A new record was set last week when 107,000 Israelis arrived at Ben Gurion Airport just before the holidays. How many of them ordered their flights by themselves can only be guessed, after more and more Israelis in recent years have abandoned travel agentsת when they realized that they could save money by scheduling their holidays by themselves.
FindAir.co.uk, a new flight searching website founded only two months ago, is trying to do exactly that. The website is aiming at a niche occupied by popular websites Kayak, Expedia, Skyscanner, and many others. Its two entrepreneur-founders, Ilan Michaely and Dan Kallmann, told "Globes" that they have "solved the formula that will display the truly cheapest price for any flight," and even compared themselves to the founder of Facebook: "Mark Zuckerberg thought up his idea in storeroom in his parents' house, so why shouldn't our idea come from an office in Tel Aviv?," they say.
Nevertheless, the company that they founded is registered in the UK for reasons of a future IPO, and the uk in the company's name is no accident. "A third of the world's population are Muslims, and they won't enter a website with the ending co.il, but they're not the only ones. We're a global website that appeals to the entire world."
For them, the main competitor is the popular Skyscanner website, which was acquired in 2016 by Chinese tourism group Ctrip for £1.4 billion. That is where Michaely and Kallmann are aiming - the highest possible. They obtained evidence that they are headed in the right direction from the recruitment of high-tech entrepreneur Amit Bohensky. "We showed him the model, and he said it was a bonanza."
In addition to Bohensky, another recruit is the Moonbow Ventures fund, which specializes in new companies and has invested in dozens of startups in various fields. Moonbow has a 22% stake in FindAir, which is totally based on broad search features and an advanced algorithm, a sector in which Bohensky specializes in various sectors. Another company in which Bohensky is a partner is Zoomd, which provides an internal search engine based on artificial intelligence (AI) for applications and websites that makes it possible to predict the users' next step. A year ago, the company also acquired Moblin in order to create an optimal platform based on layers of information and monitoring on all the digital channels in which the user is present. This art of searching is now encountering the tourism industry through FindAir.
No IP games
Kallmann and Michaely are tourism veterans. Kallmann owns the Cosmos Tours agency founded by his grandfather in 1949; he joined the firm the day after being demobilized from the IDF in 1981. Michaely entered his father-in-law's business, Lear Tours, which was founded in 1979. The agency grew to 10 branches which he managed, before it was sold to Issta. The idea for the venture, as in many other stories of entrepreneurs, especially in tourism, came from a personal experience. "A customer called me up and asked about a ticket to Buenas Aires," Kallmann says. "I called him back with a price offer of $2,300. He checked Expedia for exactly the same flights and found them for half price. I told him to buy on the website and to talk to me about his next trip. From there, we started thinking deeply about what Skyscanner and Expedia do that makes them much better than us.
"We realized that the secret lay in making the search broad and smart. The point of departure was that if Expedia offered him a ticket at half price, it exists, and we can also offer it. We said that we'd change the approach - we'd think like an Israeli, but out of the box."
The algorithm of the system was developed by Bohensky's development company, located in Bulgaria. In effect, it brought together the tourism industry with 130 engineering and mathematicians. The rationale is based on an optimal search operating on several fronts: it first covers hundreds of websites around the world. Then the system studies the user's search patterns and improves them accordingly. FindAir operates according to a model similar to that of Skyscanner; the order is not made directly through the website; it serves solely as a search engine, not a sales website.
Since the search transcends borders, an Israeli passenger seeking to buy an airplane ticket from Tel Aviv to Madrid, for example, can find him or herself making the deal with a travel agent from Italy, or even from Japan. In the next search of the same flight route, the system is designed to detect where it found already good results, and to sift them accordingly. The time dimension is critical, because this search, which appears to cover the length and breadth of the entire world, has to be finished in a few seconds according to the formula for the patience of the surfer waiting for the results.
According to this search method, the search results are likely to change with a resolution of a second or even less. To illustrate the point, if there are 100 websites for ordering tickets in 120 countries, the system will scan all of them and provide a different result every time the page is refreshed. Furthermore, while many websites display different prices according to the surfer's country of origin, Kallmann and Michaely promise that FindAir does not display discriminatory prices and does not play IP games that are well-known in the tourism industry (in which the system detects the user's identity and changes the price according to the frequency of the searches, M.R.-C.).
"Globes": What you are saying is that you have solved the million-dollar question in the sector.
Kallmann: "We're saying that our algorithm, together with the advanced search method, makes us cheaper than all other websites. At the same time, keep in mind that the price that you get in the morning is not the same as the price you get at noon. Actually, the price can even change after a tenth of a second. This applies to both tourist class and business class. We have a customer who looked for a ticket from Tel Aviv to London with El Al. The system led her to an agent in Tokyo, and the ticket also went through an agent from Greece and another agent in Kiev. The final price that she paid is more than $100 cheaper that El Al offered on its website."
Does each of those agents make a profit on the deal?
"Yes. It can be $15, or even $1, but after all, it's still the cheapest price."
With whom is the deal made?
"With whoever gave the cheapest result at the specific moment. In this case, it was the agent from Tokyo, but it could just as easily have been an Israeli agent. Whoever was the cheapest at the time of the search, but keep in mind that this time changes all the time."
How can we know what is the best time to look for a flight?
"This is also a million-dollar question. In general, the systems depend on supply and demand, and everything is very individual and very dynamic."
"We don't want to deal with the consumers"
FindAir's business model is built on a fee that they receive from the websites and agents with whom the deal is eventually closed. It changes according to the type of ticket and agreements with the agents. On the basis of this rationale, when passengers buy tickets for longer flights with more stopovers, Michaely and Kallmann earn much more in fees. One point worthy of note by Israeli passengers is that if the deal is made with a website or agent that has no offices in Israel, the Consumer Protection Law does not apply to it, including for canceling a deal. For Kallmann and Michaely, price consumers do not take this factor into account much, given the fact that the Israeli consumer has also adopted international tourism websites, such as Booking.
Why don't you sell directly to consumers and earn more?
"Why should I sell directly? It's enough for us to earn money from fees, without dealing with consumers."
If the system is based on smart searches, you can apply the algorithm to other tourist services, such as hotels, trains, or car rentals.
"The system can find hotels in the same way, and Booking has already expressed interest and wants to cooperate with us. We prefer to first try things out with flights and then also expand to hotels. Ordering train tickets is also very interesting to us."
The search engine is not patent-protected. Aren't you afraid of imitations?
"We're not protected by a patent, but by the things around it. Randomly, once in every several searches, we deliberately won't even display the cheapest price in order to avoid standing out and arousing suspicion. In this situation, Expedia could become angry and display its own price that is $1 less, but in order to avoid angering them, we've made special changes with a lot of protection."
Maybe if you get Expedia mad too much, they will buy you. Is that what you are aiming at?
"We hope and believe that this will happen"
"We don't need a Hebrew website"
Until that happens, Kallmann and Michaely's goal is to raise $3 million and bring a partner into the company for a share of up to 20%. Most of the money to date was raised from equity and what Bohensky paid for his share; it was invested mostly in development, and far less in marketing. "Most of the orders made to date came from 20,000 people on LinkedIn to whom we sent personal messages about the launching of the website. Up until now, most of the orders were by Israelis, but we also have customers from New Zealand, Peru, Malaysia, and the United Arab Emirates. There are four billion passengers a year worldwide, and the target that we've set for ourselves is to sell 3% of the tickets. The emphasis is on tickets including 3-4 segments on each flight, because that's where the big profit comes from. We're able to offer larger price differences there in comparison with the providers."
The cheapest price can involve stop-overs of quite a few hours.
"The creativity is built into the ticket, and it can also be with a long stop-over. A lot of people don't care about waiting a few hours in order to save money; the only factor that interests them is the price, and that is where we're aiming. We also include all of the low-cost airlines, from which we charge a smaller fee."
Are you also considering starting a website in Hebrew?
"No. We don't need a Hebrew website, and in case, Israelis prefer surfing on foreign websites to Israeli ones. If it's necessary, Google Translate can solve the problem. We got an offer from an agent in an Arab country to translate the website into Arabic, and we're considering it. We realize that we also have to be in the Chinese market. As far as we're concerned, we're not an Israeli website, and I don't want them to know that we're Israelis. We're a global website that appeals to everyone."
Nevertheless, it appears that in a competitive market like the aviation sector, if you have really solved the formula, a competing website will probably arise.
"It's possible that Skyscanner already has the formula, but it prefers not to use it, or it selects which results to display for commercial reasons, like Google, which chooses which results to display first, even though they aren't necessarily the best. We're like Coca Cola - there are three people who know our formula. Even the developers who worked on the systems didn't work on them continuously, in order to preserve the formula."
Published by Globes [online], Israel business news - www.globes-online.com - on September 12, 2018
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