Other than a little exposure to travel during his stint as country manager at Street Deal, a group buying company in Malaysia, Aaron Sarma knew very little about the vertical.
But when he was looking to do his own thing after leaving the daily deals company, the first industry he looked to was travel.
Founder Aaron Sarma (left) and Ikhlas Kamarudin, chief strategy officer
“Travel is exciting, our team loved travelling and we asked, what would be the first thing we wanted to do. Not flights, too difficult, not hotels, too many already doing it, and so we thought of ground activities,” said Sarma, founder and CEO of Touristly, the Malaysia-based tours & activities platform.
Sarma clearly sensed an opportunity. The tours & activities space was starting to catch fire. In July 2014, TripAdvisor had acquired Viator for US$200 million in cash. And there was no Malaysia-based player yet in the segment.
As it turned out, his sense of timing paid off. He launched an MVP of Touristly in June 2015 and a seed round was raised. The idea was to build a bookable trip planner. “We built the trip planner on top of the booking engine so that you can add activities to your basket and transact,” said Sarma.
While fund raising for the next round for customer acquisition, it got introduced to the AirAsia-owned incubator, Tune Labs, which took a 9.54% stake for an undisclosed amount in August 2016. In April 2017, AirAsia increased the stake to 50% stake for US$2.6 million.
The deal involved AirAsia injecting its Travel 3Sixty digital magazine, valued at US$1.5 million into Touristly via AirAsia Investments Ltd and extending a US$1.1 million convertible loan to it for working capital and development.
AirAsia clearly sees an opportunity to tap into its existing base of customer to increase ancillary income. “With the trove of AirAsia customer profiles and datasets coupled with Touristly technologies, the Touristly platform can offer more targeted offerings that match the customer’s lifestyle and travel aspirations, for instance, adventure travel,” said AirAsia in a statement to Bursa Malaysia at the time of the deal.
While it has meant him ceding the majority share of the business, Sarma said he retains autonomy over the business and the deal has given Touristly ability to grow, stability and opportunities to improve the product.
He was also encouraged by the higher conversion rates when selling on-ground activities to AirAsia flyers with an average spend of RM813 per flyer.
It also helped address the biggest challenge facing any consumer-facing travel business – customer acquisition. At the time of the deal, Sarma said, “It’s nearly impossible to put a value on the opportunity to serve over 60 million travellers a year with our platform. This is highly qualified traffic with purchase intent. This will enable us to scale up at a rapid pace.”
Today, he acknowledges it is a gold mine “but we have to bring our own pickaxes to mine it”.
Prior to the AirAsia partnership, it had some regional coverage but since the partnership, its volume of traffic has risen and it’s launched with AirAsia in the Philippines, Thailand and Indonesia. Today, it has 18,000 activities in 77 destinations across Asia Pacific, most of it with instant confirmation, he said.
Asked if he had given away control too early, Sarma said, “At first I was reluctant, we were just a year into the business but an opportunity like this doesn’t come everyday. Tony (Fernandes, chairman of the board) is a fair business leader, he empowers us and looks out for entrepreneurs. He’s given us room to do our own thing.”
As with any startup in the tours & activities space, Sarma said an early challenge was that it was dealing with a low-tech segment of the industry. “It was hard to achieve scale. We couldn’t launch with five destinations and 200 activities and we spent at least six months getting inventory up to 7,000 activities and 25 destinations.”
Sarma’s background in daily deals helped. “That was also a very low tech industry – and we made it very manual for them. With daily deals, we were dealing with mom-and-pop shops which needed handholding – and we had to upload deals, deal with pre-purchase tickets and consignments.”
From a team of five, Touristly now has a team of 17 and has taken on a chief strategy officer, Ikhlas Kamarudin. The priority now is to work with other partners beyond AirAsia and it is seeking partnerships with other travel suppliers like airlines and hotel groups. “We want to grow our B2B2C business and boost our distribution,” said Sarma.
A new app is in the works and is scheduled to be launched by the second quarter. “We will use the resources that we have and use the AirAsia customer base to introduce unique products. With 70m travellers, that’s a big sandbox for us to play in. We will bring more supply online and we have a plan to use the app interface to do this.”
Said Sarma, “Generally speaking, people tend to book activities two weeks before their trip. People who plan early tend to book early,” he said, noting the best-selling activity is theme parks with Universal Studios in Singapore a front-runner.
He’s excited by the strong investor interest in tours & activities and is not fazed by the fact that it is a relative latecomer. “The advantage is we see what other players have done and we take lessons from them.”
Asked what’s the key lesson he’s taken from working with Tony Fernandes, Sarma said, “Be quick. He likes clarity and he likes you to be concise and sharp in questions and answers.”