These are 5 challenges most travel startups face
Travel and hospitality industry seems to have already made the transition from physical offices to web platforms, where travelers from all over the world can book flight tickets, hotel rooms or cars really fast, from the comfort zone of their mobile devices.
Although this has given companies the advantage of a global customer base which wasn’t possible earlier, startups in the travel and hospitality sector still need to overcome many challenges that are part of the “game”.
According to the results of an Amadeus’ travel startup survey titled “State of Travel Startups 2018”, conducted by Skift, travel businesses face a wide range of challenges, including -among others- finding the right people, dealing with weak business models and the data complexity.
Skift, on behalf of Amadeus, surveyed 177 individuals from all over the world who work at travel and hospitality industry startups, to come up with these results. More specifically, Skift asked respondents about “the most overlooked factors leading to failure”.
As it turned out, here are some of these common factors, when it comes to the operation of travel startups:
1. Issues regarding the founders’ team and leadership
As some of the respondents pointed out, there are challenges that arise due to vulnerabilities of the founder or the senior managers of the company. For instance, issues that concern a possible burnout of the founding team, or lack of management skills. Thus, in order for a travel startup to survive during -especially- its early stages, its founding team needs to be cool-headed, have a clear vision for the company, as well as leadership skills, and pass on this kind of mindset to their team.
2. Limited travel market knowledge
Many survey respondents emphasized that the lack of deep knowledge regarding the tourism industry is another main challenge startups working in this sector usually face. “Startups often don’t understand the complexities of the travel industry and the sales cycle. The sector is much more complicated than they think”, some respondents explained.
Additionally, as one of the 177 individuals highlighted: “travel is a crowded space. Travel data is very complex, and so it’s hard to keep user experience simple”.
3. Vulnerable business models
According to the Skift survey, one common challenge many travel startups face, regarding their business model, is customer acquisition costs. As some respondents explained, travel startuppers have to balance between pros and cons like a “higher lifetime value per user against acquisition costs per user.” Moreover, “targeting the wrong consumers could be problematic, such as a decision to focus on low-spending leisure travelers instead of high-spending business travelers”, as a number of respondents reported.
4. Funding challenges
There were quite many survey respondents who emphasized that another major issue that’s often, is the undercapitalization and running out of cash. As one respondent highlighted: “you need time and money to fund the growth of a startup in its early years”.
According to the survey, a factor that could also divert a startup’s focus from its development, is the pressure to generate revenue for investors.
5. Technology-related difficulties
Although technology did not weigh in as heavily as some of the previously mentioned issues, some respondents did describe “underestimating technology challenges” or challenges with data, such as battling to “keep user experience simple despite data complexity”, is something that’s usually overlooked, too.