{"id":11057,"date":"2020-03-17T11:12:27","date_gmt":"2020-03-17T15:12:27","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/boatsetter-democratizing-the-sailing-experience\/"},"modified":"2020-03-31T12:05:48","modified_gmt":"2020-03-31T16:05:48","slug":"boatsetter-democratizing-the-sailing-experience","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/boatsetter-democratizing-the-sailing-experience\/","title":{"rendered":"Boatsetter: Democratizing The Sailing Experience"},"content":{"rendered":"

Creating value<\/strong><\/p>\n

Why sailing should be exclusive? Why not just have a unique day-out experience at your fingertips? Boatsetter creates value for renters offering an affordable, reliable, varied and seamless way of accessing a boat experience in more than 600 locations around the world. Compared to incumbent options (travel agencies or local website listings), Boatsetter offers an affordable alternative by leveraging the economies of scale of strong cross-sided network effects between boat owners and renters. In order to attract a large volume of renters, Boatsetter provides differentiated features.<\/p>\n

The first of them is reliability. For renters to have a safe experience, Boatsetter not only offers captains (3rd<\/sup> party or owners) as a feature in case they can\u2019t operate a boat, but also an insurance package that covers renters, owners and captains.<\/p>\n

The second feature is variety. Boatsetter has a wide portfolio of regions and boat options, allowing renters to choose among differentiated alternatives and find their best experience (from pet-friendly boats to catamarans for bachelorette parties).<\/p>\n

Finally, the decision-making process is straight-forwardly conducted through the app in a couple of minutes. No pre-bookings and seamless payments: search, connect and set sail. Unsurprisingly, most of Boatsetter\u2019s renters are Millennials who have not had similar experiences before: a clear untapped market.<\/p>\n

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But why owning a boat should be so expensive then? Most of the boat owners face high maintenance and storage costs for an asset that has a 1% utilization rate. They need a profitable, reliable and autonomous way to rent their boat. Boatsetter creates value for owners by granting them wide access to new revenue opportunities, which they can evaluate through a set of profit estimation tools that the company offers to owners considering entering the platform. Once the proprietor accesses Boatsetter, she has the autonomy to choose the conditions of the rental, such as price, availability period or any other personalized requirements. Finally, reliability is offered through the above-mentioned insurance, the trusted pool of 3rd<\/sup> party captains and the company\u2019s mediation between the 3 sides of the platform.<\/p>\n

Capturing the value of a sustainable business model<\/strong><\/p>\n

In order to capture this value, the company follows a fee-based revenue model with fees going from 15 to 35%. Despite imposing a higher fee than its competitors (GetMyBoat), Boatsetter has been able to grow its volume by 350% during the last year through different M&A\u2019s and by following an investment-heavy approach to developing the local networks of owners and thus locking-in the supply-side of the business. Even though this aspect could hinder the scalability of the model, the localization efforts are worth enough: supply is the critical piece to control in a platform with an untapped demand. And the scalability efforts are more reasonable in this case since Boatsetter is a highly sustainable business.<\/p>\n

First, the strong cross-side network effects above-mentioned and the reviews system direct network-effects, particularly important for a market of renters who are new to these experiences, are a key pillar for the sustainability of the business.<\/p>\n

Secondly, the network structure also plays an important role to sustain Boatsetter\u2019s advantage. Even though the supply-side is local, the revenue growth is mainly driven by remote travelers, with local seasonal customers playing a nonnegligible role but not as important as the one travelers play. So, Boatsetter could be defined as a global network with a small local clusterization that gives the company a reasonable defense against new entrants.<\/p>\n

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Regarding disintermediation, Boatsetter has an advantage compared to other platform businesses: the frequency of rentals made by the same user are particularly low since most of the revenue comes from remote travelers. As the owner-renter relationship doesn\u2019t go beyond a couple of interactions, the incentives to bypass the platform are limited since there are few opportunities to develop trust between the parties.<\/p>\n

Even though it is vulnerable to multi-homing, Boatsetter could reduce its exposure by offering additional services to owners, for whom maintenance and storage costs are a hassle. The company could explore ways to leverage its scale and customer-oriented product development to establish partnerships with maintenance and storage providers and also offer owners a set of basic analytical tools to manage their assets.<\/p>\n

Finally, as Boatsetter can\u2019t bridge to other networks on its own, it will be critical for the company to double down on its partnerships with most of the online travel agencies and Airbnb, ideally aiming for exclusivity agreements. Even though the business\u2019 sustainability is vulnerable to the vertical integration of these players, Boatsetter could leverage its large base of owners to weaken the new entrants in the space.<\/p>\n

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An example of the partnership between Boatsetter and Airbnb.<\/em><\/figcaption><\/figure>\n

So, as strong network effects, low disintermediation risks and a global-local network allow Boatsetter to mitigate the action of new entrants, value-added features to lower supply-side multi-homing and an extension of its current partnerships could strengthen even more the company\u2019s sustainability and set even calmer waters to sail through.<\/p>\n

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Sources<\/strong><\/p>\n