“It's not who you know, it's who knows you.” – Alex Simon
Alex Simon is the co-founder and CEO of Elude, which is focused on helping people find and book incredible travel experiences. It's the only place where you can simply input your max budget, your local airport, and how many days you'd like to be gone to find incredible destinations around the world that fit those parameters. So you can ask the question, where can I go next week for a thousand dollars?
This episode is a fascinating, deep dive into the world of travel, from the unique barriers to building an airline and hotel booking business—which include a surprising amount of regulation—to an overview of the major players in the travel space and a look at what it's like to build a cutting edge company in a very old industry.
In our conversation, we go deep on why travel is considered a startup graveyard and how Elude overcame all of those obstacles to build a big and completely new company in the industry. We cover how they brought deep experience building Google Search to build their own unique search experience for travel. We talk through all of the regulations in the travel industry, why they exist, and how they impact travel companies. We discuss why Elude wanted to become a merchant of record, owning the customer and transaction from end to end, rather than follow the typical playbook of simply building a search UI and then using affiliate links to airline and hotel websites. Finally, we discuss all of the lessons that Alex and his team have learned building Elude over the last few years, and reaching more than 500,000 searches to date.
For more, explore the transcript of this episode.
This episode is our definitive guide to building a startup in the travel industry. In it we cover:
- 00:00:00 – Introduction
- 00:02:24 – The path from investment banking to entrepreneurship
- 00:05:35 – The Elude customer journey, from app download to travel time
- 00:14:11 – Building a travel search engine from the ground up
- 00:19:34 – Why the travel industry is a startup graveyard
- 00:25:32 – How travel regulations make it difficult to build and scale a business in the industry
- 00:32:42 – Why becoming a merchant of record was crucial to Elude’s success
- 00:35:21 – Building a brand with the help of Apple advisors
- 00:44:09 – The difficulties and rewards of entrepreneurship
- 00:49:55 – It’s not who you know; it’s who knows you
The Big Takeaway
The travel industry has long been considered a startup graveyard. Building and scaling a travel business is difficult and costly in part because of how heavily regulated the industry has always been. Most travel booking platforms are data aggregators that simply forward customers to airline and hotel websites for a small commission without owning or managing the actual booking. Elude has taken the longer and harder route of becoming a merchant of record, which means they own the transaction from end-to-end. This gives them a real moat and real customer relationships so they can become a dominant brand over time.
- Regulations Favor Incumbents: The travel industry is heavily regulated, for very good reason—for example, known terrorists are restricted from traveling by the U.S. government. But regulation can be both helpful and unhelpful. In this episode, Alex talks about how Elude had to raise at least $200,000 to put into a checking account just to meet minimum balance sheet requirements to become a registered travel agent. Regulations like these inhibit disruption and make it harder for new companies to enter the market.
- Own the Customer Journey: The travel industry is largely broken up into two distinct types of players: aggregators and merchants of record. Aggregators don't own the transaction or customer journey; they simply display results and pass users off to airline or hotel websites to complete the purchase. Merchants of record are the exact opposite. They own the transaction from end-to-end, including things like customer support. This makes their job much harder, but it allows them to build real customer relationships and become a trusted brand over time.
- Brands Are About Trust: So much of creating a great brand is about building trust with customers, which isn’t easy to do. It requires ruthlessly focusing on the customer journey and delivering a great experience in every interaction. For Elude, building trust has meant focusing deeply on the design of their app from day one to ensure it provides an incredible customer experience. If Elude does that job well, over time, they'll build trust and slowly build a powerful brand in the travel space.
We covered a lot of ground in this interview. Here are links to the stories, articles, and ideas discussed:
- Connect with Alex Simon: Twitter | LinkedIn | Elude
- Morgan Stanley | Global Leader in Financial Services
- Deutsch Bank | German Multinational Investment Bank
- KAYAK | Search Flights, Hotels & Rental Cars
- Sabre | An innovative technology company
- Amadeus | The leading travel technology company
- The Travel Corporation | Private Hotel Group & Travel Company
- Priceline.com | The Best Deals on Hotels, Flights and Rental Cars
- Expedia Travel |Vacation Homes, Hotels, Car Rentals, Flights & More
- Ctrip | Chinese Multinational Online Travel Company
- Global distribution system | Wikipedia
- ARC | Airlines Reporting Corporation
- IATA | International Air Transport Association
- Orbitz | Hotel Deals, Flights, Cheap Vacations and Rental Cars
- Skyscanner Travel | Compare Cheap Flights, Airline Tickets, Hotels & Car Rental
- Distribution with Offers & Orders (New Distribution Capability) | IATA
- Duffel | The best API to sell flights online
- Tim Kobe | LinkedIn
- Delian Asparouhov of Varda Space Industries on Problem Solving with Space Manufacturing | Outlier Academy Podcast
5 Ways to Dive Deeper
Want to dive deeper? Here the best content we've curated on this subject:
- Life is Short, Travel Now: This TED talk by Jared Kamrowski provides practical travel tips and encourages us to travel more. (10 Min)
- Dollar Scholar Asks: Can Travel Booking Sites Like Expedia Actually Save Me Money? – This summary of online travel agencies work underscores why becoming a merchant of record was so important for Elude. (7 Min)
- Tim Kobe, CEO of Eight Inc. and designer of the original Apple Store, opens up about his approach to design and the importance of brand experience: Learn about the design philosophy of Tim Kobe, one of Elude’s top design advisors. (7 Min)
- How airline distribution works: Watch this quick guide on how GDS (global distribution systems) function. (7 Min)
- COVID-19 Travel Recommendations by Destination: Before deciding on a destination, check out the CDC’s recommendations based on current local COVID case numbers. (5 Min)