Xotelia is a channel manager dedicated to bed-and-breakfasts (B&Bs), gîtes, chalets, flats, and other rentals.
It connects to online travel agencies (OTAs), such as Booking.com-owned villas.com, and peer-to-peer platforms, such as Airbnb, via a real-time, two-way interface, enabling instant bookings.
Founded in 2012, the startup says it is already breaking even.
Xotelia, based in Grenoble, France, exploits a gap that's opened in the global lodging market because of recent shifts. Large hotels chains are losing share against small independent owners who are merely renting a room, a flat, a villa, etc…
Numerous listings platforms have appeared based on a peer-to-peer, or a consumer-to-consumer, business model (eg: Airbnb, Wimdu, Housetrip, 9Flats, etc…).
As a response, B2C OTAs (e.g.: Booking.com, Expedia, Clès Vacances, and Gîtes de France) are now distributing some small properties run by individual owners. In 2012 Booking.com has integrated the option “flat” on the main website. In 2014 Booking.com launched villas.com.
When hotels try to cope with a variety of distribution outlets, they turn to channel manager software, which is usually connected to the property management system (PMS). Today more than 40 certified channel managers are on the market for hotels (defined as having 15 rooms or more) who connect to OTAs and global distribution systems.
But there's are hardly any channel managers for the independent owner. That's where Xotelia steps in.
A Q&A with CEO Jeffrey Messud
Tell us how you founded the company, why and what made you decide to jump in and create the business.
I graduated from university in 2010. I worked for Expedia as a revenue specialist in France, then as a sales manager for Möevenpick Hotel Doha Qatar. Finally I decided it was time to create my own business.
Size of the team, names of founders, management roles and key personnel?
We currently have a half-dozen employees at Xotelia. Myself, two account managers, one sales manager, and two IT developers.
The core team: Nicolas Martina is in charge of all our members, integration process, and evolution of the system. He previously worked for Lastminute.com. Denis Roussel, IT manager, makes our system even more scalable. He previously worked for M6 Web.
Personal assets and a loan.
Estimation of market size?
Market size is huge, Homeaway mentioned 13.5 million potential clients worldwide at the Phocuswright Conference last November. They already have contracted 1 million.
Airbnb says it is registering a thousand new places everyday.
Currently our subscribers manage 1,200 properties through Xotelia. We are aiming at handling more than 35,000 properties by the end of 2018.
Today various solutions are close to ours but none have the capability to connect to any of the key OTAs in this market (e.g: Clès Vacances or Gîtes de France for the French market, our Cottage in Canada for the Canadian Market).
And few are focused on the individual owner market and provide instant booking management of tens of portals and OTAs.
Our technology allows us to connect to small local OTAs dedicated for the short term rental activities. These OTA’s although small, they usually have very good conversion rates and are hard to connect from an ROI point of view for the bigger channel managers.
Revenue model and strategy for profitability?
Monthly membership fees are based on year-long subscriptions.
1. Monthly charge during 12 months
2. 12 months down payment + 2 months additional for free
Xotelia is already profitable at our current rate of growth and size of membership. What is really helping us is our high renewal rate.
We help hotels grow their customer base for instant booking capabilities. We will further increase our growth with the launch of an automatic registration solution and growing our customer focus team.
What problem does the business solve?
The main two difficulties:
- Maintain a reliable system. Currently we update every day 60,000 availability records with our system.
- Finding the best OTA (B2C or C2C) that actually generates reservations.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
The initial idea hasn't changed that much, we have evolved in our selling strategy. Selling outside of France was not considered before 3 years time. Yet per today, already over 30% of our members are outside of France.
Why should people or companies use the business?
Our system is simple, user friendly and correspond to the needs of short term rental owners.
For instance using “Hotel Channel Managers (HCM)” for your short term rental activity would make no sense. As an owner you would be willing to advertise your rentals on Homeaway or Airbnb for instance. Existing HCM do not provide this type of connectivity.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
As mentioned above, the best way to raise awareness is the quality of our service which results in positive word-of-mouth marketing.
Then we also have international partners that recommend our service to their customers, such as Jimdo (>10M subscribers), Paypal, as well as big OTAs like Booking, Expedia, Tripadvisor, etc.
Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
In three years time we have the following objectives:
- 35,000 properties
- Yearly sales of 7 Million euro
- Keep our renewal high
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
Nothing is wrong with the tourism industry, it is just changing. Today people are looking to have complimentary revenues by renting their villas for instance. It is more profitable to rent your apartment based on short stay that renting for an entire year.
Today travellers want to travel and live like locals. Staying in an old flat in the middle of Venise rather than a classic five star hotel room.
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?
We like the culture and speed of our partner JIMDO. They cater to similar customers as ours and they have grown incredibly fast to a respectable size while keeping the teams super motivated as during the first days.
Which company would be the best fit to buy your startup?
Recently we have seen several exit opportunities:
- Real Page ($1.45 billion value), purchased Kigo (80 employees) for more than $36M.
- Priceline acquired Buuteeq (6,000 hotels websites, sold for $60M, 200 employees) getting deeper as Hotel-Tech Provider.
These are inspiring. There are many possible companies that could similarly be good fits with us.
Describe your startup in three words?
Flexible, problem solver, customer focus.
One of the hottest trends right now is subscription-based software-as-a-service (SaaS) solutions for the hospitality industry. Xotelia is an interesting new player.
CEO Jeffrey Messud in charge of the sales and developing key new partnerships, but this is a fractured market. How to effectively market to such a diverse, "long-tail" group?
Messud has been developing a strong reputation as an up-and-coming business star in Parisian trade circles. His company seems to have product market fit, another good thing.
Messud's company seems to have both identified a real pain point that customers will pay to solve, and it seems to have created a product that customers like -- given that the company claims to have a 84% renewal rate, and that it has hit breakeven.
But Xotelia looks like it needs funding and mentorship to help it scale up quickly.
His team got its first customer in a bed and breakfast in Chamonix, France. Within the first year of business, the company had signed up 250 bed and breakfasts located in France, Switzerland, Portugal, Spain, Belgium, Sweden, and Columbia.
That pace of growth is good. It means it generated more than 2.4 million euro in reservation volume for its clients last year.
But it needs to grow faster to out-maneuver potential rivals.
We are eager to see what happens to this inspiring startup.