The Russian online travel industry, if not in its infancy, is barely into toddlerhood. Until the mid-2000s, travel e-commerce didn’t exist.
The initial pioneer went bankrupt. Several more emerged at the same time, and Hotels.com and Booking.com came in.
Some start-ups tried to copy the Booking.com model – and the company’s success – but one entrepreneur said they were overlooking a distinctive trait of Russian travelers: “They like to buy travel packages from tour operators,” Mikhail Reider, founder of HipWay, said.
International travel became accessible to most Russians only in the early 1990s, following the dissolution of the Soviet Union. It’s an experience that can be daunting to novice travelers.
“They need to get visas,” Reider said. “It can be difficult and scary. And they’re afraid to go abroad by themselves. They want someone in charge who can arrange things,” he said.
Ironically, international travel is all that most Russians can afford.
Domestic airline tickets are outrageously expensive. “A ticket to Siberia can cost up to $1,000,” Reider said. “We had one discount airline that had good prices, but it went bankrupt.”
One or two domestic vacation destinations have emerged, but for the most part, it’s cheaper for Russians to go to France or Egypt.
When Reider decided to launch a website for the Russian traveler, he researched the market and decided a tour operator focus was the way to go. “It’s going to be a great market for the next five to 10 years, he said.
But although Russian travelers like the tour operator model, investors were wary. “The idea is not really understood by investors,” Reider said. “They want to see models they understand.”
But some investors get it. HipWay just completed an angel round of fundraising that added $2 million to its previous $750,000 backing. It has received support from Chamath Palihapitiya formerly of Facebook; Michael van Swaaij, former head of Skype, Fabrice Grinda, co-founder of Zingy, and Mark Gerson of the Gerson Lehrman Group.
This year, HipWay.ru – billed as the “hip way” to travel – “grew tenfold,” Reider said.
He realized that as Russians became more at ease with traveling beyond their borders, they eventually might outgrow their reliance on packaged tours. So the HipWay team borrowed from the private flash sale trend and created an offshoot, HipClub, that offers stand-alone hotel stays at deep discounts.
HipClub offers hotels in international destinations, but it also has taken advantage of the vertigo-generating hotel rates at Moscow properties. Business travelers with expense accounts fill the hotels during the week, but luxury hotels are empty on the weekends.
HipClub makes the luxe life accessible to Muscovites in the form of weekend romance packages at name-brand hotels – a “staycation” in style.
Reider took some cues from Priceline’s success: It started out with very good deals and built up a loyal clientele.
A number of Groupon clones have sprung up in Russia, and they aren’t always honest.
HipClub, on the other hand, plays fair with its customers and suppliers, Reider said, and has built “a strong image of being a great deal-maker,” he said. “We will transfer that image to HipWay as well. We have a very loyal bunch of customers.”
Later on, the company will add airline ticket sales. “By then, we will own the customer,” Reider said.”