TravelDaily on travel startups featuring Shanghai-based Mylan, China’s first and leading members only online luxury travel company.
1. Who and what are you (including personnel and backgrounds)?
Prior to co-founding Affordable Luxury Network (ALN), Frank was a Principal at Newbury Ventures, a US$400M Silicon Valley based VC firm investing in e-commerce, mobile, and consumer Internet companies. He has also led Panasonic in their business development and investments efforts in the U.S. before joining Newbury. However, his penchant for luxury travel and technology started when we worked as an investment banker at Goldman Sachs and Salomon Smith Barney.
In 2010, Frank decided to start ALN with three long time friends, including his roommate from Harvard. All of them love to travel and experience upscale and unique experience but found the China market to lack such a service. Ctrip and eLong are more mass market and affluent Chinese currently have nowhere to go to buy online high quality upscale experience. What they want to do is to reinvent the online travel space in China through social media and luxury. ALN is a blend of Jetsetter which promises the world’s best vacations at members’ only prices and Tablet which offers the best luxury and boutique hotels worldwide, but localized for the China market. ALN’s value proposition is to offer certified selection of high quality products, great customer service, inspirational content, personalized service, good value for the money, recommendation by trusted source, culminating in a WOW member experience. ALN started with domestic destinations in China but in June launched packages to nearby places in Asia such as Bali, Phuket, Tokyo, Bangkok, and Singapore.
2. What problem are you trying to solve?
Trip planning is becoming more and more time consuming and complex. For the upper middle class consumers, time is something that they lack the most. As a result, ALN help our members discover pre-curated unique and upscale properties spread across interesting destinations in China and neighboring China. We then pre-negotiate an attractive package rate for our members to fully experience what it means to relax and experience luxury getaways.
3. What financial support did you have to launch the business?
The company was initially financed mostly by the four founders ourselves. Later on, we received investments from leading institutional and angel investors.
4. Describe the business, core products and services?
Founded by a team of Silicon Valley returnees including two Harvard roommates, ALN is China’s first and leading members only online luxury travel company. Our mission is to upgrade the travel experience for the burgeoning Chinese mass affluent consumers and provide our members a fun and interactive online travel community. Exclusive membership is by invitation and referral only.
ALN’s two-way value proposition is to help our hotel partners monetize their empty rooms, and at the same time, to help travelers indulge themselves without feeling guilty about spending too much money. When a member sees an interested package through ALN’s flash sale model, he can purchase it, invite his friends to join him on the trip, or just let them know about the deal. Through this viral marketing method that is further amplified by a distinctive package curation process, members are motivated to act quickly and confidently thus enabling our hotel partners to monetize a large volume of inventory in a short amount of time while minimizing pricing and brand dilution. In the backend, ALN keeps track of all activities, transactions, and referrals made by each member. Employing sophisticated data mining techniques will allow ALN to better understand members’ needs, preferences, and relationships with other members, thus enabling ALN to continually enhance its service quality and product offerings. ALN will also implement a member loyalty program and innovative gaming mechanics such as voting and member generated packages to revolutionize the way consumers discover, plan, book, and upgrade their travel experience. Finally, through algorithmic refinements and collaborative filtering, ALN would aggregate all collected data and enable better targeting and ultimately superior conversion rate, leading to higher satisfaction from both our members for relevancy and our hotel partners for results.
5. Who are your key customers and users at launch? How you market your services to the customers?
Our key hospitality clients initially were the major luxury hospitality brands such as Ritz-Carlton, Banyan Tree, Hyatt, Sofitel, Kempinski, and Aman who wanted to promote their properties during the slow seasons. Gradually, as our business expands and as our message spreads within the industry, boutiques such as Relais & Chateaux and other independently run luxury boutique hotels started to seek us out to help them promote their properties, not necessarily just during their needs period as these smaller properties have even more limited sales and marketing resources. Finally, through popular demand by luxury properties outside of China looking to tap into the Chinese outbound travelers, we have also expanded our hotel partnerships to outside of Greater China, including destinations such as Bali, Phuket, Singapore, Tokyo, Chiang Mai, Bangkok and others.
On the other side of the equation, we have the pleasure of serving 50,000 exclusive members who are white collar, well educated, affluent individuals in China referred or invited to join ALN’s network. Our initial members were alumni of top universities such as Harvard, CEIBS, University of California at Berkeley, Fudan University, Stanford, and Beijing University. Through their patronage and enthusiasm to spread the ALN spirits and values, we continue to see double digit growth in our member base on a month to month basis. These pre-certified set of luxury travel promotions entices more members to refer ALN to their friends, who most likely belong to the same social strata, which in term attracts more interests from luxury properties to promote on the ALN platform. As this positive feedback system feeds on itself, the ALN platform continues to optimize to offer the most value to both our hotel partners as well as our valued members.
6. Did you have customers validate your idea before investors?
Yes, many friends of mine have also expressed similar needs for this kind of getaway offerings in China. At the same time, there have been successful companies in U.S. and France that are pursuing similar business model.
7. What is the business AND revenue model, strategy for profitability?
ALN make money on the markup that we charge on top of the net rate that hotels offer to ALN.
8. SWOT analysis – strengths, weaknesses, opportunities and threats?
Company is targeting the RMB 785 billion online travel market, in particular the higher margin and yet unaddressed upscale travel market in China. Our customers include higher end consumers as well as some corporates that are looking to upgrade their travel experience. Competitors in the market include Ctrip (mass market OTA), eLong (mass market OTA), MangoCity (mass market OTA), CTS/CYTS (traditional travel agency), Qunar (travel search engine), as well as new package tour OTAs such as Tuniu, Manmanzou, and Travelzen.
9. Who advised you your idea isn’t going to be successful and why didn’t you listen to them?
Some said that the Chinese consumers are not ready for this kind of luxury getaway. However, we believe the Chinese consumers in fact have a strong desire to upgrade their travel experience and stay at nice luxury properties for leisure in addition to business. At the same time, it’s a known fact China is already the second largest luxury goods market in the world. With the brand consciousness of the Chinese consumers and the rising mass affluent population, we believe the explosive demand for upscale travel is imminent if not already taking form. In fact, we now have proven traction of our members willing to spend the money to purchase these upscale packages.
10. What is your success metric 12 months from now?
Profitable with RMB2,000,000 monthly revenue. Have at least half a million user base.
11. You previously worked as an investment banker, why did you leave this career for the luxury travel industry?
It was partly through my stint at Salomon Smith Barney and Goldman Sachs that I got exposed to these world class luxury properties such as Mandarin Oriental, The Plaza in New York, and Ritz-Carlton and became spoiled with my travel habits. Nevertheless, I am always on the lookout for deals at these types of distinctive properties, especially for my personal trips.
Passion – this is prime reason that I left investment banking and venture capital to start a social e-commerce company in the luxury travel space. The passion for inspirational travel; the passion to upgrade China consumers’ travel experience; the passion to innovate in an entrenched online travel space in China; and the passion to build a respected luxury services brand in China. Most importantly, I was able to team up with three of the most creative, dedicated, intelligent, and capable people that I know, who are all long time friends of mine including my roommate from Harvard. This shared passion emboldened us to leave the comfort of our previous cushy, enviable jobs and pursue the arduous but fulfilling life of an Internet entrepreneur striving to change the travel industry in China.
12. What kinds of travel experiences are your members looking for?
ALN member are looking for a more distinctive, pre-qualified, and luxury travel experience whereby they feel like they are pampering themselves without having to feel guilty about it. At the same time, we want to present to our members the story behind the property or experience that we have worked so hard with our hotel partners to package. It’s through this desire for better appreciation of luxury experience that is motivating our members to try something which resonates with their values or individuality even though they might not have heard of the particular property or destination. At the same time, these quick getaways are more impulsive, more single destination driven, and revolve more around immersing oneself in that luxury property. We want our members to come back from ALN getaways feeling pampered, rejuvenated, and perhaps expanded their horizon on a certain aspect of what it means to travel in style. More importantly, we want our members to look forward to our future promotions and share with their friends about ALN’s unique value proposition and impeccable services. As one of our members put it “My dream is to try out all the packages that are offered on ALN!”