HotelsCombined isn't well known in North America's travel tech community. Yet the accommodation metasearch site, based in Australia, has recently experienced a surge in growth.
In the past two years, HotelsCombined has doubled its number of users to 200 million. That translates into about 18 million monthly unique visitors, including the traffic generated by its affiliate network, white-label partners, and direct visits to its consumer website.
In the past 18 months, the Sydney-based company has doubled its staff to more than 200 employees. More than half of these workers are outside of in* Australia, and the expansion at the Sydney headquarters has led to the opening of a second office. (*Corrected on 23 August.)
Doubling its revenue from a small base in 2012, HotelsCombined has hinted to the Australian trade publication TravelTrends.biz that its annualized revenue might now be as high as $100M AUD.
In the past year the privately-held company has expanded its inventory of "live, bookable" hotels from 320,000 hotels to 400,000, thanks to a series of partnerships with companies, such as Venere, a hotel portal owned by Expedia Inc; InItalia, a hotel reservation center in Italy; and Hotels.nl, a major Benelux booking site.
Metasearch on the verge
HotelsCombined is feeling a lift that's part of a rising tide for all metasearch websites, which aggregate listings from numerous sources. For proof that this business model is now profitable, look no further than the recent spate of acquisitions by online travel agencies of major metasearch sites. In the past year Priceline Inc nabbed Kayak for $1.8 billion, while Expedia Inc acquired German hotel metasearch site Trivago for $632 million.
While a comparatively smaller player, HotelsCombined is still impressive for being a startup that has been fully bootstrapped since its founding in 2005. The majority of shares are owned by the company's three founders -- Yury Shar, Brendon McQueen, and Michael Doubinsky -- refugees from HotelClub, an Orbitz subsidiary.
On Priceline Inc's radar
HotelsCombined is popping up on the radar of industry executives. In June Priceline Inc CEO Jeffrey Boyd namechecked HotelsCombined in the same breath as Kayak, Trivago, and Google as the masters of metasearch, during off-the-cuff remarks at Goldman Sachs' Lodging, Gaming, Restaurant and Leisure Conference.
Perhaps coincidentally, also this summer, Priceline-owned Booking.com appears to have removed its inventory from HotelsCombined, according to a source speaking to Tnooz anonymously. Neither company commented on the report. But Booking.com is no longer listed on the site's list of suppliers.
If Booking.com pulled its inventory because it feels HotelsCombined is a threat, as opposed to some commercial factor, that may signal the first time that Booking.com has started to use its substantial leverage to throw its weight around.
White-label offering
HotelsCombined has benefited from whopper deals with DoHop, Momondo, Skyscanner (since 2009), and Travel Supermarket -- three metasearch sites with heavily European audiences.
It's also gained from niche partnerships with direct marketing organizations, especially Visit Abu Dhabi.
It's most lucrative white-label project may be with Ryanair, the Irish low-cost carrier that up-sells passengers on lodging via RyanAirHotels, a website powered since April 2012 by HC that generates commissions for the airline based on the number of bookings made.
Going back to the previously mentioned tension with Booking.com, one US analyst says on the condition of anonymity:
I also think it’s interesting that they provide meta for Ryanair, and the Ryanair branded hotel booking path is actually powered by Booking.com. So exactly who’s customer are you? Ryanair's, HotelsCombined's, or Booking.com's?
HotelsCombined won't divulge what it earns for supporting partner websites. Its margins may be minuscule, because it's essentially taking a cut of a cut. Even so, even assuming the partnership margins are smaller than from direct traffic, margins in general for hotels and other accommodation types are pretty good, so these deals could be quite lucrative.
Affiliate-led growth
Three years ago, Yuri Shar, director of the company, said that the affiliate network drove 59% of its traffic. Paid search advertising generated about a quarter, with organic search referrals providing the rest. (Executives no longer release such figures.)
The company's extensive affiliate program is similar to the largest comparable operation, Expedia Affiliate Network EAN, in that it provides access to hotel content via an API. The company wouldn't share its contract terms, but fees commissions to affiliate partners vary between $0.50 to $2 AUD per click to one of its compared suppliers. [Sentence corrected per comment posted by company co-founder, below.]
Those rates may be low, relative to the lack of clicks that typically take place. A second, well known digital entrepreneur in Asia Pacific who used to work with HotelCombined's program noted that its commissions "suck big time." When asked to clarify, he said by e-mail, "The commissions suck BIG time."
Negatives to watch
No company's perfect or without challenges and HotelsCombined has its share of flaws and hurdles to overcome. The biggest thing may be that its growth rate has been relatively lower/slower than Kayak's, Trivago's, and other metasearch sites in its competitor set, at least until this year.
A second potential problem is quality control in the eyes of consumers. For example, Jeroen van Velzen, CEO at Sound of Data in Rotterdam, is a frequent user of HotelsCombined when booking his personal travel. He told Tnooz by phone:
The company ought to offer marketing consulting services to help its booking partners. As a consumer, I don't always trust the names that pop up.
If I'm looking for a hotel in Rio de Janeiro, and the lowest rate is on some site I haven't heard of, like SuperLowPricedHotels or something, I might prefer to pay the $15 or 15 euro premium to book the same hotel, same room via a partner that I know better, like say Venere.
They could do more to inform consumers about why their lesser known partner brands are trustworthy.
Henry Harteveldt, an analyst at Hudson Crossing, a consultancy, offered this estimate to Tnooz:
It's a nice metasearch site, but there's nothing terribly compelling about its user experience. It uses the the traditional booking framework.
The site doesn't offer the ability to shop by interest, or proactively shop by price/budget. Not every consumer has a destination in mind when first thinking about taking a trip, and travelers do allow their budgets to dictate their destination.
Its search results aren't presented in a pioneering or compelling manner, although I do like that is offers a lot of photographs of each property.
All that said, HotelsCombined's pages download quickly, its information is presented fairly clearly, and its content is published in 39 languages.
A standout startup that's unknown in North America
HotelsCombined isn't a household name in North America. One analyst who is frequently quoted commenting on the hotel industry admitted to Tnooz he hadn't heard of the company until we asked about it.
Says another prominent US-based travel industry analyst, who spoke on the condition of anonymity:
It’s probably fair to say HotelsCombined is broadly off the radar in terms of the US supplier industry.
The low-key style of top executives probably also contributes to the company's low profile. They're not constantly self-promoting on the global conference circuit. Says Harteveldt:
There's nothing wrong with a company whose leadership focus on making sure the business is running as well as it can, rather than seek out press coverage. I actually find that refreshing.
Branding campaign
Building sales through its direct channel rather than white-label will require even broader brand recognition. Given its substantial private brand business, HotelsCombined's name isn't displayed to many people who book through it, so the company doesn't have a household name globally.
In 2013, it grew ~60% in traffic to join the top five most-visited Australia travel sites, according to data from Experian Hitwise, provided to Tnooz by eMarketer. Those numbers roughly align with figures from ComScore.
Describing itself as one of the Australia's "most successful businesses", HotelsCombined still has room to grow. It has yet to crack the top-ten list of travel sites visited by Australians -- a list that includes Aussie OTAs like WebJet and Flight Centre and global brands like TripAdvisor and Skyscanner.
But in January, the metasearch site moved to change this by dropping its online-only marketing strategy and launching a TV campaign that broadcasts a 30-second ad (watch it, below) during peak and off-peak programming on a variety of Australian channels, mimicking successful TV branding campaigns by Booking.com, TripAdvisor, and Trivagoin the US.
Given the growth rates in Asia Pacific, HotelsCombined can afford to be off-the-radar in North America. Its white-label program may also continue to gain appeal with smaller digital players because of the rising costs of driving alternative traffic flows, such as to pay for search engine marketing and or to hire a skilled user interface development team.
That said, there's room to grow. Two US analysts with whom Tnooz spoke said that small size didn't make it a likely, immediate acquisition target. The company hasn't taken outside funding, so it has time to wait.
Yet HotelsCombined is nevertheless impressive in the context of being a startup in Australia -- a country that hasn't produced many online travel companies that have achieved global scope.
It'll be interesting to see how long it may take HotelsCombined to gain first name recognition among professionals in the North American travel tech sector, though starting with Jeff Boyd is good progress.
NB: Charts are republished with permission from eMarketer.