Having been in the “entrepreneur game” for the last 17 years, in either my own startup or someone else’s, I am not new to “the business of starting companies” so I knew what I was getting myself into. However, I keep on forgetting how much time gets devoted to giving birth to a new company. I think if I would remember this simple fact I would stop this madness. I also think it’s an addiction to do something crazy like this and I think that everyone in the [tech] startup business are a very intense bunch. Between, having something to prove and the exhilaration of creating something new and exciting, is enough to keep us crazies up until the early morning in front of our laptops caressing our keyboards…
Three years into creating a startup [of MONUMENTAL SIGNIFICANCE] and it still feels like only yesterday. These have definitely been the three fastest years of my life. I think it can all be summed up in one word: SWISH.
You know what!?!?!?! These last three years have been so much fun. And I really mean fun. Never mind working 10 hours every day straight like a machine. If you do something you love to do, why would you do something else right?! But, let’s not get too much into my crazy addiction and love affair with my laptop. This entry is about letting you get to know me and my co-founders and find out how it all started.
So let’s start from the beginning…
I spend my time between New York City and Bangkok; trying to stay away from the cold and the rain as much as I can. I love four seasons of summer! I grew up in Oslo, Norway but New York City became “Home” when I was 18. Walking down Broadway and seeing what I’ve only seen in the movies. Some people think NYC is too much. But for me, it was exactly right. It was only much later that my aunt sent me an astro chart that tells you where it is beneficial for you to live and vice versa. The map told me Oslo was the worst and NYC was the best. At that point I started listening to my gut more because it was dead on. That’s exactly how I felt! I also encourage everyone else to travel more to find where “home” is for them. It’s a great feeling and life is just “easier” when you are “home”.
Being an entrepreneur at heart but a software developer by trade, I am able to create and implement my ideas without a lot of upfront investment. Technology is the greatest equalizer of all time and I highly encourage everyone to get to know this world better as it’s only going to get more prevalent and ubiquitous. I am also able to work from anywhere in the world with only my laptop at my side and that definitely has its benefits.
Traveliko got its initial kickstart when I was doing some charity work down in Phuket. We were staying at a beautiful resort in the Phang-Na area when I met my co-founder Yann, who was GM at the resort, for the first time. Having done a lot of consulting during my professional career, I am naturally curious to learn how different businesses work and our discussion quickly went to how hotels operate. In my mind, luxury resorts all over the world were making a killing and if you owned a hotel you had it made. I quickly learned that that wasn’t exactly the case.
Actually, in the last twenty years, hotels saw their profits go down dramatically with the rise of the online travel agencies. Not at first though. OTAs charged lower commissions than the existing brick and mortar travel agents and hotels liked this new global channel of revenue. However, the OTAs did something smart which would eventually lead to the state the hospitality industry is in today. They let the hotels bid against each other with their commissions to get featured better and more prominently on the OTAs site. Hotels loved the chance to get a “one up” on their competitors across the street and gladly started paying the OTAs higher and higher commissions. However, no one really thought about the long term impact this would have on the industry. The OTAs provided the platform to get hotel rooms sold to travelers all over the world and they offered hotels a way to game the system. In the quest to book every room every night, hotels gave away their power to the OTAs; to the point where the OTAs were the ones calling the shots and telling the hotel industry what they should do or face the possibility of being banned by these sites. The best analogy that comes to mind here is that of a frog in a pot of slowly boiling water. The heat increases so slowly that the frog doesn’t realize that he is being cooked until it is too late.
Twenty years ago, hotels paid between 10 – 15% commission to brick and mortar travel agents for a booking. 20 years later, the global average spent on commission to OTAs is 19.7%. But that’s just the average. If you have a hotel that is located in a high-demand area, you easily find yourself paying 35 – 45% commission. There are even places that, if you want to be seen on the first page of an OTA, you have to dish out 70%+ commission to get there. This is not the fault of the OTAs. This is due to the hotel’s quest to fill every room every night.
Then the OTAs did something else that would cost the hotels even more money. The OTAs took all the extra money they were making and they put it all into Google Adwords. They put it into Google Adwords and they starting bidding on the main keywords their hotel customers were using themselves. So let’s say you had a hotel that was called “The Best Hotel”. As part of your marketing budget, you would spend some of it on Google Ads. When someone typed in “The Best Hotel” in Google, the link to your hotel website would show up as a featured (ad) link on the top of Google’s search results. If your website had good SEO (search engine optimization), it would also naturally be listed at the top of Google’s organic search results.
What the OTAs did was too say to Google, “we are willing to pay more for the same keywords so our featured links get displayed above all others, including that of the hotel’s own website”. And because the OTAs are online entities and have no hotels of their own, their ONLY concern is to get listed high in every way to a user looking for accommodations, the SEO for their own sites is heavily invested in. As a result, all the OTAs show up above hotels in both featured ad banners and natural search results. Only the largest hotel chains of the world, who are willing to pay an arm and a leg to have their name featured higher, are listed higher than the OTAs.
Now, you are probably saying “Hey, wait a minute! That’s not nice.” And you are right. Service providers usually don’t try to screw their customers over like the OTAs have done with hotels.
As I listened to Yann telling me this story, I couldn’t help but blame the hotels again. So I asked Yann “So if the OTAs treat the hotels so badly, why don’t they just leave? It’s like a bad relationship; if it doesn’t work…get out of there!” The problem is that hotels have given away so much power to the OTAs that they feel powerless to leave. On average, hotels sell 25 – 50% of their inventory through an OTA. If they should choose to cut that relationship they couldn’t compete directly with the OTAs in the digital space even if they wanted to. At the end of the day, OTAs fill rooms and hotels are addicted to filling rooms.
As I looked more into the industry I could see that the big hotel chains were fighting back by doing ever larger mergers. Personally, I didn’t think that was a real solution. At the end of the day, I would always go looking for a room with an OTA because I know the selection would always be greater than what the hotel chains could offer me. Also, there had been no “new think” in the online industry of selling hotel rooms for a long time. It had taken the first OTAs a long time to reach market saturation by having contracts with a million hotels around the world. These contracts take time to do so any newcomer wanting to get in the game would spend a lot of time in the beginning just signing up enough hotels to be able to offer anything of substance and quality to their customers. As a result, most new OTAs were content with being affiliates to the largest OTAs and selling the same inventory, taking a small cut and making the OTAs even stronger. Getting into such a market in order to make a difference would not be easy. It would take time and money and a whole lot of determination.
I found this lopsidedness fascinating so I talked to other hotel owners and researched the industry more. The word “war” came up frequently when writers would write about the relationship between hotels and OTAs. I still couldn’t help but think that hotels would do the exact same thing again if they were given the chance to sell their inventory somewhere else.
And sure enough, as we decided to create a new OTA and started talking to other hotels about what they would want to see in a new, standalone, OTA platform that could help them even the playing field a little. The first thing that came up was “Wow, you offer lower commissions. That’s great! Now how do I game the system so I get featured higher than my competitors across the street?” You really want to go there again!?!?
We could see that hotels definitely needed a new online distribution channel and a service partner that would have their best interest in mind and at the same time offer customers with a great experience that would make them choose a new OTA instead of the established ones.
…and that’s how Traveliko got started and it’s been a wild ride so far. What makes us different? Well, that’s a whole new blog post 😉