Jon Hayes wanted to take his wife on the perfect honeymoon, and after combining his reward program points, they were traveling in style with two first class tickets to the Maldives and a stay at a luxury resort, all within budget.
Now Hayes wants to help customers do the same with his startup RewardStock. RewardStock works off a series of algorithms that configure various combinations in order to give users the best use of their reward program points, and if users do not have enough points to make it to their destination, RewardStock suggests ways to make up the points quickly.
For Hayes, his startup has two functions—it helps people better use the points they’ve earned and it helps him travel the world with his wife. (He’s pictured above on rewards travel in Istanbul.)
But the travel and leisure industry that Hayes is trying to leave his mark on isn’t the one that your grandparents might recognize. Instead he is playing in an industry that is fiercely competitive and evolving rapidly through the use of new technology, such as the algorithms that form the foundation of RewardStock.
A growing industry
There are an estimated 750 travel startups serving both businesses and consumers today, but the problem that arises as the number of companies grows is the need for funding to help them expand. Lucky enough, funding to these companies is “skyrocketing”, according to CB Insights. Through the end of December 2015, more than $5.2 billion in venture capital funded 348 travel startup deals, a 125 percent jump from 2014 funding totals.
There’s so much activity today because the travel industry, like so many others, is becoming more efficient, says Chris Heivly, a managing director of The Startup Factory who co-founded and spent 15 years at MapQuest.
To him, efficiency means a lack of the friction. Friction 20 years ago meant limited travel options because all booking and travel happened through physical agents. While that has been eliminated, there’s new friction for startups to tackle today because trip planning is so multi-layered— whether it’s during the booking, planning or “getting there” process, companies have the opportunity to create their own form of disruption.
“There’s a niche for everything, and one of the things we encourage our startups to do is grab a niche they know a lot about and then expand from there,” Heivly says.
An example is Hostel Rocket, a Durham travel startup The Startup Factory funded in 2014. It allows users to find and book hostels worldwide across any device. The app had a successful initial launch, and after stalling a bit in 2015, resurfaced earlier this year with plans to relaunch under a new team in Berlin.
Despite the inherent competitiveness that comes with a crowded, diverse industry, the incentives to join are still high.
In 2016, U.S. residents and international visitors are expected to spend $979.4 billion, up 3.4% year-over-year, on U.S. travel expenditures, according to the U.S. Travel Association. That number doesn’t even account for what will be spent on overseas travel throughout the year.
In terms of funding, home-rental service Airbnb notably closed the year out with another $100 million in funding on a $25.5 billion valuation. That’s after using its lofty valuation to help it secure $1.5 billion of capital over the summer.
So while there’s a risk, there’s also room for reward.
A homegrown feel
The Triangle is known for its bustling tech and startup community, which is why the Raleigh-Durham area has its fair share of travel-dedicated startups. Here are a few Triangle travel startups to watch:
Year founded: 2011
Current executives: Duarte Morais, Gene Brothers, John Bass and Tim Wallace
Headquarters: HQ Raleigh
Latest Funding: Not yet
An online marketplace launched last Fall helps travelers find and book unique experiences provided by local experts at various destinations. The site lets experts offer up workshops, tours and activities like fishing trips off the coast of North Carolina or an arts and crafts class or cooking lesson in Costa Rica (experiences offered today). Founded by a group of researchers from NC State University’s social science and computer science departments, People-First Tourism is the university’s first tech-based social venture spinout. Royalties from the site are being used to fund student scholarships and additional research on how tourism can benefit local communities and people.
