Travel Tech Essentialist #64: Benchmarks and Metrics

Sep 24

The principles of building great products and services are common across industries. This is why in the Travel Tech Essentialist newsletter I include a mix of travel specific content and also ideas borrowed from other industries and disciplines that are perfectly applicable to building great customer experiences in the travel industry. Today’s newsletter has a bit more “horizontal” content than usual. I hope you enjoy it. And if you are hiring, check out the promo at the end of the newsletter.

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1. Benchmarks on how to build and scale to $100 million in ARR

What should my gross margin be? How much should I be spending on R&D as a % of revenue? How does my growth rate compare to peers in the market? What does “typical” and “best-in-class” look like? Entrepreneurs would love to have answers to these type of questions, but private market financial benchmarks are elusive. Private companies lack reporting requirements that would make their benchmarks known, and investors of private companies keep their portfolio company information private. Until now. Bessemer Venture Partners has made over 200 cloud investments and has one of the largest cloud portfolios of any VC in the world, and they have just released Scaling to $100 Million based on results from a decade of cloud investments. This is meant to be the industry’s benchmarking report for cloud companies. Great charts, data, lessons and templates that will help you model your business around these benchmarks to achieve your goals.

2. Choosing your North Star metric

Lenny Rachitsky writes a great newsletter and previously led initiatives in growth and community at Airbnb. Nailing your north star metric(s) — the top-line metric that all company priorities are aligned around — is crucial, as all energy and brainpower will flow in that direction. This can be hugely effective but it can also be dangerous. By maintaining a laser focus on a single metric for too long, teams risk short-term thinking, missing new opportunities, and sacrificing the user experience. In Choosing your North Star Metric, Lenny details the various categories of north star metrics, shares data and case studies to provide lessons for narrowing in on your own north star metric and when to broaden your lens or pivot your approach. He also offers a framework for choosing a north star metric, depending on each type of company.

3. Magic metric: Immediate Time to Value

Kieran Flanagan, SVP of Marketing at Hubspot wrote about the importance of reducing the time it takes someone to realize the value they're getting from your product or service. With Calendly, for example, the user that receives a calendar link gets immediate value, as they can see available times and book a time without needing to sign up or create an account. An immediate time to value will drive users to signup for their own account, send the product to others, and the cycle repeats. Read more.

4. NDC as a cornerstone of modern travel retailing

A new Amadeus report, NDC 2021 and the Path to Industrialization, gives an overview of where we are today in terms of NDC readiness, sheds light on some of the barriers that still exist to reach full industrialization, and shows what modern travel retailing could look like. Modern consumers have the same expectations of travel companies as they do of brands such as Amazon or Netflix. According to this report, NDC will lead the way in how the travel industry meets and anticipates the needs of the modern digital consumer.

5. The pocket guide of essential Y Combinator advice

Here are the 22 pieces of advice for startups that Y Combinator considers as the most important and transformative. Whether common sense or counter-intuitive, this guidance is likely to help. Here are a couple of them to get a taste:

Spending any time worrying about your competitors is nearly always a very bad idea. Startups are more likely to die of suicide than of murder.
Avoid chasing big deals with large companies which represent amazing, company validating relationships. They seldom end well for the startup.
Growth is not always the right choice. If you have not yet made something your customers want (i.e. have not reached product market fit), it makes little sense to grow.
Once launched, do things that don’t scale. Get your first customer by any means necessary, even by manual work that couldn’t be managed for more than 10 customers.

6. Use behavioral science to boost your conversion rates

People don’t always act rationally, which makes it important to understand irrational human behavior. The field of behavioral science sits at the crossroads of psychology and economics, looking at the effects of cognitive, emotional, and social factors on decisions and, ultimately, actions. The application of behavioral science is typically called behavioral design. Kristen Berman, founder of Irrational Labs shares four concrete examples of experiments that saw significant shifts in conversion rates when they used behavioral design to drive product design—and why they worked. She then shares five behavioral design strategies you can apply to your own product immediately. Read more.

7. Business travel outlook remains cloudy

According to a WSJ article, business travel for intracompany meetings and training make up about 20% of business travel, and this is a category that will likely be replaced the most by online alternatives. Trips for client meetings and closing deals are picking up again, but some research points to a permanent disruption likely amounting to 19% to 36% fewer business trips overall. Some other data points:

HRS Group, a London-based business travel company that helps big companies negotiate discounts at hotels, believes business travel in 2022 will be down 30% compared with 2019.
Food maker Mars, which has 130,000 employees in 80 countries, said it plans to cut its future business travel globally by at least half compared with 2019.
Deutsche Bank’s airline analyst projects US corporate travel will get back to only 50% or 60% of what it was in 2019 by the end of this year.
Delta Air Lines CEO said corporate spending in March was only 20% of what it was in 2019 for his airline. That doubled to 40% by June, and expected to reach 60% in September.

8. A guide to seed fundraising

Another Y Combinator guide, this one by Geoff Ralston (President of YC). A Guide to Seed Fundraising is a summary of what startup founders need to know about raising a seed round. When to raise, how much to raise, at what valuation, rules to follow, what not to do while dealing with investors, etc…

9. Year to date stock performance

OTAs and intermediaries have the four best stock price performance year to date among this list publicly traded travel companies. eDreams and Lastminute top the list, with increases of +71% and +47% respectively.

10. Funding and M&A

FLYR Labs (JetBlue Ventures’ very 1st investment) closed a $150 million Series C to continue developing its Revenue Operating System, a deep learning platform to forecast airline demand and set airfare prices.
Less than six months after raising $75 million, Pacaso — the US vacation home co-ownership proptech platform — announced that it raised $125 million at a $1.5 billion valuation.
Hotel distribution and technology provider SiteMinder closed a $74 million funding round from Fidelity Management. The investment is being positioned as a pre-IPO round for the Australia-based company.
A new corporate travel platform called Spotnana launched this week with $41 million in funding and backed by industry veterans. The NY-based API-friendly platform is “not just a booking tool or a better UI; it’s like an AWS for travel”, said its founder.
Headout, a New York based marketplace for make same-day bookings for tours, events and activities, raised $12 million to expand to 300 cities and hire over 150 employees.
Barcelona-based Ukio raised a seed round of $9 million. The company offers rentals of one month or longer, featuring a turnkey premium experience in prime city locations. It was founded early last year and has grown to more than 100 apartments between Barcelona and Madrid.
Atomize – the Swedish hospitality revenue management specialist raised $4 million
RateGain will acquire hotel distribution provider MyHotelShop, which launched in Germany in 2012 and works with around 2,500 properties and chains. Terms of the acquisition by the India-based company have not been disclosed.

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Have a great weekend,

Mauricio