The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
There’s nothing wrong with a startup pivot. Even successful online travel industry veterans Bob Diener and David Litman had to change the trajectory of Getaroom.com when they realized their initial assumptions didn’t work.
If anyone remembers the Getaroom.com jingle and TV commercial of 2010 [embedded below] then you’ll be interested to know that the five-year-old startup, co-founded by Hotels.com co-founders Bob Diener and David Litman, is singing a different tune these days.
Getaroom started out trying to build a consumer brand, but the company, which is profitable, pivoted over the last year into providing back-end technology and forging affiliate relationships with partners, including NewOrleans.com, Kayak, TripAdvisor and others, says Diener, Getaroom co-founder and president.
Diener and Litman, Cornell Law School friends and business partners since 1991, know something about the travel and hotel business from their pre-Internet days to the current online and mobile jumble.
Diener didn’t articulate it this way, but there are tons of lessons for travel startups in the evolution of Getaroom.com and in the Diener-Litman journey.
After all, in 1991, prior to founding Getaroom.com in 2009 after a non-compete agreement expired, Litman and Diener co-founded the Hotel Reservations Network, which eventually went pubic, changed its name to Hotels.com and ended up as an Expedia Inc. brand, making the two co-founders very rich in the process.
In their heyday, Diener and Litman were rock stars in the online travel world as Hotels.com upended the way hotels sold rooms offline and online, reluctantly giving online travel agencies such as Expedia and Booking.com, much power and control.
The two travel industry veterans initially thought they could make a consumer business out of Getaroom by selling hotel rooms online, and pushing consumers to the company-owned call center, where they’d get unpublished rates and offers for higher-end stays.
Over the last year, Diener says, the company realized it would be much more profitable to find a niche and to enter into affiliate partnerships with other companies, and in that way they wouldn’t have to compete against the larger resources of major online travel brands which are crowding TV broadcasts with their omnipresent advertising.
“We do almost nothing in advertising, very minimal,” Diener says, adding that other companies can execute on search engine marketing much better as this was not Getaroom’s expertise.
And, with 85,000 hotels, sales teams fanning out across Europe, Asia, the Middle East and South America, and a company-owned call center, Diener thinks the 300-employee Getaroom has the formula to grow the top line while containing costs. The company has been profitable for around a year, Diener says.
When the call center has overflow, then home-based agents pitch in, Diener says.
“We can continue to find niches in the market,” Diener says. “We don’t conflict [i.e. compete against partners] with anyone [because Getaroom is not building a brand]. We are kind of like Switzerland.”
Lesson: For startups and late-movers who think that “quality wins” or that your little company can compete against the offline and online advertising clout and skills of major players, then Getaroom’s transition shows you’d better rethink that premise. Find a niche or do something very special because going head to head against major consumer travel brands is a very daunting and thankless battle.
And, there is nothing wrong with pivoting, In fact, it is rarely wise to keep stubbornly whacking away at a business model that just won’t work. Instead, learn from your business experience, mistakes, and data — and try something new.
On the question of adapting, Getaroom is adding vacation rentals to its hotel roster and new sorts of accommodations, including “shared-bath hotels” in New York City, where several guest rooms share a bathroom, bringing down the room rates, Diener says.
The Entrepreneurial Spirit
Diener doesn’t have to be working long hours and laboring away at building a self-funded business from scratch, but says he and Litman “love creating businesses.”
“We are classic entrepreneurs” who would be bored to death spending excessive hours on a beach, Diener says.
Diener says he has five kids, the oldest of whom is 19 and grew up around Hotels.com. Diener says some of his kids intern during the summer at Getaroom and one of their roles is to informally serve as testers for social media and other initiatives.
Lesson: Startup founders and co-founders had better love what they do (most of the time, at least). When it all becomes merely a “job,” then you are in the wrong line of work.
Diener and Litman have known each other for more than three decades, with Litman now working from company headquarters in Dallas and Diener operating from Miami just as was their modus operandi in the Hotel Reservations Network days.
Diener has said in the past that their arrangement has been based on a handshake agreement.’
Lesson: Whether you are a venture capitalist analyzing a startup or a startup co-founder yourself, much of the success of the enterprise lies in the quality of the team, and how the parties work together. Creative tension can be important, can also over-hyped.
Think Big, or Strategically, at Least
Diener and Litman have public company experience with Hotel Reservations Network, which later became Hotels.com, and they envision “probably” doing a Getaroom IPO, as well, Diener says.
There will be plenty of deserved skepticism about whether they have a chance for that level of success, and Diener declines to provide any revenue or profit numbers. He says the company is meeting “projections-plus” and is experiencing a “very strong growth rate,” especially internationally.
On Getaroom’s prospects, Diener argues that the global hotel market is massive, and the company only needs to capture a couple percentage points of it to be successful.
“We love the business,” Diener says. “If we have one or two percentage points of that, we’ll do well.”
Lesson: Startups should think big and strategically. As Skyscanner CEO Gareth Williams argues, online travel is still “a very immature market,” and there are a lot of opportunities. Whole swaths of the world are still coming online.
One of Momondo’s biggest markets is Russia; Cheapflights just launched a metasearch site in New Zealand, and Booking.com is expanding in Eastern Europe, and Agoda in Asia. Launching your business in the most competitive georgraphies with already dominant players isn’t the most prudent strategy. Pick your spots and markets very carefully.
Here’s one of the initial Getaroom.com TV commercials: