A treehouse yurt. A tent in a Hawaiian forest. A FEMA-certified dome. These are some of the examples of quirky places to rent for under $99 a night via Hovelstay, a Glendale, Calif.,-based startup.
The cheap lodging platform says it has received $1.2 million in Series A capital from private investors in Dubai.
In July, Hovelstay began with a .edu address and a target market of college students. But most of its inquiries for cheap and wacky places to stay came from Baby Boomers. Go figure.
So yesterday it opened to the general public.
All of its rates are $99 a night and under, says public relations manager Louise Miclat. Cheapness will be a differentiator from other listing services, like Airbnb.
Guests can search hovels in three price categories: Survivor Hotels, "Good Enough," and Clean and Comfortable. As with Airbnb, there's a back-and-forth with a host before a booking is confirmed.
Hovelstay has created a cute Vine to capture its ambition.
Q&A with CEO Michael Bolger:
Tell us how you founded the company, why and what made you decide to jump in and create the business.
Two of us who had years in the luxury vacation rental business were floored at how serious a lot of these vacation rental sites took their properties, describing them as luxury when in fact they weren't.
So we decided on creating a site that went entirely in the opposite direction - if it’s a dump, we would love to have it.
Size of the team, names of founders, management roles and key personnel?
A total of 9
Co-Founder and CEO Michael Bolger
Co-Founder and COO Michael Womack
Co-Founder and CTO Patrick Cunningham
Director of PR Louise Miclat
Business Development Associate Caitlin Houston
Operations Coordinator Jessica Gilhooley
Shaun Finley Development Administration
Brendan Petroff Software Engineer
James Barros Developer Senior Architect
Funding arrangements?
We were unbelievably lucky. I had mentioned what we were doing by chance to an investor I knew when we were working out the prototype.
He asked if we were looking for funding after hearing about the idea. Once the prototype was up, all he asked was “how much do you guys want?”
It is not lost on any of us what a stroke of luck that moment was. And we are in great financial shape until well into next year, when our original platform will be finished and we might look into series B funding.
Estimation of market size?
Well, quite frankly, massive. The numbers of vacation rental site users is in the ten of millions each year, and growing.
Its one of the reasons hotels are fighting tooth and nail in cities to temper the vacation rental market. But it needs to be pointed out, we didn’t start this to take on any big chunk of the market.
At all. It was supposed to be a little bit of an inside joke, catering only to colleges students, wanting to keep it edgy and underground.
We didn’t realize we were striking a nerve in the marketplace.
Competition?
Well, there are the obvious competitors whose names we don’t mention in the office, but there’s also a really fair number of unknown sites that are specific, like ones for teepees, for example, or cool sites like glamping.com, although they do the full-blown experiences, crystal and china included, I think.
And much like them, we’re way more niche than the average competition.
Revenue model and strategy for profitability?
Our revenue model was to deliver more on the users experience than stuffing our pockets. This endeavour was not spread-sheet analysed prior to launch.
We wanted to pay our bills and have some fun. That was it. The fact that it has converted itself into a popular site is icing on the cake.
We literally have VCs contacting us on a regular basis asking for buy-in, and other sites asking us to partner. And we’ve only been live since July.
Timing has a big hand here with our profitability potential as much as anything else. We know that’s not a model, but we're becoming used to breaking norms.
What problem does the business solve?
We are the “space between.”
Some sites let you stay in more luxurious accommodations, some let you crash on their sofa.
We’re that undiscovered area, allowing people to still travel without spending 45% of their travel budget on a hotel or motel room.
That’s a huge piece of your travel pie when you think about it. So we solve the problem of lack of options.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
The initial idea evolved from a bathtub. Literally. One day Bolger thought: Wouldn’t it be funny to just market a bathtub as the “Ritz-Carlton of bathtubs, and you could rent the tub for a night?”
Since then it has been nothing but staying flexible. We’ve had to hire 7 new people after our first eight weeks live.
We’ve managed to stay pretty even keeled so far by staying open minded and fluid.
Why should people or companies use the business?
It’s cheap, interesting and easy. We don’t pressure the hosts to make their property look a certain way, or give favouritism to hovel owners whose properties book more often than non-featured hovels.
It’s a level field with us, on both sides. And— people traveling through us have the potential of making a new friend. To us, that’s pretty cool.
What is the strategy for raising awareness and the customer/user acquisition?
Niche targeted marketing and social media. We want what others don’t think about or necessarily want, but when it’s provided, they want it.
Who would think they could generate a little extra cash by renting out a corner of their dining room where someone could throw down a sleeping bag and crash? We are the site to answer that call.
Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
Our biggest challenge to overcome will be growing too fast. As it is, we are already opening an office in London to handle marketing for the European and Asian markets.
And while we want to keep this as organic a progression as possible, we also believe in three years time we will be very well rooted in the marketplace, without losing our identity and what we do.
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
The word luxury is the second most abused word in the English Dictionary, next to love. That’s why we come from the approach of totally underselling something and letting you be surprised when you arrive.
Full disclosure: Personally, we would much rather stay in a Yoga hut in Nicaragua near a waterfall then take another elevator ride from my hotel room to the lobby restaurant.
What other technology company (in or outside of travel) would you consider yourselves most closely aligned to in terms of culture and style... and why?
Maybe oddinns.com and airfordable.com. I like what both of these sites are doing. They are off the beaten path and providing an awesome service.
I also really like the socially responsible sites like thisbarsaveslives.com. They are doing tremendous work in Africa.
Which company would be the best fit to buy your startup?
Anyone who “gets it.” If and when we ever consider such a move, it would be to someone who understands what we are doing and keeps the integrity of the site in check.
Someone who also might want to fold a brand like ours into their own brand without watering it down.
Describe your startup in three words?
Anti-Luxury Marketplace
Tnooz view:
Well, this is one of the most enjoyable of the Startup Pitches that we've reviewed. It has a direct proposition, a conversational style, and a sense of humor.
As for its business, Hovelstay's most obvious challenge may be in persuading people to list lodging on its platform.
It's up against monster rival Airbnb, which has more convenient services for property owners -- simply by virtue of having been experimenting with features for years.
Today, Hovelstay's inventory looks skimpy in comparison. It will have to solve the chicken-and-egg problem of achieving a network effect for its marketplace.
A second daunting effort may be persuading other investors that they will earn adequate returns, given that the commissions on under-$99 lodging are unlikely to be high.
The discount end of the market is underserved. Some brands have developed solid, if modest, businesses upon the market, but these businesses are unlikely to produce 10x returns on investment within, say, seven years.
We're thinking brands like Couchsurfing for peer-to-peer lodging, all of the house-trading exchanges like Intervac, EuroCheapo for hotels, plus Frommers.com and BudgetTravel.com for (often value-based) travel advice.
Still, the Hovelstay team has moxie. Let's hope it can execute on its plan and kick ass.