Unlocking Serendipity at Conferences & Events

Last month, I attended a 3-day conference focused on education & the future of work. There were 3,000+ attendees – and I barely knew any of them.

So of course, I did my homework. I spent hours browsing through hundreds of individual profiles, thought carefully about who might be interested in what I’m doing, read up on a select few attendees, and crafted and sent dozens of personalized cold emails.

Thanks to my legwork and a couple folks who did the same by reaching out to me, I had set up a few meetings in advance. And overall, I enjoyed a fantastic conference.

And of course while there, I met some people serendipitously as well. However, for every individual with whom I had a meaningful conversation, just based on sheer volume, I estimate that there were 10 missed connections.

I wish conferences & large events as a whole were structured a bit differently.


The Problem

You’ve probably experienced this before. You are a newcomer at an industry event / conference. You want to meet people, but it can be overwhelming

Take the happy hour mixer. The free food & booze is always great. After all, who doesn’t like Coronas and shrimp cocktails? (As they say, everything tastes better on a stick!)

At a mixer, by default you try to glimpse at name cards and appearances, size-up the context a bit, and try to approach people who seem open and friendly.

More or less, it’s a stab in the dark – you might meet someone who changes the direction of your business & career. More often than not, you make an acquaintance, who while a perfectly wonderful person – has different interests than yourself. Both of you realize this, so you engage in a few minutes of polite small talk before moving on.

For the most part, I do enjoy that randomness and excitement, but our time is a valuable thing. And I’ve long thought that there must be a more efficient way to maximize the value of connections created and increase the overall level of serendipity.

I doubt that my experiences & sentiments are unique.

As a whole, I wish conferences and events would do more to create connection between the attendees. And I think that there are some simple things that can be done that would add enormous value.


The Solution

The next time I sign-up for a conference or event, I would love to be asked (and be forced to respond to) 1 -3 of these questions:

  • What is ONE thing that you need help with right now professionally?
  • What is ONE topic that you would like to learn more about and why?
  • What is ONE interesting thing about your industry / position / career that few others know?

I’d want my answers to be made publicly accessible to other attendees via some type of web / mobile app interface. After all, wouldn’t you want others to try to help you?

And from the opposite perspective, I’d look for people I wish to connect with and try to “Give First” by addressing their stated needs as a way of getting in touch.

Not only are these questions great icebreakers, but they are actually even more valuable as a filtering mechanism. They help all parties better understand what they need, who to talk to, and what to say.

Interestingly enough, our company DeepBench helps people answer these exact same questions – in a slightly different setting. You can think of DeepBench’s system as a filter, designed to sift through millions of professionals around the world to make the connection that you need to find the information that you want.

We are starting to do some AI-powered matching at DeepBench right now. It is not yet used in the realm of large, live events – but our experience indicates that automatic matching of individuals can certainly be done. Sidenote: perhaps whoever pursues this idea can partner with DeepBench from a technical perspective.


Market Size Estimate

Not all event / conference attendees want to better connect with new people. For example, some VIP panelists & keynote speakers are too important to be bothered. Plus, many industry veterans attend these conferences with a key goal to reconnect with old friends.

I actually suspect that this is the primary reason that such a matchmaking tool isn’t widely used by conferences.

Most conferences are centered around the VIP speakers and NOT the masses. Even the organizers themselves are generally VIPs – after all, one has to be well connected to organize a large, successful conference.

My working hypothesis is that decision makers in this arena are disconnected from and do not feel the pain of a large chunk of end-users.

For the rest of us plebes & industry newcomers – we only know a handful of people at any event, and a better matching tool would be very useful.

I estimate that between 50-75% of all attendees at every professional conference would find helpful a filtering mechanism that helps make connections.

How did I ballpark that number? Simple – just start with the % of the population who are introverts and add a few extroverts like me who just want a tool that allows us to find the right people to approach.

If I were organizing a large, professional conference, I’d pay an extra $1-$3 / attendee for the aforementioned matching capability.

With something so simple, I could provide enormous value for my audience. And I could use this data to better understand my audience and improve the event year after year.

Within the USA alone, there are 200 million conference attendees annually – so this one feature represents a $200 – $600 million annual opportunity domestically.


Competitive Landscape and Path to Market

The market for corporate event apps is highly fragmented – see the Google Search results below. I’m not quite sure why that is. My hunch is that the barrier to entry is very low, there is no real network effect, and there is too much customization required for each conference for any single app to enjoy true economies of scale.

Customer acquisition costs & churn seem very high for a new entrant. So my conclusion is that this business opportunity is less viable as a standalone start-up idea, and more viable as part of an existing platform.

It would make much more sense for an existing conference / event technology company to build in-house, or an incumbent could license software to do this.  *coughs* Come talk to me if you are one of those incumbents! 😉



About the author:  Yishi the co-founder & CEO of DeepBench — We connect users with experts on any topic in any industry, and we also license our software to enterprises to better unlock expertise internally. (Check us out if you are interested in joining our network or using our product!)

IDEA: Turning Liar’s Dice into the next Texas Hold’em

Liar’s Dice is one of the best games ever invented.

It is a fast-paced game involving luck, probability & bluffing. It is easy to learn – you don’t need to be particularly good at math. If you can divide 24 by 3 in your head, you will do just fine. And most 12-year-old kids should become proficient after 2 minutes of instruction.

If you are unfamiliar – check out this Wikipedia article. Or better yet, watch Captain Jack Sparrow challenge Davy Jones to a round of dice in this brief clip from Pirates of the Caribbean.

And the game itself is super versatile

  • You can turn it into a gambling game
  • Or a drinking game
  • Or just enjoy the challenge of trying to outwit your friends & the friendly banter that ensues =)

I first played Liar’s Dice in 2008, I’ve since introduced it to dozens of friends. Anecdotally, but almost universally – everyone I’ve taught has also become an evangelist.

The game is easy to understand but hard to master. It is very much so like Texas Hold’em Poker, but easier and things move much faster.

Unlike Poker, Liar’s Dice works well from an audience standpoint. Because there is constant, visible action, it is easy to cheer on from the sidelines and share in the glory.


I’d bet that in the past year, at least 50 million people globally have played Liar’s Dice. The game originated from Latin America. And you can find it played every day in hundreds, if not thousands of bars across Asia.

As a point of comparison, PokerStars was acquired for $4.9bn in 2014 – and is estimated to control 70% of the market. Which means that the market for online poker is $7.0bn give or take.

That could be the market for Liar’s Dice – if not larger. After all, both games require a similar combination of luck & skill, but one is easier to learn, faster-paced and more social.

Path to Market

There are two paths you could take to monetize this game.

Path #1: Work with brick & mortar casinos.

Casinos are open to testing new games. However, to go from concept to the pit floor, the process takes over 5 years and around $500,000 to cover various legal & other fees.

According to this article drawn from the work of Eliot Jacobson, a math PHD and one of the world’s leading experts in casino games, there are several criteria that any new casino game requires to be successful. I’ve listed what I believe to be the 4 most relevant criteria for Liar’s Dice.

However there is a catch. Even if you invested the time & money, and Liar’s Dice Casino Edition became a success, I’m not sure how defensible the core intellectual property would be. After all, Liar’s Dice dates back to the era of Pizzaro and the conquistadors (Although the exact origins are contested, it seems incontrovertible that the game is several centuries old).

You could probably design & patent a special table + camera contraption that is optimized for Liar’s Dice. This would earn you some royalties, and you could build a consulting business around it.

Liar’s Dice Casino Edition may generate billions for the casinos. However, if you were only to focus on brick & mortar casinos, my guess is that your entrepreneurial upside is capped in the tens of millions.

It could no doubt still be a great outcome, but you should just understand that such a prospect alone wouldn’t attract traditional venture capital funding. Perhaps you could obtain funding via angel investors or the innovation arms of the casinos themselves.

Path #2: Daily, free, online cash tournaments

There are already several existing Liar’s Dice apps. I downloaded the first one which had by far the most reviews, and gave it a test run.

Upon first glance, it’s actually a nice-looking, highly functional app!

It’s only been around for a few months and has an audience of what I estimate to be several thousand daily active users.

I chatted with the founder of YoAmbulante, the company which made the game, who mentioned that it was made by a team of 5 experienced game developers.

Pretty impressive, and I’m sure that his app has a lot of untapped potential.

A relatively simple experiment I would do if I were YoAmbulante (or had my own Liar’s Dice app) is to add $100 daily tournaments.

Such tournaments would be free to enter, and a different winner would win $100 every day. You wouldn’t need regulatory approval because people aren’t gambling – they are playing for free with the opportunity to win a cash prize.

Similar to HQ Trivia – this would build a habit amongst users and generate virality. And of course, there would be some spillover growth for your in-game purchases. Last summer, my friend built another gaming start-up around free daily tournaments with real cash payouts. And I saw this working up close and in real-time.

Liar’s Dice would be perfect for the daily, free-to-play, cash tournament model given the easy-to-learn, fast-paced, and social nature of the game.

Ultimate success: Becoming the PokerStars of Liar’s Dice.

In the long run, to capture the $7.0 billion opportunity for Liar’s Dice, you need a digital platform that provides gambling capabilities. This requires a whole host of new features such as collusion detection, ID verification, billing, privacy, compliance, and customer support. And of course, you would need the appropriate gambling licenses.

None of the above comes cheaply, but either Path 1 or 2 could be a great proof of concept and fund the long-term vision.


If you are interested in this area or are already working on something related, please reach out. And I’ll try my best to connect you with the resources & people you need.

I’d love to see Liar’s Dice become more mainstream – no matter who creates it. I’ll certainly play it myself. But as they say – the house always wins, so I’d rather work with the house =).



About the author:  Yishi the co-founder & CEO of DeepBench — We connect users with experts on any topic in any industry, and we also license our software to enterprises to better unlock expertise internally. (Check us out if you are interested in joining our network or using our product!)

IDEA: Twitter meets Slack / WhatsApp

Problem & Vision

Twitter starts with public conversations and moves inward via threaded replies & direct messages.

What if there was a platform that starts the other way around—by focusing on private conversations with friends, with the ability to expand outward to include strangers?

 I read Twitter regularly to keep up to date and broaden my perspectives. Though I rarely tweet for the following 2 reasons:

  • Twitter is public and permanent, and the hurdle for posting is higher
  • I have many varied interests, and I want to maintain a coherent public identity

Ironically, I actually love sharing content with people via email / private chat.

As many of my friends know, it is very common to receive a message containing an article from me out of the blue. I try to be thoughtful about what I share and who I share it with, and this is how I prefer to connect with friends – based on mutual interest.

Often times, an article I send to a group or someone sends me leads to a thought-provoking discussion – a more nuanced conversation that I rarely see on social media. And I love it when that happens.

How do we create a space that enables those private, authentic discussions to occur, while expanding those circles of discussion in a way that feels natural, yet controlled and safe?

Twitter doesn’t give us nuanced controls to decide who gets to see our tweets by default – other than the heavy handed – “private timeline” toggle.

I do want to showcase my personal brand via a public-facing timeline.

I also want to host semi-private discussions that others can join via invite, and these discussions should not be publicly visible.

To use a concrete example – I sent this February 2019 Natty Light twitter ad to several close friends, as I thought the comments were hilarious.

Our ensuing private conversations covered the gamut of:

  • What a great advertisement this was
  • How Wiener’s Circle embraces a similar brand approach, and
  • Reminiscing over college party experiences.

On a public platform like Twitter, I doubt we would have had the same type of free-flowing conversation – but I would have loved to have the ability to branch into a discussion with strangers who know a bit more about marketing & psychology. And private communications tools such as iMessage / WhatsApp do not have the UX to easily enable users to branch out.

There should be a way to encapsulate both that free-flowing feeling of private chats & the ability to connect strangers with similar interests all on one platform. 

Product test idea

If we were entrepreneurs building this from scratch, we could take the following steps to test this on Slack: 

  • Start a Slack channel, invite a few dozen close friends that we often share content with
  • Get our close friends to agree to only use Slack to share content for a few weeks and slowly invite others
  • Create a few public as well as private groups within Slack, moderate as necessary, and see if we could keep the community growing and engaged

Market opportunity

One obvious answer is that this would become an independent social media company, and WhatsApp / Twitter would be a good proxy of value creation.

However, there would be B2B potential as well. We could be a tool for enterprises to share ideas and foster collaboration across departments.


My goal for writing these posts isn’t to personally build another business. But I do think there is room in this world for something in between Twitter & Slack / WhatsApp, and I would be very excited if someone else turned this into the next big thing.

So if you are interested in this area or are already working on something related, please reach out. And I’ll try my best to connect you with the resources & people you need. It would be cool to see a new company emerge rather than an existing tech giant dominate in this space.

Note #1: I wrote much of this in late February, before Mark Zuckerberg laid out his vision of a private, inter-operable social media platform. As I clearly agree that there is a market need here, I don’t take the cynical view that Zuckerberg is just saying this for political brownie points – though that is certainly a side benefit for him.

Note #2: Ben Thompson’s strategic analysis of this topic in Stratechery is also a great read, and I’d be much more excited to explore this from a ground-up entrepreneurial, product-design perspective.



About the author:  Yishi the co-founder & CEO of DeepBench — We connect users with experts on any topic in any industry, and we also license our software to enterprises to better organize and monetize expertise. (Check us out if you are interested in joining our network or using our product!)

My Personal Mission & How I Arrived Here (Part 3 of 3)

 (Note, this is Part 3 of a 3 Part Series titled “My Personal Why”. Part 1 – Switching from Hedge Fund Investor to Software Entrepreneur, Part 2 – Warren Buffett, Charlie Munger, and the Principles of Entrepreneurship)

An interesting shaving story

A little over a year ago, I was in Las Vegas with a few business school classmates celebrating the end of the semester.

One afternoon, I found myself happily exploring storefronts along the Venetian’s indoor promenade.

I stumbled across a store called “The Art of Shaving”. The name seemed intriguing and vaguely familiar so I wandered in.

Now, my shaving habits are pretty simple. I use a mass-market razor and buy cartridges & cream in bulk from Amazon.

As I entered The Art of Shaving, it was like entering a different world. I was blown away by how complex shaving could be. There were so many blades, brushes, and ointments of all sorts – I felt overwhelmed.

Luckily, the store wasn’t very busy, and the saleswoman was ready to help. We chatted about their products for a bit, but soon the conversation migrated toward their business model.

Among the things I learned were:

  1. Procter & Gamble (owners of Gillette) bought The Art of Shaving nearly 10 years ago.
  2. Some of the store’s best revenue generators and highest margin items are razor cartridges. (And of course, they only sell Gillette cartridges.)

That was fascinating to me. Within the store (and as I would later discover online), the Art of Shaving advertises everything but its cartridges – which makes sense, since the store bills itself as a high-end brand, and the cartridges that they sell are pretty much the same ones you can buy at CVS.

It surprised me that despite all the fancy oils, creams, and gels that the brand advertises – the basic razor cartridge is still one of their biggest money-makers. And it made me think again about why Dollar Shave Club was so disruptive.

I also hypothesized that Procter & Gamble bought The Art of Shaving in 2009 to lock down a premium distribution channel and ward off potential competitors to its cash cow cartridge business. The saleswoman agreed with me – but who knows if we are right.

Ultimately, the conversation lasted a good 30 minutes. I walked out with a $28 bottle of shaving oil – partly because I felt the need to reciprocate for the saleswoman’s time and insights.


Where my mind wanders

Now I do this a lot. I’m not talking about buying boutique consumer products, but rather the act of asking everyone – from friends to strangers about business models and unit economics.

To paraphrase one of Paul Graham’s essays: It is important to pay attention to where your mind wanders when it’s free.

Well, this is where my mind frequently wanders—on vacations, on airplanes, at dinners—anywhere, anytime.

When socially acceptable, I try to steer conversations in the direction of business topics. I do so because I’m constantly seeking to better understand how the world works, and things become just a bit more REAL when the exchange of money is involved. With real stakes on the line, you truly see how incentives and human psychology come into play, and I find it all very exciting.


But what else

While I feel fortunate to have recognized this facet of my personality, that alone isn’t specific enough for me to figure out what I want to do with my career in the long-run.

I know I can grind away and get work done and motivate my teammates to do the same. But I also know that I don’t enjoy leading in such a manner, and it won’t be scalable as I grow older.

What I do enjoy, however, is curiously inquiring (like to that saleswoman), understanding people’s needs, and crafting creative deals.

It also makes me genuinely happy to connect intelligent and motivated people. (Fittingly, I co-founded a business that connects expertise.)

Much like how my mind often wanders toward business topics, it is also on the lookout for potential intros. And I have a tendency to act on those thoughts. My rationale is that, after all, 15 minutes of effort from me crafting emails could change the course of 2 people’s lives and lead to something that could change the world.

As an example, I was at a friend’s wedding last month where the bride told me that her mom is the global head of corporate travel for a prominent tech company. My thought immediately went to my friend Alex Jara who is working on an innovative travel start-up called Deal Engine that should be of great interest to her. I laid the groundwork, and when the time is right, I’ll make that intro.


Putting it all together to arrive at my personal mission

In thinking about what I want to do with my life, I try to take a pragmatic approach.

I recently made an effort to triangulate to the intersection of a) what I am good at, b) what I enjoy doing, and c) what is good for me in the long run. And I’ve come up with this diagram.

I’ve concluded that my personal mission will be to connect people to capture business opportunities together.

I’ve decided that I will use this blog as a means of broadcasting business ideas + my own analysis + personal anecdotes with the explicit goal of connecting people. I will continue to write about things I find interesting, and I will go out of my way to connect those who also find those topics interesting.

I can see how this could evolve into an investment vehicle down the road (and perhaps even merge with my current company), but for now, I will just do it for fun – in my free time.

I should mention that I don’t need to be the person to come up with these future ideas. As everyone knows, ideas are a dime a dozen, it is the execution that is hard – and my goal is to help people execute in the way that feels most natural and fun for me.

So if you think of a business opportunity that you wish to share publicly—let us discuss, and I may write about it! Together, we can spread the word and help you find the right people to connect with!



About the author: Yishi is a former hedge fund investor, current entrepreneur & MBA grad who enjoys thinking about businesses in his free time. He can be reached via yz [at] yishizuo.com

He is also a co-founder & CEO of DeepBench — We connect users with experts on any topic in any industry, and we also license our software to enterprises to better organize and monetize expertise. (Check us out if you are interested in joining our network or using our product!)

Counterintuitive Takeaways from an MIT Nobel Laureate’s Research

Does more information in a market = a better functioning market?

Sounds true – but not always, according to the latest work from MIT Nobel Laureate Bengt Holmström.

After reviewing this blog post, Professor Holstrom had the following comments:

  • I want to avoid the (commonly) mistaken impression that I’m saying financial market liquidity doesn’t require transparency. I talk specifically about money markets (defined as debt with a shorter than one year maturity; much of it repo with over-night maturity).
  • So many people seem to think transparency is the solution to the financial crisis, which I think is a serious misunderstanding. My paper tries to explain why this is not the case and why money markets never have been characterized by transparency

Holmström won the 2016 Nobel Prize in Economics for his research in contract theory. His pioneering work in principal agent theory focuses on circumstances where information is difficult to obtain.

Holmström’s more recent research focuses on the relationship between information transparency and market liquidity. And his findings are surprising.

Holmström wrote in a 2015 paper, “Understanding the Role of Debt in the Financial System”, “People often assume that liquidity requires transparency, but this is a misunderstanding. What is required for liquidity is symmetric information about the payoff of the security that is being traded so that adverse selection does not impair the market.”

My takeaway is that if neither the buyer or seller has a hidden edge, the mutual lack of information could create a sense of trust. This trust based on a LACK of information counterintuitively enables markets to function.

But if we examine this phenomenon using real world examples that Holmström cites in his paper– we see that his findings are not so counterintuitive after all.


Example #1 – Dealer Used Car Auctions

Holmström uses the example of dealer used car auctions. In these auctions, buyers are not allowed to conduct more than a cursory examination of the goods.

Neither the buyer or seller know the full details of each vehicle. The buyer is taking a risk but can be confident that her competitors and the seller are equally in the dark.

As such, the auction house is able to avoid buyers picking the best vehicles and leaving behind the lemons. By forbidding buyers from spending time to examine the vehicles in detail, the auction market can function as intended with minimal friction.


Example #2 – Pawnshops

Pawnshops have existed for millennia. According to Holmström, they are a fascinating solution to the asymmetric information & liquidity issues that would otherwise inhibit market transactions.

How Pawnshops work:

  1. Let’s say you own a Rolex now worth $5,000. You need money today but don’t want to give up the watch.
  2. A pawnshop can provide instant liquidity by paying you, say $3,000 for the watch.
  3. It doesn’t matter if you know or believe the Rolex is worth $5,000.
  4. You have the option to buy it back in the future for $3,000 + a small fee.

A pawnshop thereby eliminates the need for the buyer & seller to agree on price, enables liquidity, and minimizes market friction.


Example #3 – Bank Repo Market

Holmström discusses the bank Repo Market in detail in his paper. In essence, the bank Repo Market is not too dissimilar from a pawnshop.

How the bank Repo Market works:

  1. Banks will trade baskets of assets with each other for just a few days at a time in exchange for cash.
  2. These baskets of assets total billions of dollars.
  3. Banks are not analyzing these assets in detail, and in normal times, it doesn’t matter.
  4. In normal times, each side of the repo trade can be reasonably assured that the basket of assets is worth the stated amount.
  5. In normal times, the bank that is selling the basket of assets will return the cash and get the asset basket back in the next few days.

Unfortunately, during the 2008 financial crisis, the opacity of the asset baskets led to disaster.

When times are good, the opacity of the asset baskets enables trust based on mutual ignorance. When times are bad, that complacency quickly evolves into mutual distrust.

In Fall 2008, with asset prices falling so rapidly, the buying banks in the Repo Market couldn’t be sure of the value of their asset baskets. Questions were raised whether certain selling banks in the Repo Market would even exist the next morning to return the cash.

In fact, Lehman Brothers collapsed when its counterparties refused to honor its repo trades. (Repos Played a Key Role in Lehman’s Demise, WSJ) After Lehman’s collapse, liquidity dried up everywhere, along with trust. Only when the US government stepped in to bail out the banks, guaranteeing liquidity, did the world start spinning again.

As evidenced by the 2008 financial crisis, liquidity built upon ignorance can be fragile. Holmström himself caveats, “Let me close by noting that I have said very little about systemic risk [ . . . ] If [money market] liquidity relies on no or few questions being asked, how will one deal with the systemic risks that build up because of too little information and the weak incentives to be concerned about panics.”

In Conclusion – Implications for business leaders

In July 2012, during the European Debt Crisis – the European Central Bank Governor Marco Draghi stated, “[T]he ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough”.

As Holmström notes, “This is as opaque a statement as one can make. There were no specifics on how calm would be re-established, but the lack of specific information is, in the logic presented here, a key element in the effectiveness of the message.”

If Draghi had been more specific in his plans, that likely would have led to questions and more uncertainty. It seems a bit counterintuitive that the less information Draghi provides, the more the public is able to believe him.

In line with this rationale, I think it may be better for a CEO to communicate a vague strategic vision rather than a detailed plan that invites doubt. Much like the tradeoff between market liquidity and transparency, there could be a tradeoff between business efficacy and transparency.

On the other hand, given the failure of the Repo Market during the financial crisis, perhaps business leaders are playing with fire when they embrace opacity for the sake of expediency.


About the author: Yishi is a former hedge fund investor, current entrepreneur & recent MBA grad who enjoys thinking about businesses in his free time. To contact him about this article, or suggest new future topics – he can be reached via yz[at]yishizuo.com

He is also a co-founder & CEO of DeepBench – a company that connects those who have expert insights with those who need them. If you wish to learn about any industry in any geography, or if you want to join the DeepBench network and be paid for your insights, his company can help!

Priority Pass – A Great Business Model with Strong Network Effects


Priority Pass is a fantastic business with 1) strong network-effect barriers to entry in a growing industry and 2) plenty of new opportunities. I would invest in them if I could.


What is Priority Pass?

Priority Pass is paid membership program that provides individuals access to airport lounges. They are owned by the Collinson Group, a UK-based “provider of lifestyle membership programs and travel enhancement products.”

Priority Pass has been around since 1992. Lately, the product has experienced double digit % annual  growth. One of the drivers of this growth has been the success of the Chase Sapphire Reserve Credit Card – which provides membership to Priority Pass.

Beyond the boost from the Sapphire Reserve’s success, overall industry trends for Priority Pass are very favorable. Global air traffic is anticipated to grow at 5% over the next decade and 4% the following. Leisure travel is up as the global middle class grows, and expanding income levels drives demand for better airport experiences.


Analysis of Airport Lounge Business Model & Estimated Unit Economics

Independent airport lounges have a pretty good business model.

In a December 2017 interview – an airline lounge industry insider explained that:

  • Airlines like independent lounges because airlines often can’t drive enough traffic to fill their own private lounges – especially in new cities.
  • Airports like lounges because they make great, unique use of airport real estate (often in places like higher floors and hidden nooks and crannies where retailers don’t want to be due to lack of foot traffic)

On the revenue side, airport visits are pretty steady, even during the financial crisis, airport passenger visits barely took a dip.

The lounges’ largest fixed cost is rent, some of which becomes variable due to revenue sharing agreements with their airport landlords. The rest of the costs are largely variable & in the lounges’ control.

I estimate profit margins at the lounge level (before corporate SG&A costs are factored in) are about 20%. That is pretty great for a low-capital intensive business with recession-resistant elements.

Here is a simple model of the economics of an airport lounge with my assumptions (in blue) and notes at the bottom.


So you’ve convinced me that leisure travel is a growing industry and Airport Lounges are a pretty good business – what makes Priority Pass good?

Given the underlying trends in leisure travel and airport lounge dynamics, Priority Pass operates within a healthy and growing ecosystem.

Within this ecosystem, Priority Pass sits in an enviable location.

Credit card companies, airlines, and some individuals directly pay one price to Priority Pass. Some of these payments are based on usage, some are based on annual fees.

The company then pays lounges a lower price to provide the service. Sources indicate that the company’s cut is somewhere around 25%. Priority Pass bears little risk while playing a critical role as the middleman.

  • Given its structure, Priority Pass enjoys the ability to expand rapidly without having to build physical locations or pay rent to airports.
  • Priority Pass was one of the first movers in the industry, and they’ve created a platform with classic 2-sided network effect, with over 1,000+ lounges in their network, and millions of members.
    1. Lounges need them to acquire users. Members, Airlines, and Credit Card Companies need them to obtain access to lounges.
    2. The more lounges there are in the network, the more attractive Priority Pass is to users. The more users there are on the network, the more attractive Priority Pass is to lounges.

It would be very hard for a newcomer to disrupt this network effect model. That is why no other platform for independent airport lounges exists at scale. Priority Pass simply dominates.

Update 3/24 — Based on the Collinson Group Co-CEO’s LinkedIn Profile — it seems that Collinson Group generated more than $750mm in revenue , and have more than 20 million members, and grew 40% last year (!!!). I’m near certain that most of this is coming from Priority Pass.

Ways Priority Pass Could Lose

Threat #1 – The Amex & Chases of the world

  1. Sources indicate that given how fast the Chase Sapphire Reserve Card was launched and grew, Chase executives thought it made more sense to partner with Priority Pass rather than directly compete.
  2. Amex is expanding its Centurion lounge program, and they are targeting a more high-end segment. Amex also gives Platinum members access to Priority Pass – which suggests that the competition between the two companies is relatively friendly and rational.


Threat #2 – Existing & future lounge alliances

  1. Similar to how Netflix also produces its own shows, so too does Collinson own a few of its own lounges.
    1. These lounges are profitable in their own right, but it is also a savvy strategic decision for Collinson to gain some negotiating leverage against individual lounges. This also allows them keep abreast of things happening on the ground.
  2. Other lounge groups exist, such as one operated by Star Alliance. However, their value proposition is different. Priority Pass gives these travelers another option, and the company targets an increasing proportion of travelers who are not loyal to any particular airline.


Threat #3 – Shift to a new model (such as a-la carte pricing)

  1. Membership programs in the lounge industry have been around for a while and seem to work. I think that there are fundamental elements of human psychology that makes a leisure-oriented, semi-exclusive product such as Priority Pass more suitable for a membership model than a-la carte.
  2. I came across an interesting start-up called LoungeBuddy during my research. LoungeBuddy allows users to book lounge access ahead of time. I’m not quite sure why LoungeBuddy hasn’t pursued a membership model, perhaps it was too difficult or they are waiting to build scale. As entrepreneur, I hope that this start-up does well, but I wouldn’t consider them a threat to Priority Pass anytime soon.


What I would think about if I were CEO of Collinson Group (Priority Pass parent company)

Thought #1 – Concern about overcrowding

Priority Pass occupies an attractive and growing market segment. Their customer base is growing so fast that their member lounges often experience over-crowding issues, diluting their value proposition.

I personally think that occasional overcrowding is a reasonable price to pay for Priority Pass given the overall benefits. Given the lack of other affordable options for travelers, overcrowding may not seem like an urgent problem today, but a truly great business would address this before competition creates urgency.

I think the solution is to build software that integrates with lounges, just like what OpenTable did for restaurants. This would allow Priority Pass users to understand which lounges are busy at what time – and check real-time availability on their app. Another start-up could do this, but Priority Pass is in a far better position to succeed given their resources and negotiating leverage.


Thought #2 – Concerns about competition at the high-end

The other concern is potential competition from Amex’s Centurion lounges. Similar to the overcrowding issue, even though today Amex may not be an urgent competitive threat, Priority Pass should be thinking 5 – 10 years down the line.

What I would propose is for Priority Pass to partner with other high-end lounges and create a higher tier of membership to keep Amex at bay – call it Priority Pass Lux or something.


Thought #3 – Opportunity to expand beyond airports – become a broader platform for perks

I could envision one day, Priority Pass lounges at train stations, sporting events, concerts and more. I could envision exclusive experiences that only certain tiers of Priority Pass holders have access to.

Beyond the lounge experience, membership rewards today come in all shapes and sizes. The world is becoming more segmented and niche, consumers want unique experiences. Priority Pass can be the platform that interfaces with all “perk” providers.

If Priority Pass went down this route, yes they would more directly compete against the Chases and Amexs of the world who provide similar perks to their cardholders. However, I wouldn’t be scared of that.

As consumer needs evolve beyond cash back rewards, it doesn’t make sense for a credit card company to be at the forefront of satisfying consumer needs. By all means, we should decouple the method of payment from the leisure experience.

Given Priority Pass’s expertise and pure focus on hospitality & leisure, I would bet on them over any financial institution to take advantage of this opportunity.



About the author:  Yishi is a former hedge fund investor, current entrepreneur & current MBA student who enjoys thinking about businesses in his free time. To contact him about this article, or suggest new future topics – he can be reached via yz[at]yishizuo.com

He is also a co-founder & CEO of DeepBench – a company that connects those who have expert insights with those who need them. If you wish to consult with any travel industry professionals, or if you want to join the DeepBench network and be paid for your insights, his company can help!