Travelstart steps up its African game

Eyefortravel's Pamela Whitby speaks to the OTA’s founder and CEO about its recent cash injection and of the risks and rewards of operating in Africa

Since launching in South Africa in 2006, Stephan Ekbergh, founder and CEO of Cape Town headquartered Travelstart, has bootstrapped his online travel agency into a profitable business.  In 2015, the firm turned a profit of $3.5m and has offices throughout Africa and subsidiaries in the Middle East and Turkey.

Now, a decade on, the time seems right to take the firm to the next level with a $40m injection from UK-based global tech investor Amadeus Capital Partners (not to be confused with Amadeus the GDS). The most significant aspect of deal, announced last week, is the strategic alliance with MTN, which, as Africa’s biggest mobile network, counts 230 million subscribers.

EyeforTravel caught up with Ekbergh to hear more about the investment, which is being hailed as the ‘largest of its kind on the African continent, Turkey and the Middle East’.

EFT: Can you expand a bit on where the funds will be directed?

SE: We have adopted a ‘mobile first’ approach as this is what the market here demands. So we will focus a lot of resources on improving and expanding our mobile offering as well as innovation in this space. Last year we launched Flapp, the ‘two-tap travel app’, which we are tweaking more. Funds will also be used to acquire the talent we need to take us to the next level. And of course, to increase our lead and visibility in core markets such as Nigeria, Egypt and South Africa - markets like these have shown a lot of growth and we want to solidify our market leadership.

EFT: When we spoke back in 2014 infrastructure development - or lack thereof - was a barrier to doing business in Africa. Has this changed significantly?

SE: No it hasn't - in Africa lack of infrastructure development is still an issue, however, smartphone adoption rates have soared.

The overall growth in mobile subscriptions in Sub-Saharan Africa is expected to shrink from 13% to 6% in the second half of this decade. There will, however, be 525 million smartphone connections by 2020, accounting for more than half of the total connection base at that date.

Source GSMA

EFT: So the partnership with MTN is obviously a significant one…

SE: Yes, the MTN partnership will allow us to partner with Africa's largest mobile telecommunications provider on campaigns and marketing initiatives. It will also help us in the battle against fraud in countries like Nigeria where it is a problem. MTN already has advanced fraud protection measures in place and serves 60-million plus in Nigeria alone! In addition, they are a household name throughout Africa so the partnership lends us some positive brand association. We will be MTNs preferred travel supplier in thousands of MTN stores across the continent, and the Travelstart website will not incur data charges on the MTN network.

EFT: There are a number of challenges to operation in Africa, not least currency and language diversity. How are you tackling these?

SE: In some cases, even if your business is e-commerce, the infrastructure is just not there yet. Travelstart has found ways around this by innovating in payment solutions, having physical offices where customers can make bookings with travel consultants on a walk-in basis and optimising our websites so that they respond on outdated phones and slow networks. In Egypt we offer cash-on-delivery for unbanked customers, and in Kenya we offer M-Pesa. Trying to operate in some African countries can be a bureaucratic nightmare. Original and officially approved documents for menial things are par for the course. Soft copies rarely fly when it comes to getting things done.

EFT: How important are local partners?

SE: Yes, finding local partners with a grassroots understanding of the local travel industry has been crucial to the success of Travelstart. We aim to find homegrown partners who have earned their stripes and are willing to share their knowledge of the market.  However, all the time we continue to be cognisant of who the dominant players are, assess risks and the size of our target group to ensure whether or not the market is viable. We will continue to rethink our marketing strategy as well as assess if the level of infrastructure can support our business.

EFT: What do you make of global trend towards consolidation of say metasearch and OTAs?

SE: Yes that’s happening in many places and makes sense to a degree since the two models are converging.

EFT: The press release states that Amadeus Capital 'has deep experience in technology and invests in high-growth companies from early stage to pre-IPO'. So the inevitable question: is an IPO on the cards?

SE: At this stage we are focused on building and will decide the next step in the coming years. There is plenty to build on. Africa is the second-largest continent, after Asia, in both size and population (well over a billion people). It’s also one of the fastest growing in the world in terms of connectivity and usage especially when it comes to mobile, which has become more widespread than fixed line telephone. Up to 50% of Nigerians access the web via mobile devices for instance. So the market potential for ecommerce companies in this landscape is, quite simply, huge.

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