Homestay accommodation is not a new phenomenon in the student and youth travel sector.
But the market for online booking and management services for educational and leisure short-term lodging is massively fragmented, without a leader, according to Homestay.com, a consumer listings for the short-term stay market.
Soft-launched in July 2013, Homestay.com has raised €3 million to date in funding from venture capital firm Delta Partners and some private investors.
In less than a year, Homestay.com has signed up more than 15,000 homestay hosts, has procesed more than 50,000 nights of stays, and staffed up with 20 employees in Dublin, according to the company.
CEO is Alan Clarke, previously of PaddyPower.com, the online gaming giant of the UK market, and formerly of Yahoo and McKinsey. Chairman is Paddy Holahan, the founder and CEO of Newbay, bought by Blackberry maker RIM for $100m in 2011.
Tom Kennedy, one of the co-founders of Hostelworld.com back in 1999, is also involved, along with Debbie Flynn, director and founder of Irish Education Partners.
Tell us how you founded the company, why and what made you decide to jump in and create the business.
Kennedy, with experience in having created the world's most successful hostel listing service, and Debbie Flynn, a 30-year veteran of the education travel industry, saw a huge opportunity to support an offline travel vertical. There's a technology play in building a better website than the competition.
There's also a marketing challenge in expanding the concept's appeal beyond young people. Targets include tourists, people doing internships or relocating for work, anyone travelling to learn a language in another country.
Competition?
The homestay industry has a number of existing online portals and listing sites including Homestaybooking.com, Bedycasa.com and more broadly there are a number of large P2P accommodation sites like Airbnb, Housetrip etc… who compete in similar verticals but are not exclusively focused on building out a Host is Present aspect.
We are focused on maximising the local and personal nature of the homestay experience, and plan to develop a marketplace tapping into a ‘Host is Present’ model exclusively. We have integrated into our platform the ability to match guest and host interests such as fishing, golfing and cycling.
Revenue model and strategy for profitability?
The business is based on a simple booking deposit model, which gives transparency to both hosts and guests. It also allows us to scale very quickly.
Estimation of market size?
We estimate the global homestay market spend to be in the region of €11 billion a year.
What problem does the business solve?
We know there is a strong and growing appetite in mainstream travel for alternative accommodation to hotels and hostels. Homestay accommodation has been around a long time but as a fragmented market and largely confined to student travellers.
We connect hosts and guests worldwide, ideally with similar interests, bringing homestays to the mainstream travel market. It’s not an empty apartment or house, the host is there during your stay.
People who have a room to rent in their home can sign up (for free) as a host family and we promote their homestay to a global audience.
Here's a Vine that Homestay.com created:
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
Debbie, one of our co-founders, is a 30-year veteran of the homestay industry and a director of a number of travel related businesses in Dublin. Debbie recognised the need to bring more transparency and efficiency to the youth and student travel market place. To that end the business originated with a plan to build a B2B platform to support existing homestay network providers and language school operators.
Having developed a version of this platform, the business evolved into supporting in addition a fully-fledged marketplace for homestay experiences. The goal is to build the supply side of the marketplace in collaboration with existing industry partners, as well as directly through digital marketing spend.
Why should people or companies use the business?
When people travel they want authentic experiences, staying with locals who know the destination they’re visiting better than anyone else and who ideally share similar interests. Homestays are an alternative, affordable accommodation option to ordinary tourist accommodation such as hotels or hostels.
It suits all types of travellers including tourists, students, interns, people relocating for work or attending an event.
The hosts are what make homestay accommodation so unique. They welcome the guests into their home, share their local knowledge and provide the opportunity for visitors to not just see a place, but to really experience it and understand what it’s like to live there.
Our hosts range from young couples to retirees and families. Anyone around the world can sign up as a host on Homestay.com, they just need to have a spare room in their house and be living in the home during the guest’s stay, making it a truly authentic and unique travel experience.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
In addition to PR, our focus is on growing awareness and customer/user acquisition through digital marketing channels including Google, Bing, Facebook and Twitter ads.
We are engaging with the travel blog community to build awareness among consumer leisure travellers and engaging with industry partners in the education travel sector to build awareness among the student and intern market.
We’re building awareness on social media platforms, including YouTube, which we use to promote video testimonials by our hosts to drive awareness among people interested in becoming a host and videos explaining the homestay concept for anyone interesting in booking accommodation.
We attend events and expos relevant to our sector.
Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
Our goal is to build a global homestays booking platform.
We currently have hosts in 40 countries across four continents and we’re adding new hosts every day. The site is available in English and Spanish with Portuguese being added this month.
We aspire to develop a global business, with a global network of homestay hosts and guests, partnering with established homestay industry providers where plausible.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
There is a massive opportunity to open it up to mainstream travellers who want a more authentic experience, staying with locals in their homes.
In the six months since we launched in July 2013, we’ve also had strong demand from the more traditional student and intern sector for whom the concept of a homestay is less unusual.
In Ireland alone, 96,000 foreign students come to learn English every year, largely staying in host family accommodation organised by schools and agencies. That's a largely untapped market for homestay via online booking.
What other technology company would you consider yourselves most closely aligned to in terms of culture and style... and why?
The team leading the Homestay.com business has a strong track record in the ecommerce travel industry and the education travel sector. The company was founded with a similar booking deposit business model to Homestay.com and at the time it launched was disruptive and pioneering in the travel accommodation sector.
Several of the Homestay.com staff previously worked with Kennedy at WRI, which was sold in late 2009 for $340m to private equity group Hellman & Friedman. Homestay.com chairman Paddy Holahan previously served as chairman at WRI for several years.
Tnooz view:
The company claims triple digit month-on-month growth, from a small base. That's promising.
Yet some of the company's actions are eyebrow-raising. Why, for instance, did it chose to open its headquarters on St. Stephen’s Green, one of the most expensive areas of Dublin, not many doors down from the five-star Shelbourne Hotel?
(Perhaps they got a really great deal. As you can see from the Vine, it's not a space age office by any means.)
Are its social sharing and rating features as effective as Airbnb's, Tripping's, or Roomarama's?
(From an amateur's eye, they seem behind the curve on these points.)
And given such competition, where are the advisors or investors who have experience in that vertical and who can guide the executive team in which shoals to avoid?
(No one seems to have experience in the homestay business in particular.)
Given that language learners are a target demographic, has the company made it a high enough priority on its product map to roll out foreign-language versions at a fast enough pace?
(A new language every three months seems like an ambitious goal, but maybe necessary to build a competitive moat to protect the brand from copycats.)
All that said, it's easy to crack wise from the sidelines.
Kennedy has a track record building mass consumer-facing businesses, as do several of the investors and advisors. Delta Partners has invested in a lot of well managed companies. The initial growth metrics are promising. The slogan "Don't just visit, live it!" is catchy.
Here's hoping this Irish travel brand succeeds.