Travel Tech Essentialist #39: The Calm Before the Storm

This week’s newsletter is a bit longer than usual as a result of lots of things happening in the sector and also going into some depth on topics such as Amazon’s gradual but what seems inevitable entry into the travel category (story #1)…A couple of interesting research reports on building marketplace startups (#2) and on what it takes to excel in one of the three main customer acquisition “lanes” (#3)…Money continues to flow into travel startups (many financing rounds in #9) and new funds and SPACS are being raised to invest in the sector (#5)…And please get in touch with me if you fit the profile of #4.

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1. Amazon’s takes new steps into Travel

Back in 2015, Amazon added hotel flash deals and discounts to its Amazon Local daily deals platform and also launched a dedicated hotel booking platform called Destinations, focused on helping customers across 35 cities find weekend getaways close to home. A few months later, it quietly shut both. In mid 2019, Amazon started to offer flights via a partnership with Indian OTA Cleartrip. Later in 2019, Amazon added bus tickets in India via a partnership with MakeMyTrip-owned RedBus.

Last week, Amazon India announced a partnership with the Indian Railway Catering and Tourism Corporation to sell train tickets through Amazon, with special discounts for Prime members, and instant refunds in case of train cancellations for those booking through Amazon Pay. And earlier this month, Amazon introduced Amazon Explore, a virtual travel platform offering tours and experiences across the globe.

OTAs grew and flourished as a result of their retail prowess and also as a result of hotels’ and airlines’ lack of retailing abilities. But 24 years after the launch of the first OTAs, the reality is that there is still no dominant multi-product retail platform in travel. If there is space for a dominant travel platform, and no travel company fills the role, maybe it’s an invitation for Amazon to take over by expanding its natural monopoly in retail into a neighboring sector: travel. No better retailer than Amazon. It also has detailed information about the consumption habits and preferences of its 150 million Prime members across the world. Amazon’s foray into travel might be gradual but it seems inevitable. Amazon has proved that it doesn’t need to own inventory to dominate a market. The day when a traveler heads to Amazon to fill in his shopping cart with “a room for five days, two evening restaurant reservations, a bottle of champagne and flowers in the room and a taxi or limo from the airport” (Forbes ) might be getting close.

2. Everything you wanted to know about marketplaces

Travel companies make up 10 out of the top 100 (and 2 of the top 10) largest and fastest-growing consumer-facing marketplace startups and private companies, according to 16z’s Marketplace 100 ranking. Version One Ventures just published a very thorough 81 page Guide to Marketplaces. Some of the sections that they cover include:

• Selecting the right market

• How to win against the incumbent

• Seeding a marketplace

• Sparking the virtuous cycle of growth

• Scaling a marketplace

• Transaction fee model vs listing fee model

• Finding the right pricing strategy

• The right marketplace metrics and KPIs (includes a template)

• Investor valuation multiple for marketplaces

3. A customer acquisition playbook for consumer startups

First Round Capital is a Silicon Valley VC, seed investor in companies such as Uber, Hotel Tonight, Inspirato, Warby Parker, Notion and Mirror. First Round posted an interesting report that states that for consumer companies, there are only three reliable “lanes” for long-term and sustainable business growth.

• Performance marketing

• Virality

• Content

They look back at the most successful consumer businesses of the last 10 years and conclude that every company achieved initial scale in a market by excelling at just one of three lanes. They provide a framework for validating the lane that is right for your startup, committing the necessary resources to give it a real shot and then scale the investment to become world-class. The report looks in some detail into the strategy and metrics for Airbnb (how they validated and committed to virality) and Booking (validated, committed and scaled on performance marketing). Read more.

Source: First Round Capital

4. If you are looking to sell or looking for financing…

If you fit one of the criteria below and are looking for an investment or a sale, please get in touch with me (reply to this email). I might be able to point you in the right direction.

• Travel B2B or B2C, €200 million+ in GMV and/or €10M revenues pre-Covid. Profitable, product differentiation vs incumbents. Europe-based, with particular interest in Spain, Italy, France.

• TMC, €50 million+ GMV pre-Covid. Europe-based, with particular interest in Spain, Italy, France.

5. There’s a new SPAC in town. Thayer Ventures Acquisition files for a $175 million IPO

Thayer Ventures’ SPAC, Thayer Ventures Acquisition, files for a $175 million IPO targeting the travel and transportation industries. As I wrote in my previous newsletter, a special purpose acquisition company (SPAC), or blank check company, is a shell company with no operations but created with the purpose of raising money through an IPO in order to acquire or merge with another company. In the last few weeks:

• Howzat Partners - VC - raising $120 million

• Altitude Acquisition - SPAC - $300 million

• Go Acquisition - SPAC - $500 million

• Thayer Ventures Acquisition - SPAC - $175 million

Some clear signals of a buyer’s market giving investors unique opportunities to scoop up attractive assets.

6. Room Mate Hotels will provide free and rapid Covid tests to all its guests

Spain-based Room Mate Hotels will be making Covid-19 tests available to all guests for free (results within 15 minutes), with plans to roll out across its European hotels by the end of October. The company will expand the program to its US hotels by the end of November and its beach properties next summer. Room Mate, which operates 27 hotels globally, has launched its testing in partnership with Spanish workplace risk-prevention firm Quirónprevención. Read +.

7. You’re more likely of being struck by falling airplane parts (1 in 10 million) than contracting Covid in a flight (1 in 27 million)

1.2 billion passengers have travelled since the start of 2020, with 44 cases reported of confirmed, probable, or potential transmission associated with a flight. That’s 1 in 27 million. I’ll take it.

8. The average age of a successful startup founder is 47

Forty-seven is the average age (at the time of founding) of founders of startups with successful exits (IPOs, acquisitions) in the US. For all startups, it’s 42. The probability of achieving “high-success” (fastest growing 0.1% of startups) is lowest for founders in their early-20s and increases in a linear fashion along with founder age up to the late-50s. This was published two years ago, but it’s news to me. Read +.

9. Deals

• Mexico City-based hospitality startup Casai raised $48 million, the largest Series A round for a Mexico-based company. Casai has 200 rental locations in Mexico City and is working to expand to Brazil in 2021. The boutique apartments are described as “intelligent living spaces” and are enabled with a mobile app for keyless check-in, booking management, city guides, concierge access, etc…

• Kasa Living raised $30 million adding to the $20 million raised less than a year ago. The company provides proprietary technology to transform vacant and underutilized real estate into high-quality, trustworthy accommodations for travelers.

• The Taiwan-based tour and activities startup KKDay raised $75M in a Series C to focus on local experiences and staycations. The new funding will also be used to build out Rezio, an all-in-one booking management platform for travel operators and activity providers.

• Corporate Travel Management buys Travel and Transport for $200 million. The combined companies’ sales were $8.5 billion in 2019, both primarily focused on corporate travel.

• NY-based Cover Genius raised $12 million as Covid accelerates the need for insurance tech, following a $10 million Series B raised in Nov 2019. Founded in 2014, it enables travel partners such as Booking and Despegar to customize, add on and embed insurance offerings.

• London-based hospitality brand Selina, which combines accommodations with coworking spaces, acquired Remote Year at an undisclosed value “to double down on its stay, play and ‘work from anywhere’ model.” Chicago-based Remote Year, which raised $5M in Oct 2019, will continue to exist as its own brand Read +.

10. Startups

• GuruHotel is a Y Combinator startup that enables hotels to launch their website in minutes. Real time inventory, wide range of payment methods, connection to distribution partners, and bookings from +130 countries. HQ in Mountain View and founders from Mexico, Colombia and Argentina.

• Grapevine is an AI-powered Digital Concierge designed to help corporate travel management companies maximize non-flight and in-destination revenues by sending personal recommendations at the right time via the right channel. Based in London.

👍 If you like this newsletter, I would appreciate if you forward it to a friend/colleague or recommend it on social media. And hit reply to send me feedback, ideas or suggestions. Thank you!

Mauricio

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