R.I.P. Startups: Why 90% of Travel Technology Startups Fail
August 5, 2016 1:13pm
By Alan E. Young
One of the hardest truths for entrepreneurs to accept is that as many as nine out of ten startups will fail. In an ecosystem full of enthusiasm and optimism, this harsh reality can be difficult to swallow. However, the fact remains that only a small percentage of travel technology startups actually manage to become viable businesses in the long-term. My biggest frustration is companies that are ‘walking zombies’. They do not know they are dead and cling on long after they should have called it quits.
At the same time, companies can greatly increase their chances for success by focusing their attention on the things that really matter.
Identify A Market Need
The most common reason that travel technology startups fail is due to a lack of market need. Although it may seem to be an obvious consideration, many entrepreneurs jump into development without effectively thinking through this essential first step. This can at times be called the “bright shiny object syndrome”. The startup has a great idea and then runs with it without truly understanding if there is a need.
In order to achieve success, a startup must solve a pain point in the market in a scalable way. Unfortunately, many companies don’t focus enough on the viability of attracting potential customers, and instead center their strategy around the product itself. While it is certainly essential to develop an exceptional product, the concept must first be validated with potential customers to ensure that there is a market need. The reality is that many travel technology startups attempt to tackle problems that are interesting to solve rather than providing a product that fills a gap in the marketplace.
Differentiate from Competition
There is no question that the travel tech industry is highly competitive. When analyzing the companies that have been able to scale greatly, they generally either developed something new where there was a void in the market, or they built something that was much better than what was currently available.
Some of the most successful startups, such as Airbnb and Uber, have managed to expand the market on the supply side in order to create new demand for their services. As an example, Airbnb has expanded the accommodation and hospitality market by enabling people to open up their homes to guests. This model provides travelers with new lodging options that are often significantly cheaper than staying at a typical hotel, while keeping the expenses low for Airbnb, as the company doesn’t spend any resources on managing the properties.
Although it is certainly challenging to determine whether or not a disruptive idea such as Airbnb has the potential to make money, the company’s ability to expand the market greatly increased its chances for success.
Adapt to The Changing Landscape
Modern consumers have extremely high expectations for usability, convenience and immediate information. In order to achieve long-term success, startups must design their systems to be able to adapt to the evolving landscape with flexibility in both the back-end and user interface of their platform.
Millennials are a highly sought-after demographic in the travel industry. In general, they are more socially conscious than previous generations and therefore seek out additional information about their purchases. For example, Millennials may want to know whether or not the hotel they’ll be staying at in a foreign country pays fair wages to its workers. They are also very likely to be concerned about environmental issues, and may want to utilize as many ecologically-friendly transportation options as possible. Considering the massive amount of money this demographic has to spend on travel, it’s certainly worthwhile to pay attention to these preferences when designing a travel technology startup.
The Path to Success
Although there is a certain amount of luck involved in some travel technology startup success stories, a great deal can be done to increase the long-term growth potential of a new company. The most important factor is ensuring that a startup is either solving a pain point in the market in a scalable way, or providing a significantly better version of a solution that already exists. Once a strong initial plan is in place, it’s essential to identify a method to differentiate a company from other competing startups and established players. As the technological and consumer landscapes rapidly evolve, travel tech startups must be able to adapt to meet the growing expectations for convenience and immediacy of information. Companies that are designed with these key factors in mind will be well-positioned to gain initial traction and achieve success in the long-term.
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alan e. young
Alan E. Young is the President of Puzzle Partner Ltd. and Co-founder of Next Big Thing Travel & Hospitality (nbtworld.com). Previously, Alan has held executive level positions with startup companies such as Newtrade Technologies, (acquired by Expedia), Hotel Booking Solutions (acquired by IBS Software) and TrustYou. Alan is past Chair of The Board of Directors of The OpenTravel Alliance and been very involved with other industry associations most notably AHLA, HEDNA, and HTNG. With over two decades of experience in the travel and hospitality technology world, Alan specializes in helping innovative companies achieve winning performance and dramatic growth.
Contact: Alan E. Young
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