As this year draws to a close and we reflect on the past 12
months, the prevailing thoughts are about the many ways the world and the
travel industry are different today than they were at the close of 2019.
Most of those thoughts are gloomy. There is no denying the
pain caused by the COVID-19 pandemic around the world – from the numbers of deaths
and infections to the economic toll it has taken on individuals and communities.
But there are also some bright – or at least less dismal – stories
that have come across our desks. In November, we shared some of those in our
selections of the Hot 25
Startups for 2021 – fledgling companies that are finding ways to persevere
despite the setbacks caused by COVID-19.
And there are other examples of travel companies that are
not just surviving but in fact thriving through the coronavirus chaos. In conversations with the CEOs of four such companies – Serko, RedDoorz, Journera and Hopper - we sought to understand not only what they accomplished this year but also how they did it.
Serko
Corporate
travel may have screeched to a halt earlier this year due to COVID-19, but for New
Zealand-based travel and expense technology company Serko, the work has been
nonstop.
Co-founder
and CEO Darrin Grafton acknowledges that is due in part to the cushion the
company had at the start of the pandemic thanks to fundraising in October 2019
- about NZ$45 million ($28.7 million), with NZ$17.5 million ($11.2 million) coming from
Booking Holdings as part of their partnership to develop solutions for
seamless corporate travel.
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As
the COVID crisis developed, Grafton knew Serko had enough money to continue to
run for 24 months, so work began on two non-revenue focused fronts: sourcing
and distributing PPE in Serko customers’ communities, particularly to nursing
homes and to Aboriginal communities in Australia, and second, quickly creating a new expense product, Zeno Expense “Express,” that had no set-up fees and no
contracts.
“We
pivoted really quickly to build the technology that was needed right then,”
Grafton says.
That
also included incorporating new content about crisis messaging through ATPCO’s Universal
Product Attribute products; developing solutions related to approvals, expense
management and carbon offsetting; and continuing work on “Booking for Business.”
Serko
also cut expenses by about $5 million by converting some contractors to
permanent employees and eliminating the remaining contract positions.
“We actually increased our
full-time employee count from 232 to 240,” Grafton says.
“There’s
going to be so many opportunities for technology that manages risk, compliance,
cost savings, expenditures – all of that will become spotlight. So we need the
people to drive that.”
In
September, Serko raised another $36.4 million to gear up for future growth
– buoyed by corporate travel recovering to 86% of pre-pandemic
levels in New Zealand and overall travel recovering to 50% in Australia and New
Zealand, according to Grafton.
Serko
has hired about 50 people this fall and plans to add another 100 by next May –
some slated to work on things such as AI-based solutions and disruption
management tools for airlines, and others available to work on “the unknown ...
the things we haven’t even thought of yet.”
“We
will probably end up with the largest travel tech team in the world,” Grafton
says.
“We
haven’t stopped executing. We’ve 100% remained realistic about the crisis and
what we have to do and the cost control. We communicate clearly. We’ve said, ‘We
are going to burn up to NZ$2 million a month.’ And then we told people even
when we raise money, we are going to increase that burn because we still see
more and more opportunities through this and eventually it will balance out and
we can get through 2024 with that model.”
RedDoorz
Like Serko, the Singapore-based hospitality company entered 2020
on the heels of a $70 million
Series C raise from August 2019.
But CEO Amit Saberwal says while that funding provided some
comfort, “we didn’t want to get complacent.”
As the pandemic took hold, Saberwal says he knew he had to move
quickly to cut costs, so RedDoorz reduced its staff by 40%, a decision Saberwal
says was difficult but needed.
“Being decisive early on in the pandemic was one of the best
things for us,” he says.
We will probably end up with the largest travel tech team in the world.
Darrin Grafton - Serko
“But we didn’t want to panic. People were saying, ‘Cut deeper, cut hard and go to bare bones.’
We didn’t cut down on core business, core leadership, because past experience
shows travel is going to come back with a vengeance. ... It’s easy to cut, but it’s
difficult to build again. We wanted to keep the soul of the company intact.”
Along with cutting expenses, RedDoorz took on a “money-making
focus” and switched from “a thought process of grow, grow, grow to say cut down
burn, burn, burn,” Saberwal says. As part of that, the company renegotiated
contracts with property owners and began to focus on boosting revenue per transaction.
“As a result, the revenue increase over last year has been
dramatic. Literally the path to profitability is very clear, very close. We are
a much healthier company right now,” he says.
In July RedDoorz was able to reverse salary reductions that
had been implemented early in the pandemic.
In October, RedDoorz
launched SANS, a new economy lifestyle hotel brand rolling out initially in
Indonesia. And earlier, in April, the company created “Hygiene Pass,” an industry-wide
cleanliness and sanitation certification program.
“I think the crisis – apart from all the humanitarian issues
that are extremely tragic, but from a maturity of the organization standpoint - it
really accelerated our maturity process,” Saberwal says.
Now he says RedDoorz has its sights set on becoming the “largest new-age hospitality company in Southeast Asia” and to being ready to go public “at the
right time.”
“From a growth perspective, 2020 is lost. It’s a pure survival
story and a strong survival story and getting ready for the growth that will
happen post-crisis. We lost a lot of our competition, and I think the future end
goal doesn’t change for us. We want to be in the pole position when full
recovery happens.
“Honestly, we are a
little restless now. We just need a bit of luck on the tailwind side.”
Journera
Jeff Katz, founding CEO of Orbitz and
former CEO of Swissair, has been building Journera since 2016 to provide a real-time
data exchange that links each individual aspect of a trip – flight, ground
transportation, accommodation, etc. – into one unified, seamless journey.
The travel disruptions and chaos
caused by COVID likely make that type of solution more valuable than ever, but
Katz knows – particularly in a year like this – it’s about finding the companies
“who really get the kinds of things we bring to the party.”
“We are trying to create a benefit
that they hadn’t even thought about before, but they are in survival mode,” he
says.
“Airline execs are thinking about
financing the next three to four years of recovery, and hoteliers are dealing
with a version of the same challenge, and ride-share and rental car companies, too.
If you look at your airline apps in the last year to find out where has the innovation
occurred, it’s mostly been around things related to refunds, and automatic application
of electronic credits and rules that change by location.”
I think the crisis – apart from all the humanitarian issues that are extremely tragic, but from a maturity of the organization standpoint - it really accelerated our maturity process.
Amit Saberwal - RedDoorz
In recognition of the challenges
suppliers are facing, Katz says Journera – one of PhocusWire’s
Hot 25 Startups for 2020 - has focused on “being as close as we could to customers
and prospective customers” to “understand what we can do that is of value.”
The company has had several
achievements this year including launching a new product –
JourneyVision – for hotels and hospitality brands supported by integrations
with Guesty and Impala, signing AmTrav as the first TMC customer and just last
week signing five
additional travel service brands.
Journera also got its second funding
round, an $11.6
million Series B, in June and added
Amadeus Ventures as an investor for an undisclosed amount in October.
Katz recognizes the advantage afforded
to him by his longevity in travel.
“Venture investors and strategic investors
always invest in people first and ideas as a high second,” he says.
“And so that’s partly me, that’s
partly our team and it’s certainly partly Journera’s approach to the future of
travel. Nobody kicks me out of the room, that doesn’t mean they like to see me,
but I’m fortunate that people are interested to listen to what I have to say. It
doesn’t mean they agree with me or have all the time in the world for me, but it’s
better than being brand-new.”
Looking to the new year, Katz says Journera’s top priority is to add
more large brands to its real-time data exchange – current participants include
United Airlines, American Airlines, Marriott International and Hilton - because more data going helps the
algorithms become “smarter.”
Journera is also planning to launch tools
to enable brands to see and use real-time journey data.
“For example ... we know where all the
hospitality bookings are accumulating and therefore what the air opportunity
is. So this whole real-time insights is important to facilitate recovery,” he
says. And the company is continuing to work with brands on advancing the move
to seamless, touchless travel.
“The journey is still a frontier. The
only person connecting the so-called dots of the journey, making it work,
making it nice, making it stay connected after something breaks – is you the
traveler. There is nothing in technology and no travel agency in the world that
makes that better. The idea of the journey being the unit of measure rather
than the flight or the lodging or the activities is an important idea that is
talked about a lot but hasn’t progressed.”
Hopper
The saying “timing is everything” has certainly come to
fruition this year for Hopper.
In 2019 – before anyone had heard of COVID-19 and before border
closings, flight cancellations and country-wide lockdowns became the norm – Montreal-headquartered Hopper began developing financial risk-based products such as “Price Freeze”
payment protection.
As the pandemic got underway, Hopper accelerated that work
and added multiple new options such as flight delay protection and flexible
booking options, each with a fee that is either flat or a percentage of the
booking. Those fintech products, says CEO Fred Lalonde, now account for about
75% of Hopper’s revenue and are the reason the company will close out 2020 with
more than 100% growth in revenue compared to 2019.
I’m fortunate that people are interested to listen to what I have to say. It doesn’t mean they agree with me or have all the time in the world for me, but it’s better than being brand-new.
Jeff Katz - Journera
“Had we not started working on [the fintech] over a year
before, we never could have built those products in the pandemonium of 2020,”
he says.
“What we did the best is actually sticking through that –
not panicking and throwing it all in the air, but just staying focused on the
plan. That’s literally what made the difference in our outcome this year. And
then it’s our team - literally in the worst of times they stayed focused. ... We
had no slowdown in cadence, no slowdown in innovation.”
Lalonde says the pandemic has been “a stress test like there’s
never been” and has allowed the company to validate the strength of its fintech
products.
“We have not lived up to the customer service levels I would
have wanted if there had not been a pandemic, even for the fintech customers,
but we delivered on it – we were able to give refunds or credits. We didn’t
bankrupt the company. There was no month we lost money on fintech stack,” he
says.
“That is hyper-relevant because it means we are able to contemplate
recovery lon- term and not worry about a hurricane or something breaking our
business model. So in a way that was a gift for us as a company, because we had
validation that we would not have otherwise. It also helped us price everything
properly, because we know our true risk, we don’t have to overcharge for these
products, so that has turned into a gift for our customers.”
In the spring, Hopper secured $70 million in funding led by
WestCap – far less than what it might have been pre-pandemic when the company
was on track for revenue growth of more than 6X – but coupled with the stable
revenue from financial services products, it was enough for Lalonde to think about
slowly growing the company again (more than 200 Hopper employees were laid off
in early April).
And he has an ambitious list of priorities, starting with improving
workflows and automations around the customer support stack.
“We think there will continue to be a lot of disruption, cancellations,
and we just can’t live with ourselves when people are waiting this long for
refunds or they can’t reach us or things like that. We’ve been throwing more
and more bodies at the problem, but the true value comes from the customer
support stack,” he says.
Hopper will also invest in international markets in Latin America
and Europe, further develop its alternative accommodations strategy - says
Lalonde, “We underinvested in lodging this year” -
and add new products in air, ground transportation and fintech.
“As terrible as this year was – the learnings we got from it
are invaluable, and they are going to carry on for multiple years."