(Bloomberg) -- Two brains behind the powerhouse travel-advice website the Points Guy are introducing a curated vacation rentals platform they see competing with Airbnb Inc. It may have a familiar premise, but Journey has a secret weapon that Airbnb fans have been begging for for years: a points program.
Created by John Sutton, the ex-chief digital officer of Points Guy parent company Red Ventures, Journey expects to have some 2,000 home rentals and 200 boutique hotels as part of the “Journey Alliance” when the app for iOS and Android comes out next spring.
At that small size, what’s a loyalty program worth? The answer, it seems, is momentum. With the help of the Points Guy himself, Brian Kelly—who’s on board as an investor and principal adviser—Sutton hopes to leverage the program for a more lucrative product: a new credit card for frequent travelers, with airline partners and all.
Kelly’s hugely successful website became a force in the points and miles industry for breaking down the best loyalty programs and offering advice on how to maximize them; it sold for $20 million to Bankrate Inc. in 2012 and was later acquired by Red Ventures, where he and Sutton met.
As a loyalty program, Journey takes on the big competition of Marriott International, Hilton Worldwide Holdings and Hyatt Hotels, which are all trying to scoop up boutique hotels and vacation rentals under their gargantuan umbrellas. As a future credit card product, Journey is an even bolder proposition that requires going head-to-head with offerings from JPMorgan Chase & Co. and American Express Co., which also include independent hotels and homes on their travel portals.
With some 20 combined years spent dissecting loyalty programs, this is how they say they’ll do it.
Running the Numbers
“If you look at the World’s 50 Best hotels list,” Kelly says, “there’s probably only four hotels on there that you can currently book with points.” Beyond that, he says, more than 50% of the world’s hotels are independent and don’t (yet) fall into a major loyalty program.
One Key, Expedia’s new loyalty program, is the only game in town when it comes to earning rewards for home rental bookings; it effectively nets users 2% cash back on VRBO and Hotels.com reservations. For the significant spending these two categories drive, they’re drastically underrepresented by points offerings.
Journey fills that niche with a system where the points are meant to be easy to redeem. On the platform at its outset will be hotels such as Nihi on Sumba Island, Indonesia—as well as the glamping-focused Dawn Ranch in Sonoma, California; the futuristic treehouses at Onera in Texas Hill Country; and Dunton Destinations, a collection of unique resorts and homes that have earned two Michelin Keys.
Nihi’s owner, Tory Burch LCC co-founder Chris Burch, is among Journey’s short list of investors; Eric Wu, co-founder and former chief executive officer of online home-flipping platform Opendoor Technologies Inc., is another.
“We’re not banking on breakage,” says Sutton, referring to the industry term for points being left unredeemed. “Our margins are defined up front.” As such they want users to be able to get value from their points right away, rather than having to plan every trip toward accrual and redemption goals. “We want 100% use of our points—and that would be success to us.”
As with the major hotel brand competitors, members can freely transfer points to others or pool them with friends and family to book a vacation rental together—but here, it’s without the fine print that plagues similar features on other programs. Users can also exchange points for smaller rewards such as a massage at the spa, drinks at the bar or a room upgrade.
Properties can be found through the app, then booked directly with that hotel or vacation home’s website. Travelers will typically earn 5 points per eligible dollar spent (that’s 10,000 points for a $2,000 hotel stay). Hotels and homes that don’t have their own standalone booking websites—Airbnb listings, for instance—will be allowed to extend smaller gains. And properties can also offer higher earnings, say 20 points per dollar, to attract bookings in low season.
Redemption stays will be priced dynamically, rising and falling in proportion to a property’s nightly rates, starting from 10,000 points per night. The simplest redemptions, such as food and beverage credits, will start at 2,000 points. A point will be worth at least a penny—the industry standard—and sometimes up to 7 cents per point, depending on ongoing promotions.
“A lot of people in loyalty programs feel like they can never get quite enough points to get that free night that they want,” Kelly says. “We want to create more utility for our points.”
Building the Network
When Sutton talks to investors, he envisions a platform that collects roughly 3% of the world’s inventory for vacation rentals and independent hotels, focusing on unique and luxurious stays. By his count, that’s 180,000 home rentals and 5,000-plus boutique hotels worldwide. (By comparison, Airbnb last year reported that it had 7.7 million active listings.)
For now, Sutton says he’s vetting new prospects himself—digitally, without physical site inspections. He aims to crowdsource that task as soon as possible via a “guild” of “influencers,” meaning well-traveled members who contribute granular property reviews and nominate great stays for future inclusion. Travelers will receive points for leaving that kind of feedback or adding “favorite” properties to personal portfolios.
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Alliance members—the hotels and homes—don’t pay Journey an initiation fee, annual dues or a traditional commission on referrals. For property owners like Sutton, who owns and operates 16 vacation rentals, it also represents an avenue for escaping Airbnb’s high host fees.
Instead they pay per point that customers earn on each booking, which Kelly characterizes as a “certain number of pennies” per point. The rate, which will be negotiated per operator, results in commissions as low as 1.5% and top out around 7.5% with typical earning multiples; any special promotions that raise the number of points earned, would also raise the commission. As comparison, larger sites such as Expedia typically skim some 15% to 20% from the cost of a stay.
Of that points-based commission, Journey will keep 10% to 30% and funnel the rest into a fund to pay for users’ future redemptions, Sutton says. Pocketing just a portion of single-digit commissions makes for a “purposely thin” margin—but one that is “at scale, meaningful in its own right,” he says. It’s a model that demands minimal operating expenses for the 10-employee company, super-speed growth or both.
The One-Year Plan
All this comes at a time when airlines in particular are devaluing their loyalty programs and hotels are making it increasingly challenging to find awards deals via points platforms. Nontraditional loyalty programs have a shot at grabbing market share.
Take Bilt Rewards, a customer loyalty program that lets customers earn points on rent. “I thought it was a kind of crazy idea,” says Kelly, who ended up becoming an adviser to the company during the pandemic and building it up to what is now a $3.25 billion company. He says that’s given him the capital and confidence to “help solve gaps in the [loyalty] marketplace and deliver to consumers.”
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For Kelly and Sutton as entrepreneurs, the business’ real value lies in that eventual Journey credit card—something that’s in their professional DNA, having partnered with all of the major banks for e-commerce partnerships at the Points Guy and Bankrate. (Kelly remains involved in TPG’s day-to-day operations.)
“We think in time if we have a large database of engaged consumers, especially affluent travelers, that that’s a great kind of customer base to offer the next generation of travel credit cards or kind of other ancillary products as well,” explains Sutton.
Drawing that kind of audience is what Kelly does best. On Instagram alone, the Points Guy (the man, not the brand) has some 355,000 followers—all of them by definition loyalists. And Journey will also draw users by inviting them to sign up and earn points when they’re booking with a partner hotel or home.
As for how quickly the entrepreneurs can scale Journey from fringe loyalty program to major credit card?
“I think we can get there by the end of next year,” Sutton says. “Luckily we know some people in the credit card space.”
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