Travel, particularly spontaneous travel, is trending now more than ever. “U.S. airlines and foreign airlines serving the U.S. carried an all-time high of 1.0 billion systemwide (domestic and international) scheduled service passengers in 2018, 4.8 percent more than the previous record high of 965.4 million reached in 2017.”
To capitalize on this millennial trend, Rama Poola and his team created SkyHi. SkyHi is a subscription-based service for commercial airlines. For a monthly fee, customers get access to domestic flights at flat rates. By enlisting social media influencers and personalities, Rama wants to turn the SkyHi solution into a lifestyle.
We sat down with Rama to learn about how SkyHi came to be, what early feedback the team has received, and more-
Rama, can you tell us the genesis story of SkyHi?
In the role at my previous company, I was flying around a lot for business. I began noticing that many of my flights had a lot of empty seats. I started thinking about that inefficiency and began watching the flight booking behavior of my friends and family. What became clear is that they were booking far closer to departure than in the past.
The final catalyst to build SkyHi was a particular flight from Berlin to New York City. I was at the Berlin-Tegel airport when I struck up a conversation with a group of travelers. They didn’t have flights booked to anywhere but were waiting at a flight counter for tickets to fall under 50 Euro. They ended up getting one-way flights to Lisbon.
I boarded my flight from Berlin to New York, and it was practically empty. I could no longer ignore the inefficiency that I was constantly seeing. Through just a little research, there was evidence that nearly 20% of seats on planes were empty worldwide, more travelers booking closer to departure, passengers becoming even more price sensitive, and passengers with less loyalty to airlines than ever before. All of those issues, coupled with the increase in the desire for experiences made it clear that the opportunity was massive.
How do you define SkyHi as a business?
SkyHi is the first subscription service for commercial airlines.
Membership is just $199 a month and flights are $35, $75, or $120 based on distance. Flight costs never change, and there are no hidden fees. A member can book up to 5 one-way flights per month.
Our membership model allows for recurring monthly revenue and allows members to book flights for prices that are always fixed. This is something that no other booking platform is doing with commercial airlines.
Forbes describes us as the Classpass for flights.
As a closed system, where only subscribers can book tickets, we have the regulatory ability to price tickets below airline list prices. This allows for very unique consumer behavior patterns which are highly valuable to airlines.
For consumers, it is the easiest and fastest way to book airline tickets. For airlines, we can provide valuable insights to consumer booking behavior.
So with a subscription someone can get low set-prices on as many flights as they want per month. How does SkyHi make this possible and economically feasible?
Members can fly on up to 5 one-way flights per month.
We have the appropriate clearances to search and issue tickets in the airline industry. That gives us access to flights available through various global distribution systems at consolidated prices. We work with partners connected with those distribution systems to get the best prices and, in some cases, commissions per booking. We have a direct partnership with an airline for inventory at steep discounts, and will be looking to form more of these direct partnerships in the future.
Overall, this comes down to understanding airline pricing models, and changing consumer behavior patterns.
Who is the type of customer that is willing to pay $200 a month for a flying subscription?
Our current makeup of customers is 65% 27-37 year olds that take roughly one weekend trip per month, 20% are small business employees, and 10% are young retirees. Travel industry reports show that these groups are already spending significant money on travel.
The value proposition to consumers is that prices for their flights never change, we offer bookings that take just one minute, and that they have more freedom to explore. From a psychological perspective, the number one deterrent to travel is the cost of an airline ticket. Since the prices are fixed with us, travelers immediately see value. We also save customers an incredible amount of time. Airlines see 1000 visits to a site before a single booking. That ratio is called the look to book ratio, and it is getting worse across the industry. For SkyHi, the look to book ratio is 288:1, meaning users find their flight and book quicker. We also have customers telling us that because of SkyHi they are traveling to new destinations. We are empowering users to explore more, save time, and reducing anxiety around price changes in the industry.
What is the feedback you hear from early adopters of the product?
Across the board, early adopters are in awe of how quickly they can go from searching to a booking. In the majority of cases, we can issue a ticket in under a minute. That is worlds apart from other airline booking experiences where users spend an incredible amount of time searching and getting to a decision to purchase a ticket. They then have to input all their travel and payment information and often wait up to 24 hours to actually get the confirmation number.
Our streamlined process saves travelers so much time and removes their anxiety about fluctuating ticket prices.
We also have members telling us about the spontaneous trips they take. Since pricing never changes, they are more likely to take trips to new destinations. Even though they could have purchased tickets on other booking platforms, the fact that prices change inhibits spontaneity. The experiences that people are having in new places are making them loyal to SkyHi, which is hard to find in leisure travel.
How do you plan to scale the business aka what is your go-to-market strategy?
To date, the majority of our customers have come through referrals. This is proving that our customers are happy and want to share with their friends and family.
We have several additional phases to our go-to-market strategy. The initial insight that we learned after launching is that our product is far different than any other online booking experience, and many people want to use it, share it, talk about it, and have more experiences because of SkyHi. This has attracted brand ambassadors to ask how they can bring SkyHi to their communities.
We have several agreements signed with brand ambassadors with large followings across a variety of different industries to highlight their use of SkyHi. In the next year alone, we will be “tagged” in hundreds of posts, and our brand ambassadors are additionally incentivized to have members of their communities join SkyHi. The reach of all of those posts will be well over 25MM. This is a marketing differentiator for us, as brand ambassadors do not feel compelled to market any other online booking sites. Our brand ambassadors absolutely love SkyHi, are happy to both be a part of it, as well as share it with their communities.
We will also be working directly on partnerships with large travel communities around the world. One particular one is Travel Massive. The founder was a customer of SkyHi, who then became an investor. Travel Massive has chapters around the world and hosts monthly events. We’ll use the blueprint with them to engage with other large travel communities.
Finally, we will offer SkyHi discounts to members of other communities. We already have a live benefit with WeWork, Techstars, Select, Spring Place, and other communities where our customers are most likely to be.
You talk about having partnerships with airlines. Why would airlines want to work with you?
Since pricing is consistent, members make their decisions on a variety of other factors. In a way, pricing is removed from the decision making process making the true behavior of consumers, like preferences for time, day, airline, etc., more apparent. The consumer behavior data as to why our members make the choices they do is extremely valuable to airlines. Since we allow for faster, easier, and predictable booking, we can help airlines better understand the shifting trends in booking behavior to better optimize their offerings.
One example of this data, the look to book ratio, is described above. We are almost 4X better than the industry there.
What are your thoughts on targeting B2B. Does this model make sense for that market?
We will launch targeted B2B plans in the future. We already have businesses asking for these plans. There are two ways we would like to work with businesses.
- We will offer various tiered plans to businesses depending on team size, travel frequency, and destinations traveled. One of the main challenges for companies is staying within travel budgets. SkyHi offers a platform where travel budgets are far more predictable.
- We will work with companies to offer SkyHi as a perk to employees, either fully or partially subsidized. It’s an excellent perk, especially for companies that offer flexibility around work hours and location. As companies struggle to find new ways to retain employees, we know that SkyHi will be a differentiator especially as work lives become more flexible.
What other lines of revenue outside of subscriptions and ticket sales can you generate with your platform?
Subscription fees and ticket sales are just the beginning. We are already exploring the right partnerships and integrations for lodging and experiences. That will help round out the whole consumer travel experience for each member.
We will offer additional subscription plans to capture other types of travelers, both less frequent fliers as well as more frequent/luxury travelers. We plan to introduce B2B plans as well so we can capture large numbers of subscribers at a time by working with companies on their travel needs. These would be subscription plans for teams and departments. This will create far more predictability for company travel budgets.
On top of all that, we will offer hotel bookings, the ability to purchase airline ancillaries, and the ability to book experiences, adding additional revenue streams.
For airlines, we’re already seeing valuable consumer behavior data. We will be developing a dashboard where airlines can view and understand that data. This would be another revenue stream.
How will the capital in this raise be utilized to grow the business?
The majority of the capital will be used to continue to build more product features. We are all ready ahead of the market and want to continue to build distance from any would-be competitor.
We have secured additional partnerships with flight providers and with an airline, and are in the process of integration. The capital will help us expand our team to expedite the process. The capital will enable us to continue to secure additional partnerships as well.
After that, we want to build annual and group memberships, expand our destinations to include new regions in the world, and build in the ability to book lodging and experiences. We will need some of the capital to work through the technical, legal, and partnership agreements.
We will also use capital to expand our marketing efforts. To date, much of our growth has come from referrals and partnerships. We have been product driven to date, and have been careful in our allocation of resources towards marketing. However, we do have great untapped relationships across multiple industries with large quantifiable followings, and we plan to engage them, in conjunction with traditional marketing channels, to expand our awareness.
Where do you see the business in 3 to 5 years?
In 3-5 years, SkyHi will become the global travel pass for many. Our mission is to enable more experiences by removing the volatility and uncertainty in the airline market. For consumers, they’ll be able to be where they want to be, without the worry of constant pricing fluctuations. For airlines, since we enable more predictability and behavior data, they will have a better sense of what types of fliers will be on their planes. As travel becomes more and more last minute and airline loyalty programs falling out of favor, we will be their source for valuable consumer information.
Ultimately, we want a world where travel is more attainable so people can go out and have life changing experiences and bring their learnings home to their communities. It will make the world a more understanding and empathetic place.
Earlier this week, we rated SkyHi a Deal To Watch. The company strongly differentiates from other competitors in the space, has established strategic partnerships, and is heavily targeting millennial trends.
We at KingsCrowd are excited to see where Rama and his team take the company. SkyHi is currently raising on the Republic platform via Crowd SAFE with a $10M valuation cap.
About: Olivia Strobl
Olivia comes to KingsCrowd with a background in venture capital and technology. She spent time at Glasswing Ventures, an AI-focused venture fund in Boston, before joining the KingsCrowd team. There she helped develop machine learning algorithms for the opportunity qualification of preseed and seed-stage startup companies. Prior to her time at Glasswing, Olivia worked in a lab studying the neural correlates of attention. She holds a degree in Neuroscience from Wellesley College.