Co written by Joseph Zhang and Oscar Hong
For most people, the airport is a dreaded part of travelling. It’s seen as a place of unnecessary stressors, extreme boredom, and overpriced souvenirs. If there were a better alternative, travellers would have pounced on the opportunity in a heartbeat. But up until 2013, airport havens for the weary were limited in access and hard to find.
Not until Tyler Dikman, fellow traveller and entrepreneur, created LoungeBuddy and provided the opportunity to experience the hidden world of airport lounges.
“If you ask most people, they’ll tell you anytime in the airport is usually more time than they want to spend in the airport”
To understand why LoungeBuddy has been so successful, we need to look at its founder. For Tyler, LoungeBuddy was not his first rodeo; it marked the fourth startup of his career. Entrepreneurship had been in his blood since his childhood. He did “lemonade stands, had a lawn mowing business, [and] did babysitting. I was a very amateur magician for young kid’s parties. Then I started a technology consulting business when I was 14.”
It was this technology consulting business, CoolTronics, that gave him his first true taste of the world of startups and laid the foundation for his knowledge of business. After creating it in high school, Tyler brought the business with him into college and grew it to serve “hundreds of small businesses and home clients.” Under his leadership, the business was “generating millions in sales,” not bad for the brainchild of a high schooler. Clearly, Tyler had a knack for entrepreneurship. In fact, the business became so successful that he was able to get his hands on the exclusive American Express (Amex) Centurion Card–his gateway to the world of lounges.
Because he wanted to continue his consulting business in college, he had to make frequent trips between his school, Santa Clara University, in San Jose and his business in Tampa, Florida. Although necessary, these trips were physically taxing. To make matters worse, his flights were unforgiving red eyes that left little time to rest and prepare for the work that awaited him upon arrival. With the constant time zone changes and limited rest, how was he able to function every time he completed a trip?
It was all thanks to the airport lounge during his layovers. He credits the lounge in Houston as the reason he could survive the trips. At the lounge, he could “take a shower, have some breakfast, get some emails out and at least not feel like a zombie by the time [he] got to Tampa.”
Living the startup life certainly has its perks. For Tyler, an avid fan of travelling, it means he can satisfy his love of adventure. Before LoungeBuddy, his other three startups–in combination with some leisure flights–required him to fly over two million miles in just five years. Perhaps even more stunning is the number of lounges he had visited. After numerous trips to the airport, Tyler had been to one-third of the total lounges on Earth, roughly 1000 in total. While impressive, Tyler recognizes that not everyone is as fortunate.
He remembers one time when he was in an airport lounge that overlooked the rest of the terminal. There, he saw a completely different situation beneath him. In contrast to the luxuries and relaxed ambiance of the lounge, the terminal was in disarray. He recalls seeing “people there huddled against the wall or sleeping on a makeshift pillow that they took from their jacket.” It was this realization of the ‘two realities’ that inspired Tyler to create LoungeBuddy.
After this, Tyler and the founding team got to work.
They reasoned that their proposed service should be met with a warm welcome by travellers everywhere. There was a critical mass that shared a common airport hatred and no solution that adequately addressed the problem. With an easily scalable platform, they could impact the traveling experience for people far and wide.
Before they began, they needed to understand the market better. With the help of a well known aviation trends professional and the direct surveying of lounge providers across the globe, they combined their data to finally see what they were dealing with. After all the research was done, they realized, for the first time, that they were dealing with something a lot bigger than they had thought.
After the discovery phase was over, they needed a way to figure out how to mobilize the 93% of travellers that had never been to an airport lounge and appeal to the 6% that had. They segmented their customers into two pools and positioned their service accordingly. For the minority of travellers that already used lounges, LoungeBuddy acted as a “single resource for information.” Anything from “rules, photos, ratings, reviews, [and] amenities” was shared on their platform. They wanted to become the “TripAdvisor, Yelp or Foursquare [of] airport lounges.”
For the large majority of travelers that hadn’t had the ability to visit a lounge, LoungeBuddy acted as an opportunity maker. As Tyler explained, it “is an affordable opportunity to significantly improve your travel experience. Our typical airport lounge is about $35. When you think about what you spend on air travel or your journey in general, it’s a relatively low cost, especially if you say ‘instead of spending money on drinks, food, and Wi-Fi, I can have this all inclusive and exclusive experience, and feel like a VIP.’” While effective at generating revenue, the team wasn’t too focused on revenue growth at the start. Instead, they simply wanted to gain a better understanding of their business so that later on they could build upon a solid foundation. With the help of initial investments from family and friends, they began building their service.
Prior to launch, LoungeBuddy had around 3,000 beta testers providing feedback on how to improve their service and combing for undetected bugs. With the exception of the cohort of testers, the team had no idea how others would react to their service. When it came time to unveil their app, Tyler explained, “we were featured on the front page of the App Store.” With the help of the media, word was spreading fast.
In their first month, they already had over a hundred thousand members and were catching the eyes of reputable publications like CNBC. As membership grew, so did the number of complaints. With limited resources, they had to make sure that they didn’t waste their efforts on the wrong piece of advice, a common trap many startups fall into when trying to please everyone at once.
“They [startups] end up building a lot of cool features that 50 people think are cool, but when you deploy to the masses and you have a hundred thousand people using the product, 50 people out of a hundred thousand is not enough to warrant the work that you spent building that new functionality or feature.”
The most common grievance among customers was the limited number of airports in the program. To the team, they viewed the issue with a different perspective. While a large number of customers were angry, they saw an opportunity to improve their business while providing a simple solution to remedy their anger.
After these initial bumps, LoungeBuddy was off to the races. To attract the millions of users that they have today, they turned to an unconventional approach: storytelling. In business, storytelling works the same as it does in childhood: both convey a message that people want to hear. For LoungeBuddy, their story was simple,“you can turn this terrible [airport] experience into something you look forward to by saying, ‘my flight’s delayed by another hour, no problem, I’ll hang out and relax in a comfortable chair, grab something to drink, grab something to eat, watch my favorite sporting event on TV, hop on my laptop and watch Netflix, [or] whatever it may be. That was a story that really resonated with a lot of people.” And with the help of the media, this story was heard worldwide.
Today, LoungeBuddy is more successful than ever. Recently, they were acquired by American Express as part of their initiative to reward card members. Making airport lounges more accessible for every traveler, Tyler Dikman is aiming to reshape the future of travel.
“Start as early as you can. When you make a mistake and you’re a teenager or a 20-something, you don’t have to raise a family or worry about rent or mortgage payments. It’s a lot easier to make mistakes.
Get mentors. Don’t be afraid to reach out and ask for help. Again, thanks to social media, email, LinkedIn, and everything else, it’s pretty easy to get in front of somebody that you’d like to [get] help from. But you have to be very succinct. And you have to have done your homework. If you ask a silly question to somebody, they’re going to know it’s a silly question, and they’re not going to want to help you.
Start small. The best way to learn is [to] start with something that you’re really familiar with and do it on a local level. Everybody talks about whoever started this big company or that big company, but most of these people started with something very small and very manageable. And that’s where you can really get your general business experience. And then you worry about scaling it. But if you can’t nail it on a local level, you won’t be able to nail it on a global level.”
To learn more about LoungeBuddy, visit them here. To see our interview with Crayon click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!