NB: A version of this article originally appeared on online Russian publication Firrma
Flatora is Russia’s answer to Airbnb –it’s an online service for short-term accommodation rental in the region with its founders dubbing it the booking.com of the apartments rental market.
The Russian market is rather difficult for projects of this kind but Flatora founder Bobir Akilkhanov thinks the service is needed here. Previously, Bobir founded a startup called KupiOtpusk (Buy your vacation) but, he didn’t stop there.
When he tried to find a new idea to work on, he realized that there was no convenient and safe way to book an apartment online in Russia and CIS (Travelrent only entered the market in 2011). So, he decided to create a marketplace where travelers and apartment owners could find each other.
Airbnb is a global leader in this market but it wasn’t promoting itself actively in Russia at the time. Flatora’s creators admired this project and tried to emulate the model for the Russian market which is very different from Europe and America – both in terms of apartment owners and their clients.
One amusing anecdote, told by Bobir, highlights why Flatora is needed for Russia and CIS.
"A Flatora investor representative said 'When you come to Sochi, you find lots of grannies standing with ‘apartment for rent’ signs. It’s the 21st century and they should be looking after their grand-children and let professionals do this job'.”
When Flatora got seed-investments from a non-specialized investor, the team started to prepare a beta-version that was built between January to October 2012. Here are some of the challenges it faced:
Overcoming Distrust
During the first moths after the launch project the team got to know the dynamics: demand is high and conversion from targeted PPC-ads is about 8%. But, the Russian client is famous for his distrust which is for different reasons. In Europe and the US, apartment hosts are ready to let people live in their apartment but on the Russian market professional lessors prevail.
Bobir says:
“We didn’t know how our service that is built on a model that works in the developed markets would work.
The average Russian isn’t ready to give his credit card information and emphatically asks to see the apartment first, although you never sees the hotel room beforehand.”
Payment System
It took nine months for the project team to build its own payment system. The founders consider a peer-to-peer scheme to be the site’s main advantage. The interactions between lessor and his guest are organized without the help of intermediaries via virtual banking. It’s automatic and there’s no need for human participation or any bureaucracy. After the guest pays the money it automatically goes into a’virtual bank account’ – lessor receives access to it when the guest arrives and sees that he gets the apartment that was ordered on the site. At this moment guest passes the special code that is used to access the account.
Airbnb uses the same scheme but this is the only project that does it on the Russian market. However, people lose money on currency conversion even if the transaction is done between two Russian residents.
B2B
The startup develops b2b-relations with lessors on one side and offers its service to clients who need accommodation on the other. The lessor creates an account on the site and gives information on the apartment and his payment terms.
Flatora has more than 7000 units in its database right now. Some lessor-partners have their own sites which they use to promote themselves. The startup’s aim is to help these people to rent their apartments, simultaneously acting as a sales channel and additional information resource.
Such partners are worried about lots of different elements – for example, laundering. It seems like a small detail but many renters reject two or three-day apartment booking if it cannot be properly organized.
The startup gathers the information from the lessors’ community to help find different solutions for their problems. Flatora provides free consultations to lessors about different laws and regulations etc
B2C
Many Russian travellers don’t consider the possibility of booking an apartment instead of a hotel. Flatora positions itself like booking.com on the apartment market. So the goal is to warm up the market and increase clients’ trust in it. The client needs to know that if the apartment is different from the one that he saw on the site, there will be implications for the lessor and the client will be given a similar or better apartment.
Keeping all sides happy
There are still many sticking points between what guests want and what lessors need, but they are all Flatora's clients. It’s often hard for the guests to find an apartment for their required dates because many lessors are not interested in short-term rentals. On the other hand, apartment owners often have unfilled spaces for two to three days that they can’t fill.
Bobir says:
“At the very beginning we thought we would have to work closely just with the lessors because B2C clients would be able to make all the reservations independently without our help. But it turned out that every second client calls us directly As a result the team created a customer service division that is part of the sales department. Flatora has its phone number on the home page and receives clients’ calls regularly – that’s the Russian reality."
Business
The startup earns revenue by adding its commission to the apartment price. For lessors it’s a free service. In Russia there are projects such as Apartator, Travelrent that are considered as Flatora’s competitors on the short-term rental market. Cian is an indirect competitor.
The startup plans to gain a stable position on the Russian market and then turn to CIS. As Bobir says, 100 sales per day of at least three nights will enable it to be self-sustaining. The team has plans to add 12,000 more units for rent by September 2013 and a further 20,000 by January 2014. This way they’ll have about 40000 objects in Russia and CIS.
A Comment by Valentin Dombrovsky, CEO at Travelatus
The Airbnb (the leader of the share economy) phenomena excites many startups and that is also true for the Russian short-term rental market.
But Airbnb is more than a short-term rental service – it’s a community, a possibility to find new experiences and acquaintances and not just a substitute for hotels. You can even say it’s a lifestyle.
Other local projects do not work with professional lessors although it’s a less risky model. And there are many projects of this kind on the market – Apartator, already mentioned, and a bunch of projects like Vsoyuze or Kudarom etc. So the market is becoming more saturated with local startups.
It will be hard for it to fight with Airbnb for publicity – Flatora's offer includes only Russia and CIS and the target audience is Russian speaking only. And inland travel is still undeveloped in Russia – that means that the local projects have the task of its popularization.
I think that partnership with a local hotel booking service could be an interesting step for the local short-term rental service (the same way as Booking.com partners with InterHome). United efforts could help to compete with global competitors.
NB: A version of this article originally appeared on online Russian publication Firrma
NB2: Hat-tip to Valentin Dombrovsky, CEO of Travelatus for his translation skills.