Hotels at the lower end of the spectrum, from zero to three stars, are not always market leaders as far as digital capabilities. In fact, these hotels rely more on traditional means of filling rooms, oftentimes still using outmoded methods of tracking and booking hotel inventory.
HotelRunner, a product of Turkish start-up CloudArena, is aimed squarely at helping this segment of the hospitality industry reach digital audiences.
Billed as "smart hospitality services in the cloud, connecting properties and guests," the product is single solution to get hotels online.
The company says:
HotelRunner aims to maximize revenues from the Internet by providing extra sales channels based on a secure one-and-only repository for all customers, inventory, rates, packages and accounts.
Being a zero initial investment tool for hotels, HotelRunner brings online property management and reservation systems, a fully hosted hotel web site and the tools for effective social media penetration.
Rather than managing individual accounts across myriad websites, the product offers one log-in to independent hoteliers. From their account, they can then manage the various distribution platforms - which also include an easy-to-implement reservation module for the hotel's website that integrates into the overall workflow. This prevents double-bookings, and eliminates any previous back-and-forth between different calendars.
The revenue model is also appealing to expense-sensitive independents: it is a pay-as-you-go model, without set-up fees or recurring subscription costs.
The company of 13, which was founded by Arden Agopyan, Ali Beklen and Dr. Tolga Yalcinkaya, also has another product, Otamagic, which is basically a white-labeled OTA platform for travel agencies to sell accomodation to customers.
The team took a moment for the Tnooz Q&A.
Tell us how you founded the company, why and what made you decide to jump in and create the business.
As technology veterans, we were working on several IT projects in hospitality industry. As such, we were traveling often (in CEE & MENA) and staying at different establishments during our travels. We realized that low end of the accommodation segment (i.e. 0 – 3 star hotels) was very much neglected and they did not have proper online presence.
We also saw that travel agencies had a structure where they communicated via parcels. We wanted to solve this problem and give hotels the necessary tools to promote their business online, open-up inventories with a multitude of online sales channels, and do it effective and efficiently.
We believe in a mission which is to transform the hospitality sector from offline to online by providing them the right tools and services to use the power of the Internet to boost their sales.
What is your funding to date?
Established in September 2011, we put down $80.000 and founded the company. We received around $90.000 from KOSGEB (Small and Medium Enterprises Development Organization) through their R&D grant program. As three white collar friends, we left our well paid full-time jobs at global companies and became entrepreneurs.
In April 2012, we got a seed investment of $500.000 from 212 Capital Partners and our product development speed is rocketed. As we continued our R&D activities, we received an important state grant from TUBITAK (The Scientific and Technological Research Council of Turkey) around $210.000 in July 2012.
What is your estimation of your market size?
As a global company our focused geographies are Central & Eastern Europe, Russia, Middle East and Africa. We started our pilot in Turkey and now expanding to these regions.
In Turkey, in 2012, travel accommodation sales is $ 6.81 B (which is expected to grow to $12.05 B in 2016) and number of registered accommodation properties is 22.592 (which is expected to grow to 28.957 in 2016) not including the unregistered ones like daily rentals and apartments.
In CEE & MENA, in 2012, travel accommodation sales is $ 51.26 B (which is expected to grow to $ 82.53 B in 2016) and number of registered accommodation properties is 321.336 (which is expected to grow to 363.110 in 2016) not including the unregistered ones like daily rentals and apartments.
What's the competitive landscape of your service?
At this point, we don’t have a competitor providing a single platform for all the services our customers have access to. There are people who do for money what we do for free with vertical solutions.
Major global competitors in vertical solutions are 800-pound gorillas’ of the market. These companies’ products are too expensive for the emerging markets and their IT infrastructure is too old and not easy to adapt to new online business models. They also bring operational costs to their customers as they generally provide on-premise software.
Big players have: Outdated technology and IT infrastructure, a single market approach, reliance on their domestic markets (like US), little upsell opportunity, and financial volatility.
However our products: Maximizes hotel’s revenue from the Internet, brings hotels, online booking sites, travel agencies, and customers under one roof, and provides a ‘low cost - high return’ solution.
What is your revenue model and strategy for profitability?
We operate with freemium SaaS subscription model. Properties start with a free plan and in this plan they can find basically everything to go offline to online, like opening a web site, a mobile site, a Facebook page; accepting online direct reservations via web, mobile and Facebook.
Customers can upgrade from free plan to paid subscriptions when they want advanced reporting, social media, SMS and e-mail campaigns, connection to different OTAs via channel manager, and API connectivity from different software.
We also provide value added services like content translation, premium/customer website templates and SMS/E-mail credits for mass marketing campaigns.
Describe what your start-up does, what problem it solves (differently to what is already out there) and for whom?
HotelRunner is a digital marketing and management cloud platform for accommodation and lodging industry allowing them to create and manage their online content, and providing extra sales channels based on a secure one-and-only repository for all their customers, inventory, rates, packages and accounts. It enables “offline-to-online” conversion, improves online visibility, maximizes direct channel revenues, and boosts profit margins.
Being a zero initial investment platform, HotelRunner brings to hotels and suppliers of short-term lodging, online rooms and rates management, customer management, a fully hosted hotel web site, a mobile site, a Facebook page, ability to accept online reservations and payments from all channels, plus the tools for effective social media penetration including social coupons and discounts.
HotelRunner, in addition, offers a bi-directional channel manager that is able to integrate distribution channels easily and automatically based on a single inventory that feeds 30+ online channels simultaneously.
All HotelRunner services work on the web, mobile phones, and in social networks.
HotelRunner is an end-to-end integrated online platform that’s as easy to use as Facebook. We answer to all our customers’ needs on a digital platform and make it easier for them to find new guests and strengthen their direct channels. We do everything possible for hotels to convert them offline to online and sell their rooms. We positioned our platform according to this need in sales and marketing.
For hotel marketing, we developed a concept called “social coupons.” When a guest books a room from hotel’s website, s/he wins a discount if s/he shares the booking activity on social media. We keep in mind that hotels have a lot of needs in the online system and shape our services accordingly. One of these needs is for the information to be translated into different languages, especially to attract foreign tourists. We have a group of translators who answer to this need.
We also have photographers and videographers that take photographs and videos of hotels. In short, our product is about providing services for the hospitality industry. We not only organize these services but also handle the digital management.
When we developed HotelRunner, we thought about travel agencies too. Agencies want to find and sell the rooms of the right hotels. As CloudArena, we bring hotels and travel agencies together on a digital platform with HotelRunner.
Local and regional travel agencies can integrate with HotelRunner and HotelRunner Channel Manager connects the properties to these agencies. We’re moving an offline industry to the online world and we make hotels and every establishment that sells beds easy to reach via all channels.
Why should people or companies use your startup?
Today, businesses need to have a visible, lively online presence in order to survive. Moving to a digital platform can be pricey, time-consuming and hard to manage. Hotels can sign up to HotelRunner for free and pay as they go. They can manage all their online visibility, including their social media presence, through HotelRunner. This way, they don’t have to worry about technology, initial investments and hidden costs, so they can focus on their actual field of work.
HotelRunner runs from the Internet and is accessible anytime, anywhere. All hotels need is a browser to manage everything concerning the property, including rooms, rates, customers and promotions while data is securely stored in our cloud servers. HotelRunner is constantly updated for free without affecting any daily activity. Hotels don’t have to download updates or buy new versions.
HotelRunner brings all the advantages of cloud computing to all size hotels.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
We are mostly using the power of online. We use digital advertising, search engine marketing, social media presence etc. to reach potential customers. E-mail campaigns and online seminars are also effective ways to reach them.
For individual sales, we have a team consisting of tele-sales and field sales specialists as well as customer engagement specialists.
In this industry, word of mouth is the most powerful way to be heard. We create happy hotels and travel agencies and they bring more hotels and agencies to us! We grow with an enormous speed.
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?
The initial idea was to give a way to hotels to create an online presence easily while spending much more less money. Along the way our initial idea evolved to a much bigger one: an end-to-end integrated platform including many features that hotels need while going online. Instead of buying different software and services for individual vertical needs, HotelRunner is now a turnkey solution for them including everything they need.
A nice pivot was around pricing strategy. When we got into the market at the end of 2012, we were pushing a transactional pricing strategy but our customers in this industry were already hating transactional costs and commissions so we removed them. We are always evolving and changing our pricing and product strategies aligned with customer needs.
Where do you see yourselves in 3 years time, what specific challenges do you hope to have overcome?
After launching our public beta in November 2012, now, in 6 months operating in 5 different languages and with almost 1000 properties registered, we are in over 50+ cities, 10+ countries.
In 3 years, we see ourselves as a dominant global provider for smart hospitality solutions and marketplaces especially active in emerging markets. We will be raising a Series A very soon to support this global growth.
The biggest challenge we are overcoming is the education of an offline industry while converting them online. We are heavily investing time and money for our customers’ success in online business.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
In accommodation and lodging industry, the biggest problem is low online visibility which brings low direct sales and low profit margins.
In this area, every company solves only one problem with one vertical solution that hoteliers are having while doing online businesses. These individual solutions are expensive to start, hard to use, commission-based and most importantly not integrated. We are providing everything a property needs to go online for a much affordable price and integrating all sales channels and tools.
Tnooz take:
Getting independent hotels online is a big business - and a difficult one, as those still lacking a cohesive digital presence are likely customers in need of a high-touch service - leading to customer management costs.
Acquiring customers will also be a challenge, as they will either need to identify the ever-shrinking number of hoteliers without a digital marketing management solution or poach customers away from other services. Either way, the challenge is significant.
The concept of a single dashboard for a multitude of services is definitely appealing, although it is one that is being implemented by companies such as buuteeq. Hoteliers don't want to manage multiple websites, so saving time by aggregating into one interface is key. The winner in the space will be the one with the most effective UI.
Pricing strategy is also vital to this sector, and by offering a fee-free setup without any ongoing costs will appeal to hoteliers seeking a solution without heavy upfront commitment.