Some Thoughts: the Online Backpacking Travel Industry

A friend recently wrote and asked for opinions about a web site idea he had.  The idea was "yelp meets international backpackers" - reviews for restaurants, places to stay, etc.  The tripadvisor for post college travelers.

I thought I'd share my reactions, just for fun.  Guessing and dreaming is always a kick!

Howdy,

Rock on dude! I've always been curious about the backpacker traveling industry so this is a cool way to find out more about it.

I looked on compete.com and compared the traffic of hostelworld and couchsurfing. They each get about 100,000 unique visitors per month. Hostelworld apparently has 20 employees based on their home page. I'm not sure if they are all local or international / what their average wages are, but I'd venture to guess that their burn rate is about 2M per year, and I'd guess that their revenue is just north of that...maybe 2.5M or 3M per year, optimistically. If they have 1M users per year (somewhat optimistic based on their monthly traffic, but (a) they probably have lots of turnover in their user base, and (b) multiple people using the site from the same hostel probably only counts as one 'visitor') that's about 2.5 dollars in revenue per user per year (ARPU), which sounds about right given how close they are to the transaction.

Couchsurfing died a couple of years ago in a major data loss and only started back 'recently' so their growth is a little bit misleading. Anyway couchsurfing isn't in the middle of a transaction so they almost certainly have a harder time making money. They ask for donations essentially.

Much better to be airbnb than couchsurfing, if you're in it to build a big business. Airbnb is couchsurfing but with financial transactions. They got started with $15k from the same investors who gave Xobni our first money, so I don't know them but they are very close in my social network.

Anyway, it's just helpful to understand the comparables so you know what you're getting into!

Yelp on the other hand has 25M unique visitors per month, and growing! The yelp CEO mentions international growth here: http://news.cnet.com/8301-13577_3-9884023-36.html. More likely, though, they are more focused on generating revenue from those 25M users much more than growing internationally.

Anyway, I would focus on the following questions:

1) how will you acquire new users?
2) if successful, how will you make money?

The risks there seem large, but they always do at the beginning of any successful venture. :)

Comments

[Frank]

I think you are probably shy about US20+ million a year on your prediciton of HostelWorld turnover - but that is based on complete heresay. They are doing well over 8,000 bookings per day.

If rumours are to believed they received a funding round valuation of USD$130million 3 or 4 years ago.

[Adam Smith]

Holy moly! What impressive numbers! Do you think they are under-reporting their employee head count?

8,000 bookings per day roughly equals 170,000 bookings per month, which is higher than compete.com's shown monthly unique visitors! This wouldn't be the first time web traffic estimating has failed. :) I wonder what other methods could be used to approximate their traction..