Business travel startups face tough choices as they mature. TripActions and TravelPerk remain independent as their investors raise stakes in what is not a get-rich-quick industry. Others could be acquired by existing travel management companies. Then there is a middle ground.
Some new entrants are attempting to leverage TMC partnerships even though that means sharing the profits. There’s a variety within this category. Having narrowed its focus to guest travel, Pana partners with multiple TMCs as an add-on service. Part-owned by Flight Centre after a March announcement, chat tech firm 30SecondsToFly has a roughly similar approach.
Flight Centre in April announced that a 25 percent stake made it the largest investor in small company business travel provider Upside. Upside’s partnership strategy is more like that of Lola, which also targets small company clients. Lola late last year announced an exclusive deal with American Express Global Business Travel.
According to Flight Centre Travel Group chief experience officer John Morhous, startups that choose to align with established players are doing as much work as those that do not. “They’re just choosing a different road for growth,” he said. “They can partner with those who already solved challenges of distribution, supplier relationships and physical footprint.”
Some startups found that while you can create multiple TMC partnerships, they may not all turn out to be fulfilling. TripLingo learned that.
“It’s hard to partner with three or four and have them put as much muscle behind it,” said Lola co-founder and CTO Paul English during a phone interview last week. “If you partner with one, do so with the biggest company and do a tight deal.”
“You either want all of them or the biggest,” said Lola CEO Mike Volpe. “GBT has a dedicated sales team reselling our product and sales reps talking Lola all day.”
For those looking to partner with multiple TMCs, app marketplaces or reseller relationships may make sense. That concept can be meaningful to large corporate clients of an incumbent TMC. The established player can capitalize on innovation and get a fee, and clients may be assured that integration challenges are worked out. This shortens the industry’s long sales cycles. Clients may even be in better positions to justify added fees for discrete services. (When TMCs offer in-house solutions, clients tend to want them included in existing arrangements.) According to BCD Travel, more than 300 clients as of this week had implemented software from at least one of the 19 third-party providers in its SolutionSource marketplace.
A challenge for tech providers with multiple partnerships is that while TMCs want competitive differentiation, not all of them can have it. Making an investment is one way to get at that. There’s a carve-out in FCM’s arrangement with 30SecondsToFly, maker of the Claire chatbot that is integrated with FCM’s mobile app. For two years, 30SecondsToFly is not permitted to serve other global TMCs such as BCD Travel or CWT. Its work with Adelman, WTMC and others is unaffected.
“Generally, there is great potential for synergies when a startup partners with an industry incumbent, because the ‘haves’ and ‘needs’ of both players are complementary,” according to prepared remarks by 30SecondsToFly co-founder and chief marketing officer Felicia Schneiderhan. “The startup as a small, agile tech player is generally under strong resource constraints with limited long-term experience in the market while the industry giant has deep expertise, lots of manpower and lots of customers, but moves too slow to get ahead of the innovation curve.” Having Flight Centre as a minority investor “has given the jumpstart to a great relationship,” she noted. “They are actively helping to bring more capital from institutional investors.”
Pana decided to work with “the establishment” to gain access to clients that do not want support services handled by a TMC that is not their own, according to Pana CEO and co-founder Devon Tivona.
“We’re not willing to entertain exclusivity,” he said during a May phone interview. “If someone wants that, our answer is that they should just buy the company.”
Tivona said that for TMCs serving as a platform or an integrator — a role that companies like BCD, Direct Travel and Egencia espouse — the differentiation lies in the value they add.
“New entrants offer tremendous potential value to the corporate travel industry but are often barricaded by legacy systems and contractual red tape,” according to a prepared statement from Irina Matz, BCD Travel senior director of SolutionSource. Pana and others in the program take advantage of not only a seal of approval from the incumbent, but also “a set of APIs and development tools for simple and secure integration with customer programs,” according to BCD Travel.
Lola is going after a different market than Pana, and what Lola needs from its TMC partner is more narrowly defined. Like Upside with FCM, it wanted access to GBT’s preferred air and hotel content. Based on the agreement, Lola also benefits from GBT promoting it to small companies.
“They’re able to get content and deals no one else would get,” said English. Beyond that, in the words of the Lola execs, the relationship can be “tricky.”
Thorns And Roses
As with any business partnership, there is risk. For TMCs, one issue is that without having voting control at the board level, any partner could be acquired. That happened with KDS, which was a key part of CWT’s online booking strategy before its acquisition by GBT.
To collaborate well, it’s vital to have clear rules of engagement. Speaking at the Travel Disruption Summit in May, American Express Global Business Travel director Gabriel Ayache said the Lola partnership required about a year of talks. It’s like a marriage, he said. “We look at the team and ask whether we want to sit with them and solve problems with them,” said Ayache.
Speaking in December during a teleconference, American Express Global Business Travel VP of marketing and product strategy Evan Konwiser spelled out what GBT gets from the Lola deal: “When you serve the very large global clients, it’s difficult to be the best at serving the small end of the middle market, which has simpler needs. Complexity in many ways is the enemy of what these clients need. Paul English can assemble one of the best tech teams in the world and direct them at all things business travel. And if we can have them working on solving that traveler experience problem in that segment with a simpler solution, that’s perfect.”
Further, he said GBT would suggest to Lola features that could be attractive to GBT’s larger clients.
“It’s a balancing act,” said English last week. “The agreement gives us complete independence. We show them products and get feedback. They kind of lick their chops and say, ‘We’d love this for larger companies.’ The trickiness that we have to balance is that if we take the bait and provide features for large companies, it takes our eye off the ball for the small and midsize business. We think SMB is a trillion-dollar opportunity. I’m not saying we’ll never do it, but if you build features for the enterprise, and we know we can, then they ask for another, and another. It’s hard to unwind from that. You end up with software like Concur, which is unbelievably complicated.”
“Sometimes we remind GBT of why they partnered with us,” added Volpe. “The value we bring is that independence. If we were a product development agency it would be different. They have asked for things that we have said no to. Others we said yes and did it.”
“Flight Centre is far more than just an investor for us,” according to 30SecondsToFly’s Schneiderhan. “They are extremely supportive when we are approaching them for advice or weigh-in. Due to their size and global presence they are able to share many of their resources with us, from legal to engineering and account management, to name a few. We have [worked] in their offices to better understand agent workflows and processes which helps us build a much better product. We are very transparent with them about our research and development process and are happy to share our artificial intelligence perspective with them.
“Some of the downside of working with a partner of their size, however, is that things tend to be slower,” she wrote. “Processes are usually much more formal, which is why oftentimes we cannot move as quickly with them as we’d like.”
As Konwiser’s comments suggested, a big part of what allows a partnership or an acquisition to flower is the talent. “The way you win is by hiring a better team,” said English.
FCM is looking at ways to integrate the Upside team’s work into Corporate Traveler, its brand for small company and independent business travelers. Morhous last week said there was nothing yet to share on that. An April statement highlighted FCM’s new access to tech talent — not only through 30Seconds and Upside but also by taking full ownership in the Europe-based developer of its mobile app.
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Nice piece Jay, lays out some of the different commercial models business travel startups will look to engage in.