Finding Product / Market Fit for Hotel Tech Startups
Having launched over a dozen hotel technology products in the last decade I’ve experienced some success, lots of failures and learned a thing or two in the process. One of the most important lessons learned is finding the product/market fit for a hotel technology startup.
I’m going to use Marc Andreessen's definition of Product/Market Fit for this article. He defines it as:
“Product/market fit means being in a good market with a product that can satisfy that market.”
The issue with hotel technology is that “hotels” is not a market. It is a vertical but it isn’t a market. Within hotels there are various markets, such as Revenue Managers, General Managers, Marketing, Online sales, Direct revenue, Online Distribution, House keeping, Food and Beverage Managers and more.
The market, in case there is any doubt, are the people — not the department. But even within the titles above there are various markets, which is the size of hotel, the country, state, independent or chain and within that there are other markets.
The product is relatively clear for a start-up, it’s what you’ve built. In some cases it’s a service in most others it is purely an application/software.
There is one main problem with finding you Product/Market Fit (PMF) which is not understanding the market. This breaks down in two sub-problems. First is, many founders who have no idea what it means to work in a hotel thus not understanding the mindset of the future users and the second one is they’ve labelled their market as “all independent hotels” or some overly broad segment that nobody can relate to.
Build for an individual!
That’s right build for a single person, not a group, not a segment, not a persona or a title, nor even a market. Build your product for someone you know and with their exact needs in mind — then broaden slightly more and slightly more until you have a market.
If you can’t build for someone specific like your Uncle Joe who manages a hotel, then you probably don’t know the space enough and should roll-up your sleeves to go work for a hotel even for a week, and understand the mindset.
But even if you’ve done that — it sometimes goes wrong.
I once worked with a team and built a “fantastic” dashboard for hotels to manage their online direct revenue. They could see concise facts and numbers, they had insights into their direct revenue that were easier to understand than Google Analytics and showed more relevant information. Considering the importance hotels put on direct revenue, we were sure this would work, how could it not.
So we build the platform gathered all the data, found innovative ways to display incredible information, and failed miserably. Failed so bad that all the marketing we had done and even the who got it for free didn’t care.
Because we had built the application from our point of view. Not the hoteliers. We thought it was cool. We used it. But while hotels need direct revenue, it still only represents about 15% of the average hotel’s distribution mix. So why would they log-in to yet another place and look at just 15% of their revenue?
They needed 100% or nothing, anything less was a waste of their time.
Needless to say, we scrapped the project.
So my point is, you need to go and understand the exact person’s issue and that takes talking to hotels.
As many have stated before me, finding the solution is the easy part, finding the problem is the hardest part.
Now if you already have a product and you’re looking for the market — chances are you’ll need to change the product to some extent for it to fit the market. In fact all the products I’ve worked on which succeeded, pivoted at least once.
Once you have gone out to talk to various hotels and honed in on the exact person you think will need your product, now talk to a few more of those titles, be that General Managers, Revenue Managers, Food & Beverage Managers etc.
What will most likely happen is you’ll notice a lot of things that your product has, which they need — and a lot of things you’ve built that they don’t need. And now is the time where you’ll need to decide if you adapt or rebuild from scratch.
When working on an advertising management application for hotels, me and the team had basically finished the prototype of a first version of the app. We took weeks and month working through various design ideas, feature requirements and so forth and were ready to start coding the first version. I went out to see some prospective clients to discuss various features they may need, it turned out our prototype (which I didn’t show them) was not at all what was needed.
But with the additional information the product team regrouped, scrapped the entire prototype and rebuilt what was needed. It went on to be a great success with several thousand hotels signing on and is still a success today.
My point is, don’t be afraid to be wrong early and rebuild based on real feedback.
In terms of finding your market, here are some segments to think with, the list isn’t comprehensive but is a good place to start.
- Independent hotels 5–25 rooms
- Independent hotels 25–50 rooms
- Independent hotels 100+ rooms
- Independent hotels 500+ rooms
- Groups of hotels 5–15 hotels
- Groups of hotels 15–30 hotels
- Small chains 10–50 hotels
- Medium chains 50–100 hotels
- Larger chains 100+ hotels
- Chains 1000+ hotels
- Hostels
Each of the above have different needs and when it comes to software have very different requirements. There are rarely products that fit each of these segments well, so focus on a couple of them and find your fit.
There are other markets which have similarities, yet have very different buying power and needs.
- Management Companies
- Owners
- Consultants
- Franchisee hotels
- Agencies
And then of course as mentioned above there are the individual positions within the hotels, but remember a Revenue Manager for an independent hotel of 100+ rooms has a totally different need from a Revenue Manager that runs a 500+ room hotel, which varies completely from groups and chains.
The most important part is choosing the right market and building for that market well.