#76 - Are There Showers?
Hipcamp and the Benefits of Exclusive Supply
Hi 👋 - New technologies enable new business models. Today, most of the world walks around with an internet-connected supercomputer in their pocket. Smartphones have allowed all sorts of new marketplaces to flourish. Airbnb lets hosts sell spare rooms. Turo lets car-owners compete with Hertz. ThreadUp is digitizing thrifting. This post digs into Hipcamp, a marketplace for outdoor accommodations. Happy camping. 🏕
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There was a beautiful break. Had she known, she would have packed her surfboard, but the website for Andrew Molera State Park didn’t mention anything about surfing. As Hipcamp founder and CEO Alyssa Ravasio watched the Pacific surf break on California’s Central Coast, she knew there had to be a better way.
From Chaos to Order
This moment inspired Ravasio to build Hipcamp, a marketplace for campsites and outdoor accommodations. As Airbnb monetizes spare rooms, Hipcamp monetizes open space. Its mission is to help more people get outside. The product centralizes fragmented information from across the internet, including if a campground had great surfing. Hipcamp’s listings range from no-frills campsites to elaborate glamping get-ups - equipped, naturally, with Tesla chargers - and everything in between.
Hipcamp aggregated, structured, and organized data from county, state, and national parks into one location. Making siloed data accessible helped it gain traction. Most users didn’t care whether they were staying in a county park or a national park. Instead, what mattered was being near an ocean or the quality of the birding. And access to showers. Users really wanted to know if there were showers.
A start-up trope is to do the things that don’t scale first. Hipcamp followed this advice, building a proprietary data set by hand. Ravasio, her sisters, and several others scoured individual park websites, maps, and PDF files, compiling data in an Excel file that would later be pulled into a database1. Scaling marketplaces is a grind.
Hipcamp’s initial product focused on discovery. It aggregated data from various public campgrounds and allowed users to post photos and write reviews, like Yelp for camping. Its unique data set helped bootstrap demand2.
Going Private with Exclusive Supply
As traffic grew, so did user complaints. Common feedback was along the lines of: I love the product, but everything is sold out. Scaling a marketplace is a balancing act between supply (campsites) and demand (campers), and Hipcamp had a supply bottleneck.
At first, Ravasio lobbied California’s state government to open more campsites. This was a losing battle. Eventually she learned that state parks repatriated their revenue to the state’s general fund annually. Additionally, they were constantly under budget pressure. Given this situation, few park managers wanted to increase their liability by expanding the number of campsites. Public supply wasn’t budging3.
An aha moment came when a landowner reached out asking if Hipcamp could help her pay her property taxes so she didn’t need to sell her land. With public campgrounds unlikely to grow and often fully booked, adding listings on private property could help solve Hipcamp’s supply problem. They also provided unique supply, making the business more defensible.
According to Casey Winters, Chief Product Officer at Eventbrite, and Anne Lewandowski, Operator in Residence at Reforge, there are three strategies for marketplace supply differentiation4:
Comprehensiveness: Aggregate all content in one place, giving consumers multiple options for a given transaction. This is Spotify’s strategy with music and podcasts and Amazon’s strategy with merchandise. There’s a tradeoff between the ease of obtaining comprehensiveness and a marketplace’s take rate. Because there are only a handful of major airlines and record labels, Kayak and Spotify attain comprehensiveness, but at the expense of lower margins. Relative to airlines, the hotel industry is fragmented, particularly in Europe. Acquiring all the hotels was more work for Booking.com, but they also are able to charge hotels higher commissions.
Exclusivity: Being the only place a user can find something. For example, original content on Netflix or private campsites on Hipcamp.
Curation: Differentiation by hand-picking supply. This strategy is difficult to defend against well-resourced competitors. It’s best as a secondary strategy, for example Uber segmenting rides into Black, UberX, and UberPool.
Comprehensiveness and exclusivity are a spectrum. For example, Amazon sells a gargantuan number of SKUs (comprehensiveness), but it also sells private label brands (exclusivity). Hipcamp is running a comprehensive supply strategy for outdoor stays. It started by aggregating public campgrounds and later layered in exclusive private supply. Exclusive supply brings a host of benefits. First, it gives users a reason to come directly, instead of going through Facebook or Google’s toll booths. This lowers CAC and boosts profitability. Second, it gives Hipcamp the ability to positively influence the guest experience by setting standards for hosts. Lastly, it expands the TAM, a hallmark of a great management team.
The death knell for marketplaces is lacking either comprehensiveness or exclusivity. Thankfully, Hipcamp is the leading outdoor marketplace with over 300,000 campsites and other accommodations5. As it expands, it’ll bump into Airbnb more often for listings like cabins, treehouses, and yurts. The percentage of exclusive listings will be an important metric to track over time, as supply dynamics are fluid and suppliers can be promiscuous.
While private listings increased supply, they also attracted more demand. Supply acquisition remains the company’s biggest challenge. A good problem to have.
How Does Hipcamp Make Money?
The company’s main KPI is nights outside. More nights booked equals more revenue. Hipcamp is a classic marketplace business model, driven by gross merchandise value (GMV) and take rate. GMV is the volume of transactions the marketplace generates (roughly speaking: nights booked times average price per night). The take rate is Hipcamp’s commission for facilitating transactions.
Today, Hipcamp’s average order value (AOV) is $100-$200 and its take rate is about 20%, split between host fees and camper fees. For every $100 of GMV Hipcamp generates, the host gets roughly $80 and Hipcamp gets the rest.
The beauty of marketplace models is the potential for win-win-win situations. In this case, the landowner makes money, the camper gets a place to pitch their tent, and Hipcamp earns a fee matchmaking.
Over time, Hipcamp’s supply has professionalized. For some landowners, Hipcamp has become an outright business. The listings that do best are near large metro areas or right outside national parks. Top grossing properties make tens or hundreds of thousands of dollars a year. On a cohort basis, the average host makes more money over time: three times more revenue in their second year than their first year and 15 times more in year five. Part of the reason for this is that hosts reinvest revenue back into their properties, improving amenities, building our new campsites, or adding cabins (or Tesla chargers). This allows hosts to charge more. As a kicker, Hipcamp earns more revenue. This win-win dynamic helps make marketplaces great businesses.
Having built marketplace liquidity, Hipcamp seems poised to catch a wave.
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More Good Reads
This Founder’s Field Guide conversation with Hipcamp’s founder and CEO Alyssa Ravasio sparked my interest in Hipcamp. It’s a great introduction to the company and to online marketplaces generally. For a more erudite take, see the New Yorker's profile. It’s full of gems like this: The office felt like a workspace set up in the loft apartment of a Greenpeace activist with family money.
Hipcamp built supply by piggy-backing off existing networks, in this case local, state, and national park websites. This tactic is popular and was used by Airbnb, Instacart, Lyft, Thumbtack, and Uber to scale supply. More on marketplace liquidity and scaling marketplace supply and demand here.
Entrepreneurial Thought Leaders, Alyssa Ravasio (Hipcamp) - A New Approach to the Great Outdoors, January 27, 2021.
Casey Winters and Anne Lewandowski, a16z Marketplace 100, Marketplace Supply Strategy: Comprehensive, Exclusive, or Curated, March 22, 2021
This statistic is from December 2019, so it’s stale. I couldn’t find an updated stat, but today’s figure would be larger.