Investor and Room 77 Founder on the Travel Startup Dilemma

Is technology and great product enough to win?

This is a perennial dilemma for travel startups, and a point that Brad Gerstner, serial angel investor, operator of  a $75 million venture fund, and Room 77 founder, hammered home during an executive roundtable discussion yesterday at the PhoCusWright conference in Hollywood, Florida.

Gerstner, whose hotel metasearcher Room 77 debuted in 2011 and competes against the likes of Kayak, Trivago, Google Hotels and TripAdvisor, said it is harder than ever — meaning more expensive than ever — to acquire a customer these days, and “a lot of us under-estimated” the network effects that larger competitors can use to such advantage.

Sobering Thoughts For Travel Startups

For some startups, Gerstner said, “you will never have the financial scale to break through to the consumer” when competing against powerful companies such as Booking.com.

Gerstner was addressing his remarks to travel startups generally, but was he perhaps providing some commentary on Room 77’s prospects, and the rigors of competing against established players?

Gerstner, who heads the Room 77 board of directors, said he wouldn’t be an investor in Room 77 if the company tried to go head-to-head against major brands in spending on customer acquisition.

“They know,” Gerstner said, referring to Room 77 managers, “their success depends on them out-innovating the competition.”

Gerstner said Room 77 is well capitalized — $43.6 million in funding with a Series C round led by Expedia — and has the opportunity to raise additional funding.

Mobile As Opportunity and Challenge

Gerstner said the search engine optimization (SEO) and search engine marketing (SEM) game is “played out,” but he thinks mobile and the “app ecosystem” is a huge opportunity for new entrants to make headway.

However, Gerstner cautioned, the incumbent brands can also use mobile to greatly accelerate their businesses if they do mobile well.

For Room 77, Gerstner said, innovating is key with products such as its Checkmate’s mobile check-ins.

“I think that’s the way you win,” Gerstner said.

These are issues that Gareth Williams, the CEO of Skyscanner, considers as the Scotland-based flight-metasearch company makes its first real push into the U.S.

During the executive rountable discussions, Williams was asked if Skyscanner intends to mount a huge marketing campaign in the U.S.

Williams said he is a former programmer, and that “technology is the brick to build your product.”

But, is technology enough?