Roomer, a secondary market for hotel rooms, secures $2M in funding from BRM Capital
If you can’t go on a trip at the last minute—due to an illness or other issue—new startup Roomer aims to help you by serving as a marketplace where you can sell your pre-paid hotel reservation to another traveler who’s going to the same place at the same time.
You can recoup some of the cost of your nonrefundable reservation, instead of paying cancellation fees, and the buyer receives a discounted room.
Today Roomer announced that it has secured $2 million in funding from Israeli-focused venture capital fund BRM Capital.
The Tel Aviv-based site is targeting the US market first, where it claims tens of thousands of pre-paid hotel reservations are cancelled nightly.
At launch, it covers three major US cities: New York, San Francisco, and Las Vegas. It’s one of many hot startups coming out of Israel, named “Startup Nation,” and specifically out of Tel Aviv, nicknamed “Tech Aviv.”
A second life for secondary markets
Roomer was founded by Gon Ben-David, Ben Froumine, and Adi Zellner.
The team is backed by board of directors from the BRM Group with a track record of successful internet companies – Eran Barkat, Hi-Tech Partner and Yael Reznick Cramer, Business Development Manager. Joining them is Uri Levine, Founder and President of Waze, as a director and adviser to the team.
Q&A with co-founder and CEO Gon Ben-David:
It starts with the trust and safety.
Our whole user experience is based on trust. It’s our first and most important emphasis as a company and as a marketplace: we validate each and every reservation that is posted to the marketplace, so the inventory you find at Roomer is 100% verified by us, which is something that doesn’t exist in any other marketplace.
On the subject of user experience, it’s important to say that we take care of the full process of transferring the reservation from the buyer to the seller, and sellers doesn’t need to do anything on – Roomer takes care of everything for him or her.
In addition, our technology was developed to ensure that the experience of selling a room is quick and easy. All you have to do in order to post your room for sale is to set your price and to send us your confirmation e-mail, and we automatically process it and create a whole new entry based on that.
We simply analyze your itinerary and bring it to life: in a few seconds the hotel’s pictures, maps and directions alongside the additional information are composed into your ready-to-be-sold reservation.
It’s something that doesn’t exist in any other marketplace.
And then, we help you sell your reservation by marketing it via different channels, in order to optimize our user’s probability of selling their hotel reservations successfully.
How will you generate the influx of visitors necessary to provide enough listings to make the marketplace vibrant, and not a ghost town?
Since we launched the beta version this February we see that there are rooms for sale on Roomer on a daily basis, and many visitors coming into the site and engaging with the marketplace on surprising levels.
The way we ensure there is a sufficient volume of inventory on Roomer is by helping travel agencies, hotels and tour operators with their own cancelling customers that want to post their rooms for sale instead of paying a cancellation fee – and that’s how we maintain the steady stream of inventory in our marketplace.
We’re focusing on a few cities at first, to make sure we build up volume there. As our user base grows, we will expand to new destinations.
How will Roomer persuade hoteliers to be willing to allow a secondary market in pre-paid non-cancellable, non-refundable, and sometimes non-transferable hotel bookings?
The hotels are, of course, an integral part of this new market and they benefit immensely from the secondary market from increased revenues, occupancy and improving customer satisfaction. That’s a win-win for both the hotel and its customers.
While there are many fully non-refundable reservations, the majority of hotel cancellations penalties are one-night cancellation fees, which take place in the 24-72 hour window prior to the check-in, in addition to no-shows.
Due to the nature of the last minute notice, it’s not easy for the hotel to re-sell the reservation and recover the room night revenue in full.
Plus, it’s better to have the guest actually occupying the room because they’ll be spending money at the restaurant, minibar, room service, and other incremental expenditure — which accounts for up to 40% of room night revenue for full-service hotels in the US.
Getting heads in beds is where the secondary market helps the hotels increase occupancy rates, revenues and customer satisfaction, while the hotel still receives the payment in full from the original guest.
One can say that Roomer is better than an insurance policy. Most often travel insurance is limited only to extreme medical situations that cause you to cancel your reservation, and are not free of charge.
In most cases, you know you have to cancel your reservation only a short time before the check-in date, so insurance is completely irrelevant at that point, and that’s where we give the most value to our users.
Claiming your money back from insurance is a tedious process that can take weeks.
With Roomer you can sell your reservation and get paid and it’s easy, simple and safe.
How is the way you are solving this problem more special or effective than previous attempts you or the market has seen before and how different do you have to be to succeed?
We are building Roomer as the safest and easiest-to-use marketplace for booking and selling hotel reservations.
On the one hand, we automatically verify each and every reservation in the marketplace in order to ensure trust and safety in the market, and on the other hand – the user experience for both the seller and the buyer is fast and simple.
All the seller has to do in order to post his room for sale in Roomer is to forward us an email confirmation and to set his selling price: we automatically build the entry for our users so it will look like a new hotel listing, based only on the basic information that we received.
It only takes two minutes, and after the transaction happens we take care of the whole process for our users without any friction for them.
Why should people or companies use your startup?
It’s a win-win-win for sellers, buyers, and the whole travel eco-system.
For people that can’t make it to their reservations and are about to pay a cancellation fee – Roomer helps them win their money back.
For travelers, it’s an amazing way to find a great deal at a great price, all while helping someone out with his reservation.
Roomer helps hotels increase the average daily rate (ADR), retaining high occupancy and increasing revenues from food and beverage (F&B).
More generally, hotels still get paid in full for the entire stay by the original guest (rather than just a cancellation fee), tap into the emerging segment of impulse bookers and secure the incidental revenue stream generated from the new guest’s spend on food and beverage and other incidentals.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
We have been developing various channels in order to bring buyers and sellers to our marketplace.
What other options have you considered for the business and the team if the original vision fails?
Our vision is to help travelers in distress and to inspire spontaneous travel. We still have a long way to go in order to turn this vision into reality, and it’s been an amazing journey till now.
If that won’t work – we are really good at watching movies together, and I guess we would be able to build something interesting around that.
What mistakes have you made in the past in business and how have you learned from them?
We keep making a lot of mistakes, and we try to make sure to make them fast and make them once.
I can say that the most important lessons we’ve learned are to do only what’s best for our users, keep following our vision, and to bring only the best people into the Roomer family.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Travel is awesome, and Roomer’s marketplace is all about turning the less fun parts of it – such as cancellations – into new deals that improve the status quo for everyone: the hotels, the OTA’s, the buyers and the sellers.
Every year, travellers worldwide throw away about $10 billion in pre-paid hotel bookings.
Hall St and Cancelon are the two main, established competitors in this space, though there’s also a limited trade on Craigslist. (In 2012, Tnooz profiled Spain-based Hall St and Israel-based Cancelon.)
To compete, Roomer isn’t charging fees to sellers. In contrast, its fellow Israeli rival Cancelon charges sellers a service fee of 10% of what the buyer pays, while Spanish Hall St charges sellers a fee of 10% of the rate sold, unless he or she sold a room that was purchased from Hall St’s booking engine, in which case there’s no fee.
Roomer also differs in streamlining the process for posting a listing by forwarding an e-mail confirmation. The two other marketplaces require a more complex process.
It’s noteworthy that a secondary market for hotel rooms has been so slow to take off, while secondary markets for other perishable goods, like StubHub for concert tickets, have succeeded.
One explanation for the slowness may be that hoteliers have little interest in third parties arbitraging their pricing strategies, and they work to suppress such markets.
If that explanation is true, then startups creating a secondary market need to persuade hoteliers that they can boost hotel owners’ profitability.
Getting hotel cooperation seems vital. Otherwise, users will be faced with the burden of calling the place that sold them their hotel reservation to make sure it permits them to transfer the name on the booking, and Roomer will have to have to issue refunds if a front desk doesn’t accept a reservation that was supposed to be transferred.
Otherwise, hotels may insist that their rates are “non-transferable”, which means you can’t change the name on the reservation after purchase. That, in turn, would limit the unused trips that can be put up for sale.
Or else the major hotel chains may do what major US car companies have done to Autoslash, a site that aimed to help travelers automatically rebook their car reservations when rates improved: took action to prevent customers from booking through it.
Dollar, Thrifty, Hertz (which owns Advantage), and Enterprise (which owns National and Alamo) are preventing AutoSlash from showing their vehicles, suffocating the site like a boa constrictor.
Another concern facing this new marketplace is what angel investor Brian Balfour has described as the chicken-or-the-egg problem. Because few people know about the young site, the sites can feel like empty street markets, yet to attract a large number of buyers and sellers—a dynamic that can be self-perpetuating.
Roomer’s executives didn’t reveal what their plans were to solve this problem.
Here’s a new video from Roomer explaining its service.
Sean O’Neill is a New Jersey-based reporter for Tnooz. He is also a daily contributor of consumer news to LonelyPlanet.com.
He used to work for BBC Travel, BudgetTravel.com, and Kiplinger's, and used to live in London, New York City, and Washington, DC.