It didn’t take long for another major example to pop up in the news to illustrate one of Skift’s 2018 Megatrends: “Startups Go Direct to Consumers in Battle for Business Travelers.”
On Wednesday, TripActions, a business travel startup, said it closed a $51 million Series B funding round.
Businesses hire TripActions to run their travel programs, and the startup rewards employees with Amazon gift cards or credits for personal vacation if the workers book cheaper travel than they might have otherwise.
Lightspeed Venture Partners and Zeev Ventures led the round. The investment brings the total capital raised to nearly $80 million.
The Palo Alto, California–based startup, which has 120 employees, will partly use the funding to open an office in London. It will also use the funding to increase the size of its technical and customer support teams at an average rate of five employees a week through the spring.
“We have been blown away by the pace of growth we’ve seen at TripActions with rapid adoption from mid-market companies and small businesses alike,” said Arif Janmohamed, a partner at Lightspeed.
Janmohamed isn’t joking. TripActions makes some bold claims about its success since it launched its services in 2016. The most eye-catching claim from is that it has never lost a customer in the past 18 months, meaning none have tried the service and switched back to the travel management company it had been previously using.
The company claims that the number of customers and travelers under management doubled every quarter in 2017.
It also claims that 97 percent of travelers at companies that adopt its solution use it to book at least some travel — an adoption rate well above the corporate travel industry average.
TripActions, one of Skift’s Most Interesting Corporate Travel Startups, isn’t the only company that has attempted to guide businesspeople to save their companies money by buying cheaper travel.
Rocketrip was one of the pioneers of using behavioral change to trim corporate costs. It rewards employees with gift cards they can spend however they want, if they book hotels and airfares within a company’s policy and budget.
Rocketrip raised $9 million in Series B funding in 2016, bringing its total funding to $17.1 million. It is the preferred booking tool for travel managers at Twitter, healthcare company Roivant Sciences, and other midsize and large companies.
It nearly doubled its enterprise client base last year, it said, including some global and Fortune 500 customers.
But like other upstarts, it has had some losses. In 2017 it lost General Electric as a customer.
Similarly, one aspect of business travel startup Upside’s model is to offer gift cards as a reward to business travelers who book a flight and hotel package to take advantage of the savings it negotiates for bundled trips. In short, it pays business travelers to be flexible. As a side note, Upside’s CEO is Jay Walker, the founder of Priceline.
Other companies have attempted what could be more broadly called “loyalty monetization” by rewarding travelers who book at particular hotels with loyalty points in their favorite airline program. Rocketmiles, which is a brand acquired by Booking.com; Points.com, Switchfly, and TravelBank all have products that attempt to do this.
The direct-to-consumer startups face a marketing challenge in modifying customer behavior from just booking a room to trying to book a room while also earning loyalty miles or points.
In contrast TripActions, like Rocketrip, have the advantage of getting an endorsement from a company’s management to encourage travelers to try and use their products.
Co-founder and CEO Ariel Cohen credits his company’s success to using next-generation technology to provide a more efficient mix of automated and human agent support to its customers.
Co-founder and CTO Ilan Twig claimed he recently was on a flight out of Idaho that experienced a delay that threatened his ability to make an onward connection. He touted that TripAction’s platform, which uses machine learning to mine data and artificial intelligence to power a chatbot feature, helped him quickly rebook to an itinerary that assured he would make his meeting.
True or not, an ability to provide customer service throughout the trip is a critical service that any pretender to the throne of travel management greatness needs to achieve.
Big Picture Disruption
The corporate travel sector has been well-served by its strategy of combining small agencies in a network able to service multinational clients worldwide.
But now it faces a contrast between its labor-intensive expansion and the almost frictionless growth of a network of automated services powered by artificial intelligence and machine learning and self-service behavior created by TripActions and its peer startups.
If TripActions and its similar startup peers gain traction in the mid-market, travel management companies like American Express Global Business Travel and Carlson Wagonlit may face erosion of their business “from below” — as they lose smaller clients.
To be sure, industry heavyweights like American Express Global Business Travel and Carlson Wagonlit Travel have seen upstarts attempt to challenge them before without much luck. Companies such as TripActions, are not even in the conversation with them, in that regard.
Perhaps most notably, in 2008, Expedia launched its Egencia corporate travel brand with a goal of challenging the giants.
A decade on, most Fortune 500 companies like IBM and General Electric continue to rely on established corporate travel players to handle their complex needs.
And Egencia itself is now prone to disruption from startups.
Cohen said his company has already begun to steal mid-market share away from legacy players like Amex and newer ones like Egencia.
Cohen said that TripActions successfully stole away Box, an enterprise software company with about 1,500 employees, away from an overlapping solution provided by Egencia and Carlson Wagonlit.
Cohen said TripAction won SurveyMonkey’s business away from Egencia.
So how have the legacy players responded to the threat posed by a new wave of corporate travel startups?
One response has been to try to partner with the new wave of players rather than fight them. BCD Travel has entered a deal in which it helps TripActions serve some international clients.
That move dovetails with BCD Travel’s “if you can’t beat them, join ’em” approach by recently creating SolutionSource, a platform that makes it easier for travel managers to integrate products and services from startups and technology partners, such as Rocketrip.
Like any new player, TripActions is vulnerable on a few weak points.
It relies on airfare data from travel technology Sabre, which serves many corporate travel managers worldwide, and hotel rate data from Booking Holdings, which owns Rocketmiles that offers a direct-to-consumer competitor product.
If it were cut off from comprehensive data sources like those, it would likely struggle to rebound, despite its founders’ claims to the contrary.
As it adds bigger clients, it will have to become able to cope with bigger problems, such as handling the stratified loyalty status level of executives and ordinary workers and coping with complex airfare ticketing fee deals and technology systems that airlines increasingly want.
TripActions also needs to watch its costs and not overreach as another similar startup, Lola, appears to have done. Lola, founded by former Kayak creator Paul English, began as a service offering to use next-generation technologies to give superpowers to travel agents to serve travelers efficiently via chat.
The mobile booking app, which officially began focusing on business travel full-time late last year, is now working on providing more advanced software to help manage and track employee travel for existing clients, as we reported on Tuesday. This move helps it avoid playing a costly direct-to-consumer game of trying to acquire customers at scale.
Such are the hurdles that must be overcome by companies attempting to innovate in industries dominated by a handful of giants.