Why travel startups need to think about the 80/20 rule
There are 665M enplanements annually in US and we have found that 10% of travelers doing 300m of enplanements plus another 9% doing about 100m enplanements.
If there is one thing I underestimated about travel that would be: “travel inequality”. What is it? Well, it turns out that minority of travelers does the majority of trips.
Let me give you some numbers:
There are 665M enplanements annually in US (according to US Bureau of Transportation Statistics).
At the same time 55% of US population did not travel by air for last 12 months, 26% did 1-2 trips; and 9% did 3-4 trips, and 10 percent 5+ trips per year (according to Gallup).
Assuming each trip is 2 enplanements (round trip one-leg flight) we have 10% of travelers doing 300m of enplanements plus another 9% doing about 100m enplanements we see that 19% do 60% of all travels. Does this sound familiar? Yep, the Pareto principle works here as well.
What is interesting is that our own data of 1.7m downloads and 6m+ itineraries processed in App in the Air amazingly confirms this principle!
And a quote by Tim Mapes, CMO of Delta, proves the point: “5% of Delta’s passengers does 25% of our revenue.”
What kind of implications does this simple arithmetic have for a travel startup? Let me outline three areas:
1. Retention – the standard retention benchmarks may not be relevant here, i.e. daily and monthly retention is something you can’t apply to the majority of your users who are travelling only once every three t0 six months, right? Quarterly and six-month retention is something we are tracking as well.
2. Business model – we’ve noticed that while subscription works for most active travelers; one-time payment or free app with strong viral is the only way to capitalise on those who travel only once-twice a year.
3. Viral is really hard in travel since you don’t travel each day to download travel app the moment you see someone’s invite or share on Facebook.
So I suggest taking this travel inequality into account if you are a travel startup.
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