Hotel Bonanza, an online accommodation startup, is moving to zero commission for suppliers as it opens its first round of investment.
The company, which was formed in 2014 (Startup pitch here), is seeking to raise £4.5 million with the first tranche of £250,000 open to hotel partners first.
Co-founder Suzie Barber says the startup wants the industry to be on board and while the business is valuing itself at £1.35 million, accommodation providers can invest based on a lower valuation.
Barber says:
"We have decided to open our round to them first offering a reduced valuation of £1 million with a minimum investment of £100. What we're doing is for them and we want to do it with them."
The company is also talking to venture capitalists and big hotel groups.
The move to zero commission is about offering Hotel Bonanza subscribers the best prices. At launch the startup worked on an 8% commission model with subscribers signing up for £10 per year.
Hotels and other accommodation providers which sign up to the platform for zero commission will have to agree to match their lowest online prices available on other channels, excluding their own websites, with Hotel Bonanza.
The members then get a minimum 5% discount on top of those prices.
Barber says:
"While we're charging hotels it's difficult to get them to match their online prices on our platform."
The second and third phases of the funding will see the company rebuild its platform and app and integrate other travel products including flights, car-hire and insurance. Phase two will kick in during the fourth quarter of this year with phase three expected to begin in the second half of 2019 when marketing efforts will also be ramped up.
The plan is also to increase the membership fee with an eventual target of £50 once phase three is complete and the company is seeing rapid growth.
The additional travel product will be based on an affiliate model providing Hotel Bonanza with a second source of revenue on top of the subscription fee.
The company began signing up members at the beginning of the year and now has about 10,000 while the platform now has around 12,000 hotel and other accommodation properties.
Hotel Bonanza has already spoken to a number of VCs and people in the hotel industry who have expressed interest in investing.
Barber says the company has had a number of bookings and that the next stage of marketing is to turn the subscription members into bookers through a dynamic ads campaign. It will also continue to acquire new users.