Priceline Founder Launches Travel Startup Upside

You would think that being the founder of one of the most successful online travel booking agencies would be enough — right? Well, obviously not. At least, not for Priceline founder, Jay Walker, who used a $200 million valuation to raise $50 million in a series-A fundraising effort to launch a new online travel startup — Upside. According to report from inside sources, Walker is launching this new startup in order to increase the competitiveness in the market, which is currently dominated by two dominant entities — Priceline and Expedia.

Priceline founder, Jay Walker, it at it again, having raised $50 million dollars to launch Upside.com, a travel website that will focus on finding discounts for business travelers, especially those associated with small businesses — by bundling flight and hotel costs, suggesting alternative routes and accommodations. According to the initial funding valuation, this new startup is worth $200 million, and the investors include investment firm, Leucadia National Corporation and tech company, Red Ventures.

This new website will offer services that will be algorithm driven. Basically, when travelers log in to book flights, the program algorithms will suggest a total of six different hotel and flight combinations — asking the user if any of these will work. These different combinations can vary in a number of different ways — everything from leaving 30 minutes sooner than initially planned, as well as connecting through a city not originally considered. Other considerations that could positively impact the cost of a trip is the geographical location of the hotel. Something as simple as staying three blocks further from the original spot requested can lower the price significantly.

Once the recommendations have been made, if the traveler decides to use one of the recommendations, they will be rewarded with a discount that ranges from 10 to 15 percent. The user will also receive a gift card from retailers, such as Nike Inc. or Amazon.com Inc.

In a global economy when competitiveness is at an all-time high, driving small businesses to stretch their budgets further and further to meet the increasing demands of their customers, these businesses are constantly looking for ways to cut operational costs. For businesses in which travel contributes to a substantial amount of their operating costs, having an opportunity to reduce these costs on a consistent basis can be a huge advantage in their efforts to maintain a competitive edge.

According to Walker, there are these different levels of flexibility in travel that have the capacity to save the traveler money, and to this point, nobody has ever revealed the value of this flexibility to the traveler.

When it comes to online travel, the basic idea is to develop the most efficient ways to drive potential customers to specific hotels and booking sites. So, in most instances, when Upside suggests a specific hotel, it will likely be with a hotel in which they have an agreement, which is how the startup will generate its revenue. According to Walker, the company currently has deals with more than 1,200 hotels; however, he did not reveal which brands.

When it comes to the target audience for this site, Walker has set his sight on the small business traveler, primarily due to the fact that these travelers are most likely to be willing to be flexible in their travel plans in order to experience the associated savings. Also, small businesses will likely find a use for the free gift cards that are a part of the perk for using the site. While small businesses will be the initial focus of the site, Walker, and other experts, believe that larger businesses will eventually see the value in using the site as well, especially as these larger companies begin to focus more on expense management.

For those who may be wondering about the practice of driving travel customers to specific hotels, or bundling hotels and flight accommodations, it is not new. If fact, it was Walker who was a part of the team that developed the name-your-price model for Priceline. The name-your-price model allows users to present a price that they are willing to pay, and then the system will provide suitable combinations of hotel and flight accommodations to meet the customer’s price request — simultaneously leaving enough room in the profit for Priceline to take its cut.

While there are a number of online travel sites, currently the market is dominated by Priceline and Expedia. It is Walker’s hope that the addition of Upside will create more competition in the market, which will benefit the customer, and the industry in general. While the idea is to create a wider selection and better pricing overall, the fact that upside is aimed at serving the small business sector, and Priceline is more focused on individual and private travelers, it is not clear how much of an impact this new startup will have on Priceline business. With Walker having left Priceline shortly after the company went public in 1999, it is not clear how this latest move is perceived by the online travel giant.

The original plan for Upside was to take the flexible structure model to other industries, outside of hotels and flights; however, the focus has remained on hotels and flights for the present. Something else that is not readily clear is the long-term plans for Upside. While Walker has been openly optimistic about this launch, he has also been somewhat tight lipped as far as the long-term direction of the company.

The reason that long-term interests are so important is due to the fact that the rapid advancement of technology drives the rapid evolution of business models — what works today will not likely be as effective next year. Business owners and business managers are constantly being driven to anticipate and predict the movement of industries in order to remain competitive. The key for any business is to be able to meet the growing expectations of the consumer. With consumers being more educated than at any time in the past, it is imperative for businesses like Upside to have a clear and decisive plan of how they will engage the demands of their customers.

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