two biggest startups at the
time - were started by huge companies. One started by American Airlines, one
started by Microsoft. So they were startups, but they were internal.
When we
took Travelocity public, there was almost no interest. We were playing to empty
rooms. Nobody thought travel was big. People were into pets.com, toys.com and things
like that. Yet travel turned out to be the biggest category in e-commerce, and I
think it may still be larger than the next three categories in e-commerce
combined.
You then saw the rise over time of venture-backed companies,
whether it’s Hotels.com or TripAdvisor and many others who were able to grow
and were quite successful. I think it’s still a fairly small family of venture
capitalists who get involved in travel. People will say it’s a great space, but
I don’t know it. So you have this small world of people who invest, and they
know it pretty deeply.
The change you see today of course is the change you see in
all startups - driven by a number of factors, principally by the cloud and the
availability of massive computing power at very low cost - people can start and
build companies on a credit card or Kickstarter. Or four people and very low
investment. That’s a huge change from 10 years ago when it just took a lot more
money to do things than it does today.
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The other thing that has changed is that the big guys have
gotten so big … that it gets harder to make the VC pitch and say, "I’ll get picked
up by Expedia or Booking or Amadeus." Because if you go talk to the leaders of
those companies, you really have to be a pretty big acquisition to move the
needle. I think they’re not buying little companies, they are buying pretty big
things, because if you are a public company, you are not going to spend the
time for the integration.
I think the exits get a little more difficult now when
you have an industry that’s so dominated by two to three really large players. And
you have to do something quite different to get the attention of the VCs,
because there are a whole lot of recycled ideas out there.
So knowing these
challenges – the big players, the recycled ideas – is it still possible for a
startup to break through and do something valuable and big?
I’m not writing it off because the category of travel is so
huge that there’s still room for interesting ideas. You do wonder how big
they’ll get. Some things may never scale to be huge. HotelTonight has done
fairly well but they are trying to expand their idea – now it’s “hotel every night”
or something.
You can look at the world differently as Airbnb did, as Uber
did. They won massive volumes by simply looking at the problem differently. The
whole attractions arena has a whole lot of headroom. I think as you see millennials
who are much more interested in the experience driving their vacation rather
than the property, people are repackaging things around experience.
Something else people forget: You don’t have to change the
world to build a big company. Travelocity was a registered travel agent. It
just took it online. That was the only difference. The back office was just
like any other travel agent. Kayak offered choice - you can book at any of
these places, we’ll show you everything. Those are big ideas, but that wasn’t
changing everything. You don’t have to change the whole world to build a very
nice business.
What is the hardest
part of creating a successful startup?
The challenge is coming up with an idea that will have
enough market impact that you can scale. It has to be different enough. If you
are talking B2C for example, the big challenges are you are up against big
entrenched players who are spending billions of dollars on brand. That’s hard
to break into. You have to have something that grows through word of mouth to
the extent you can really make a difference.
Look at the business travel category. You have some big
entrenched players that have been around a long time. I don’t think any of them
today - and I can’t get in trouble anymore for saying things because I’m too
old – I don’t think any of the big guys are particularly innovative. I haven’t
seen much innovation at the top, but it’s very hard to break in.
Lola is trying
to break in and others are trying. There are two to three with pretty interesting
ideas, but it’s very hard to break the hold that these very large companies
have. You have to have something that grows through word of mouth and is
innovative and different enough that people grab onto it.

You don’t have to change the whole world to build a very nice business.
Terry Jones
It’s gotten very expensive. When Kayak started, Google
arbitrage was a great deal. We bought tons of search and were able to arbitrage
search and make money on it. It’s very hard now. Google is very expensive. SEO
is an increasingly difficult game. That’s why word of mouth and having clear
product differentiation where people are talking about it at cocktail parties
are what you’ve got to have.
You get a lot of people who self-fund ideas. They look at
travel, they look at Expedia, Priceline, Travelocity and they say I can make a
billion dollars. They have no idea how hard it is. And very few of the ideas
are profoundly different enough to get enough consumers to make it work. And
the problem is exacerbated by the fact that we have these titans who won’t buy
a $50 million company – you have to be big to be bought. That’s the hard part.
Because there’s nobody picking up the crumbs.
And there’s nothing wrong with running a nice little $100
million business and maybe that is a point to make. In this country people used
to start businesses and own them their whole lives – family businesses. They
were usually funded by banks – you can’t get a bank loan anymore to start a business,
that doesn’t happen. So people went to venture capital, which was great but the
trip up in venture capital is you have to exit. In five years they want out. You
may be running a nice business, but they don’t care. They want their money back
and that’s why they invested.
If you start a small company based on your
credit card you can just own that company and run it. You don’t necessarily
have to sell it. It’s not the billion-dollar exit, but you have a family
business. Maybe that’s your story. But people’s mindset hasn’t turned back to
that yet - that that’s ok.
Where do you see
opportunities for startups in travel?
I think tours and attractions, the whole experience thing.
Airbnb added experiences, now hotel chains are adding experiences. I think
small meetings is still a big area where things can be done. That’s a business
that hasn’t been consolidated. I like spaces that have lots of activity and not
much consolidation. That’s why tours and activities – there are so many vendors
that need to get automated and there’s no network in place. People are working
hard on that. People are doing the same thing with meeting rooms, even big meeting rooms aren’t
online, most of them. There’s a bunch going on there.
There’s probably a lot more innovation that can go on in the
tourist bureaus and the generation of traffic. I got a little involved with
that at WayBlazer, and we found it hasn’t changed much over the years. While
cities don’t have a lot of money, states and countries have a lot of money. There
may be stuff going on there.
I still think it’s fascinating to me that in a whole other area
the airlines are the front door of travel for about half the bookings. People
start with air before they buy hotel. And while the airlines are trying to sell
more ancillaries, a lot of it is insurance and seat upgrades. They don’t do a
very good job of selling car and hotel. Their vacation arms are about the same
as they’ve been for the last 20 years. They don’t sell an experience, and I
think that’s a huge miss for those guys and I think somebody may get to the
point to help them do that really well. But airline companies change slowly. And
that’s a B2B not a B2C setup, and B2B stuff is tough.
A lot of people are attacking this multimodal travel thing - air, train, bus ‐ how do I mix those in the right way. I don’t think there
are enough people that do that in the United Staes, but in the Asian or European markets,
those things are working. So there’s something happening there.
Thinking back on your
experiences in travel and with startups, what’s the most important component of
a great startup?
More than ever it’s all about having the right team. One of
the things I fought very hard for at Travelocity was to bring people in from
the outside, who weren’t American Airlines people. I had to fight with human
resources for six months to allow me to do that. Because you want debate, you
want argument. At Kayak I watched Paul English – who I think is the best hiring
manager I’ve ever seen – build an amazing team of rock stars.
There’s an old
Silicon Valley saying that rocks stars hang out with rock stars. You want to be
on a winning team. And he hired rock stars, and that’s one of the reasons we
went public with only 200 people. He focused so hard on the team. It really is
important. You really shouldn’t hire your best friend to be your COO or
whatever. And now teams can be so small because the entry costs are so low and
then it gets more important.
Kayak was great because Steve Hafner had this deep travel
knowledge and had also been a consultant and a great business guy, and Paul had
no travel knowledge but deep technical knowledge. And Paul worked hard to hire
people that had never been in travel. He didn’t want bias. I tried to get a
little of both. A great idea with a bad team isn’t going to work.
We regularly hear
about work being done by big companies outside travel - Google, IBM, Microsoft.
Is it possible for startups to compete against these types of challengers?
I can say this - at WayBlazer, IBM was an investor, and there
was a period of time we used their technology and they were helpful to us, and then
eventually they began competing with us, but we didn’t have a lot of trouble going
head to head against them. When I brought on Travelocity, everyone said AOL and
Yahoo will kill you. When we brought on Kayak, all the investors said Google
with kill you.
Travel is tough, it takes deep vertical knowledge. I’m not
worried about those guys. Microsoft has fooled around with travel for years. Google
is certainly becoming more a force in travel. I mean I think for the first five
years they owned ITA Software they forgot they owned it. Now they are doing
more and of course it’s very tough to compete because they own the funnel. That’s
a tough one, but consumers like choice and they still look at multiple sites.
So I don’t worry about those big guys. They usually are very slow moving and
methodical and don’t understand the vertical well enough to benefit.
Does the demise of WayBlazer indicate anything about the potential for AI in travel? Do you still believe it’s a good match?
It can have a large impact. I saw a chart from McKinsey that
showed travel as dead last of industries in adoption of AI. And then another
chart that showed of industries where AI could have impact, travel was at the
top. We have a lot of opportunity and nobody’s doing it.
That’s bad because I think the ability to change the travel
paradigm – which on every website it’s where you are going and when instead of
what do you want to do, and allowing people to interact either with voice or
text in more natural ways - and using AI to find the right product is a very
powerful idea. Those that get around to implementing it will gain share.
There’s a lot to be done both in the front office, customer-facing side and in
the back office.
And when we combine voice with visualization I think you
could get a very profound change in the way people search and plan and book. And
these systems can do something else that all online travel agencies don’t do well today, which is
give advice. Travel sites don’t have opinions, they have search engines. But AI
allows you to say what you want and somebody to say based on this, this is what
you should do.