How to survive, refocus & thrive again as a travel startup in corona times
In theory, our FindHotel fits the bill of a company that should have been in great difficulties today:
- We are an independent company funded by our own profits which means no deep pockets to lean back on in times of crisis. (my view on startup funding in the travel industry)
- We are also a fast growth company, doubling bookings in both 2018 & 2019, with over 1.3M customers making a booking in the past year.
- We grew the team by 70% over the past year, with many members joining during Q1 2020.
- We work on a ‘rooms booked’ consumption model and generate revenues only when customers stay at their accommodation. Thus, the cancellation wave in the first weeks of March & the low demand in the months since meant an instant hit to our projected revenues.
Yet, in an environment where travel operators and many of our partners had to drastically adjust their workforces, we were fortunate to have managed to hold onto our entire team. We managed to avoid work time reductions, salary haircuts, and have not withdrawn contract offers. We have even continued hiring in March & April as the storm hit. Most importantly: we had zero voluntary attrition from March through May. Our 62 team members did not doubt our survival, nor did they think they need to help us by leaving. Some offered to work on reduced salaries but we denied that notion as a last resort, and that was it. (More on that in a 2016 post I wrote called ‘who are we looking for at FindHotel’)
5 steps we took to survive the corona crisis
The first thing we understood was that it was a macro crisis and so a lot of goodwill was available from those less severely hit. While we as a young company have a relatively small safety net, some of our stakeholders (whether partners or the Dutch government) have a bigger one. In a micro crisis a startup often is on its own but in a macro crisis there is more understanding and with it willingness to help. Having good relations with our stakeholders through the years meant that we could discuss our problems with those able to assist.
We are grateful for the support we received from Google Ads, Microsoft Bing, Tripadvisor, Algolia, Datadog, Looker, Snowflake and others who took the long view and found flexibility, mostly by offering extended payment terms, that bought us time when uncertainty was high and we feared cashflow risks. We have also been publicly grateful to the Dutch government for supporting our wage costs during March to May (a support many large local companies such as Booking.com and KLM have also enjoyed. And while some of them came under local criticism, the Dutch economic system is a high tax/high benefits one where contributing to the social safety net creates the option of withdrawing from it in times of crisis).
We did the same thing with our accounts receivables, figuring out which of our booking partners might have harder time paying us on time, who might go under and hurt our customers in the process, and who is able to maintain their payment schedule. We viewed ‘paying on time’ as a sign of strength and sought to improve our relations with those that did, while removing those we suspected will have a hard time honouring our customers bookings from FindHotel.
Third, we kept an open and transparent communication line with our team. I started a daily blog where I updated the team on our efforts to buy time and stabilise our finances, and shared our crisis initiatives in product & marketing. We also had several company-wide meetings allowing the team to know where the risks were and what we are doing to avert them with as honest and open dialogues as possible. This simple move of trust building lead to team members taking more ownership on strategy and execution than ever before.
Fourth, we switched to an extremely focused strategy. We postponed a key part of the original 2020 strategy as it seemed ill fitting for the current market dynamics. On the other hand we saw an urgent need of supporting a key customer need: the freedom to cancel. We improved cancellation information across every aspect of the product, from filters to display to reporting. For a few weeks we became a ‘cancellation first’ product as we sought to integrate every aspect of our partners’ cancellation policies into our product and improve our understanding of cancellation data & behaviour in a world where old rules no longer apply.
One of the internal initiatives we launched was a ‘data war room’ where we analysed in real time how our various markets were being affected and which segments stayed strong through the crisis. The extreme data focus we have as a company, led us to identify the few opportunities that held through during the crisis. We quickly formed an ad-hoc team to focus on the opportunities and became niche experts, improving our prices and launching new marketing & data initiatives that helped us double our scale within 4 weeks. Overall we saw our key operational matrix recover about 6 weeks after the beginning of the crisis, allowing us to mark a real V-shape recovery. Thanks to an extremely rapid growth on all fronts, we moved from forecasting a 25% decline in 2020 revenues to forecasting a 20% increase in less than a month. This, in turn, ignited motivation in the team who saw that their efforts delivered instant results, leading to increasing market share.
Fifth, the confidence from the recovery allowed us to look outside and see how we can help others recover, which led to kickstarting our partnership program already in June instead of in November. We understood that our model of consumption based ‘revenue share’ is far more resilient than the ad driven models, and learned that our ability to operate such model globally is unmatched. That trumps the fact we are a low profile startup in a land of giants, especially in times when these giants are aching, reducing marketing spend and ‘refocusing on their core’. We actually think now is a great time to go on the offensive and are torn on the choice between several great growth opportunities.
The road ahead
It is important to understand that FindHotel’s model is uniquely resilient in the industry: we work with all our booking partners on a revenue-share model, which removes the risk of distribution from the partner to us. While many partners stopped paid marketing campaigns already in March, none of our booking partners pulled out of our marketplace as we carried the full risk. FindHotel’s product operates in a highly price sensitive manner, promoting better prices with the assumption that great deals lead to a good user experience and higher conversion rates, while avoiding any form of ‘hotel sponsorship’. In a period of low occupancy, the price competition on FindHotel is fierce and travellers benefit. To top it all, we are demand driven & once customers begin traveling to a destination, we are instantly there to help them find a great deal. (I go more in depth about hotel distribution models in a 2018 essay).
We are still facing an unpredictable road in the remainder of the year, and will not meet our original 2020 targets. But we are alive and kicking and are more ambitious than we ever were, seeing a great chance to make the hotel market much more efficient for travellers the world over.
We are grateful for the goodwill of our partners & the courage and faith our team members had in us during the past three months. We will come out stronger as we strive to disrupt the hotel booking industry, helping travellers get the best deals wherever they may go in the 2020’s.
We are hiring :)