So, you havebeentoaconference, spotted a supposed gap in the travel industry and now you want to create a startup to fill that gap. Great, happy days!
But hang on a second, is the idea achievable as a small startup?
Will consumers or the industry take to it in sufficient numbers for it to be a commercial success? Or will you just get plaudits at launch but six months later quietly close your doors when no one is looking?
Here are five themes that always seem to struggle.
It does not, however, necessarily mean that it is impossible to run a startup based on these models, simply that perhaps wannabe travel entrepreneurs should at least consider switching their focus to other areas where success is easier to come by.
1. Selling consumer leads to travel agents
There are so many of these startup companies around! It seems natural that agents will buy leads, but really they are a lot of work for the agent to handle - they don't really want an email inbox full of "I want to go to Spain, what can you sell me" style questions.
That is why we all built websites in the first place, right?.
Now, this type of business has the ability to work when you sell such leads to the next layer down in the industry (eg. tour operators or suppliers) or when the lead is well focused (i.e. the lead includes some element of product selection and travel dates rather than just open ended unspecific requirements).
Suppliers have the margin (30-40% rather than an agents much smaller 5-15%) to afford staff time to dedicate to answering these emails properly.
The trick is to get the leads to the right suppliers, not in sending leads to agents that then have to work out which is the appropriate supplier.
Do that work and the lead starts to have value.
2. Trip inspiration/trip planning websites that are too focused on user interface
Who really is going to spend an hour fiddling around answering questions using a fancy UI hoping that at the end of it the website is going to come up with a wonderful, fully matching, trip plan?
There are travel products that are inherently inspirational. These are what you should focus on exposing to consumers. Product, product, product rather than UI, UI, UI.
Big caveat here, as noted philosopher Bertrand Russell once said: "Time you enjoy wasting, was not wasted." So if you are going to have a user interface-oriented trip planning website, at least make it enjoyable! Easier to say than achieve though.
3. Two-sided marketplaces
A two sides marketplace is one where you both generate both supply and demand. A conventional business might be one where you are generating consumer demand, but selling another organisation's supply.
The problem with two-sided marketplaces is that to grow them companies need to run the so-called hockey-stick growth curves on both sides at the same time, and at similar rates.
The worse case scenario is to end up with too much supply and insufficient demand (then suppliers get bored and leave, unless they have another reason to stay).
If you are starting a small travel startup then focus on a sector where you just need to achieve one hockeystick growth curve not two.
4. Solving a new consumer problem
If you are going to solve a consumer problem ensure it really is a problem that consumers have. Don't invent a new consumer problem and then look to solve that.
Otherwise you have to both sell the idea, as well as sell your solution to the problem. Double the work.
One of the classic cases in the sector is the startup created primarily after the founders had a problem of their own when travelling, a relatively isolated issue rather than widespread.
Also, just because the problem exists doesn't mean there is a business to be made in solving that problem. Gaps in the market hardly ever exist because you are doing something completely unheard of beforehand - but because others have entered and exited before you.
5. Small travel agents setting up flight/hotel booking websites
Don't! It just isn't necessary. It is a battle you cannot win versus the existing, larger and probably well-established online travel agents.
Even using simple technology doesn't make it easy.
If it takes three hours to configure a hotel in a reservation system (including loading in a contract, finding images, creating a description etc) and you get one booking a month per hotel, then that three hours looks bad.
But that same three hours is necessary for a company which sells 20 bookings for that hotel per month. Much better ROI. Just not a game small travel agents can win.
As always, would love your feedback in the comments. Any models to add to or ones to subtract from this list?