Unpacking The Luggage Storage Services Business Model

Some entrepreneurs have been inspired to find new solutions to common travel challenges such as storing luggage for guests of home shares: LuggageHero Founder and CEO Jannik Lawaetz, for instance, has stayed at these types of accommodations (and with friends and family) over the past few years. But, with home shares, he did not have an option to store his bags as he did in hotels. Without a better alternative, he would have to find a local shop to ask to hold his bags for a few hours. And, once he became a home share host in Copenhagen, “I just experienced the same frustration from all my guests,” Lawaetz told PYMNTS.com in an interview.

To serve consumers who need a place to store their bags while they are traveling, LuggageHero connects tourists with local shops that store their bags. Lawaetz claims his company is “one of the fastest moving luggage storage networks” around the globe, with LuggageHero having stored more than 100,000 bags in less than two years in locations with a presence in just three cities. Lawaetz’s service, however, isn’t the only company filling this emerging niche market: Beyond Luggage Hero, Vertoe also connects travelers with shopkeepers for luggage storage that helps people who want to visit landmarks without carrying a suitcase or a backpack in tow.

The Booking Experience

LuggageHero customers who are visiting New York City, for instance, can visit the company’s website, find a location and make a reservation. Then, when customers arrive at a store, they are given security seals that they put through the zippers of their bags. To help set his service apart from other offerings, Lawaetz said that the company doesn’t charge a fixed rate: Customers use a luggage timer, and they are charged for only the number of hours that they store their bags.

The company also doesn’t ask for a customer’s details upfront, which Lawaetz cited as another differentiating factor for his service. Therefore, customers can ask for the addresses of stores that participate in the platform and make a reservation without handing over their payment details. Only once they are in the shop and about to start the luggage timer are they are asked to submit their credit card information, which can be stored in their profiles for future use. While it is possible then that customers could make a booking and not end up storing their bags, Lawaetz doesn’t want to bind anyone to the offering. “It’s a very flexible service this way,” he said.

Competitors, he claims, have their customers pay for the service ahead of time. Asked if people are skipping out on their reservations, he noted that most people do cancel their booking if they don’t end up showing up. However, he did say that the company has had no-shows as well. He sees this kind of experience, however, as an indication that customers perhaps just have other plans and will use his service another day. “That’s how we want to be remembered as a service,” Lawaetz said, adding that he wants LuggageHero to be seen as on-demand and available when his customers need it.

The Market

On the merchant side, he said that coffee shops, local cafes, bike rental shops and restaurants are participating in the platform as well as hotels and hostels. “They have a reception,” Lawaetz said of the latter two establishments. “They have people standing there all day.” And he noted that they want to drive more foot traffic and start a new revenue stream at the same time. In fact, he pointed out, tourists spend more than three times more than locals.

To main a high level of service, Lawaetz said that every place that stores bags on the platform signs a written contract to provide a quality experience every time. And, in case anything should happen, the platform does have a third-party insurance provider. “It’s not just a guarantee,” he noted, adding the insurance covers up to $3,000 for each piece of luggage and not only the booking as a whole. In terms of the service’s users, he said 99 percent are travelers, and they are usually under the age of 35. He also said that customers can store travel bags and suitcases, but they can’t store, say, bikes or surfboards.

The company is planning on moving into 36 additional cities on the heels of a $1.45M fundraising round. And its drive comes amid an emerging market for luggage storage that connects shop owners with consumers looking for adventure — and a place to store their bags.