Hot Hotels aims to crack the fragmented same-day hotel booking space
The trend of providing same-day hotel booking has picked up in a big way. This is evident from the numerous travel tech startups in this space. There are global players and there are regional players too.
Similar to vacation rental model, the same-day hotel booking model is fragmented and it might take years for it to be called as an organized sector.
The startup is bootstrapped and the company says this allows it to take autonomous decisions, enabling it to move fast.
Also, Hot Hotels says that spending its own money makes it disciplined and that its burn rate is the lowest in its competitor set.
Hot Hotels is founded by Conor O’Connor along with Ade Muriel, Jose Fernandez and Joe Haslam in December 2011.
This core team of four people (that has two Irish and two Spanish) have prior experience of starting companies from the dot com era.
We asked Joe Haslam, chairman of Hot Hotels, about what inspired the team to start the company. He said:
“Conor O’Connor, the company founder and CEO, had set up and sold some travel companies during the dot com era. He started to see some of the same Disruptive Innovation patterns again and decided to bet that the future would be all about mobile.
The only way to really understand this change was to start a company. So we designed an app, went stand to stand at the FITUR Travel show in Madrid and signed up several hundred hotels.
We knew then we could get the inventory from hotels, which was always our biggest worry.”
Q&A with Haslam below:
Describe what your start-up does, what problem it solves and for whom?
Hot Hotels offers same-day hotel booking via a smartphone app.
We solve the problem that hotels have unsold rooms that can be matched with people who need a place to stay at short notice.
Hotels figure that a customer (even at a discounted price) is one who will come back at full price if the experience is good. Customers will make a booking if the user experience is easy and the price offered is competitive.
Why should people or companies use your startup?
We provide rooms in places that our competitors do not.
We currently offer Hotels in 23 Countries and 167 cities. Our locations are in Europe, Africa, the Middle East and Latin America.
Also, we think it is important to always provide an option of a place to stay, but we notice that the hotels our competitors are sometimes full up.
The insider knowledge and trust built by Conor O’Connor and Jose Manuel Fernandez during the years they worked in the travel industry means that we can offer some great locations and rates.
Who are your competitors?
Hotel Tonight (San Francisco), Blink Booking (Madrid) and JustBook (Berlin) are the main three competitors for us.
Conor and I have spoken to Sam, Rebeca and Stefan who are our rival CEOs and we are “frenemies”.
Yes, we compete, but we have a common interest to see same day smartphone hotel booking take off.
Its not just pathetic but also counter productive to see startups squabble with each other. Let’s wait until we are all on the NASDAQ to go all Michael O’Leary.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
As we are bootstrapping, there is not much $$$ lying around for marketing.
We did a PR launch in Spain, in the UK & Ireland and in France and that brought in customers.
Then we worked very hard on retention.
We’re very influenced by guys like Paul English of Kayak when they talk about customer service and also Jeff Bezos of Amazon when he talks about designing out complexity so that fewer things can go wrong.
How did your initial idea evolve? Were there changes/any pivots along the way? What other options have you considered for the business if the original vision fails?
Lots. Actually, when we started we didn’t know about any of the other players in the market.
Nowadays we get our inspiration not just from them, but things we see from other sectors that are good and relevant and applicable.
So “social proof” is something we are implementing. Although, we say our model is ‘same day bookings’, at weekends you can book for two nights.
Plan B is geographic. While Hot is focused on getting traction in our existing markets, if we ever want to be on the NASDAQ, then it will have to be through dominating the upcoming markets like Brazil, Nairobi etc.
75% of world’s economic growth is in the developing world. The Chinese are making ever cheaper and more robust smartphones and we want to be in places where mobile is the preferred way to get anything done.
Where do you see yourselves in 3 years time, what specific challenges do you hope to have overcome?
We want to have every three, four and, five star hotel in the world available on Hot.
The authoritative travel travel technology site Tnooz estimates there are 500,000 hotels in the world. So far we have just 2,000 in our inventory list, so there is plenty of work to do.
From the beginning, we have built Hot keeping scalability in mind.
Our model will be similar to Google Adwords where Hotels can add themselves without contacting us. The challenge will be around things like payment processing and customer support.
But the momentum coming from a billion smartphones plus a billion tourists plus a billion daily users of social media means this is an opportunity that has never existed before. That potential excites even those of us that have been round the block a few times before.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Fragmentation. Booking.com’s market share in Europe is believed to be considerably less than 10% and they have done a really good job in creating efficiencies.
One hotelier told us that they were slow to embrace the internet and let others make the money. Now with the cloud plus mobile plus social media era, it simply means that either you adapt or die.
Brian Chesky of AirBnB compares the current happening (aka The Sharing Economy) with the industrial revolution. If Hot Hotels can capture a little bit of that, we’ll do OK.
Currently, the same day hotel booking market is unorganized. There are many regional players existing in this space.
As we write, there are two other startups (watch out for TLabs soon) that were launched very recently and which also provide last-minute hotel reservations.
The sheer number of players existing and entering this space is also in correlation with the market size.
Hot Hotels says, “We use the Brian Chesky (of AirBnB) figure of two trillion dollars which, as he likes to say, is half the size of the oil industry.
We also quote the United Nations figure of one billion tourists and the Gartner figure of a billion smartphones in use.
Travel is really fragmented and that is why it is not regarded as the behemoth that it really is. The reality though is that it’s a massive sector. There is lots to play for and there will be multiple winners.”
Especially, JustBook recently learnt that its mobile-only channel isn’t enough to cater to European customers and hence the desktop-based portal was launched.
However, Hot Hotels confirmed that it won’t be following suit. Hot Hotels is keen on keeping its model as mobile-only and also in tapping the countries in which mobile usage is high.
Also, the idea of going after the developing market is a key. And, Hot Hotels points that that is its key differentiator.
Hot Hotels’ revenue stream is the percentage commission on every booking.
Hot Hotels says, “We also make a small amount from good cash management, but profitability is attained by keeping costs down, getting paid directly in advance by the customer and getting a high volume of bookings. Its not a complicated business and so that we can scale effectively, we are very determined not to make it one.”
Overall, Hot Hotels has an experienced management team who is steering the company, and looks like the mission is clear for them.
Few years from now, there will be service integrations, diversification of business and consolidation in this space, too, that will finally lead to the situation of few big and key players serving the market.
Karthick was general manager for Tnooz in Asia until September 2014.