TLabs Showcase - RRBO

TLabs Showcase focus on startups featuring Ohio, US-based vacation rental site RRBO.

Who and what are you (including personnel and backgrounds)?

RRBO was founded in 2009 by three former executives from CompuServe and AOL who also had experience with timeshare ownership.

We saw a market that was inefficient, and created a website solution.

Using RRBO, timeshare owners can easily rent their units when they are not using them, and people going on vacation can rent villas at exclusive resort destinations at prices 30-50% less than what hotels charge.

The company’s founders are:

Mike Blackwell – CEO, was the former CEO of ShareThis, one of the most popular tools used on the internet and previously led AOL's search technology group.
Mike Doel – CTO, has 15+ years of software development and management experience leading the development team at CompuServe.
Bob Kington – COO, has extensive senior management experience with over 25 years in technology companies including OCLC, Goal Systems, and CompuServe/AOL where he was the Executive Producer of the online service.

What financial support did you have to launch the business?

The business was bootstrapped and the founders spent the first year working for minimum wage on a sweat equity model to build and launch RRBO as quickly and inexpensively as possible.

The company has raised $810,000 in equity financing from angel investors including the Ohio Tech Angel Fund.

What problem are you trying to solve?

There are more than five million timeshare property owners in North America at 1600+ resorts that are among the finest vacation destinations available.

About 60% of owners trade or try to rent their units each year but there hasn’t been an easy way to rent, until now.

Timeshare owners have told us they’d like to be able to rent their properties but don’t want to arrange all the details with the renter. At the same time, many people who rent vacation properties are looking for two and three bedroom villas rather than a hotel.

They want to go to resort properties with great amenities, but they don’t want to pay “retail” in prime season. Who does? Resort Rentals By Owner was created to meet these needs.

Describe the business, core products and services?

RRBO.com is the core product, and offering dramatic price savings to people going on vacation is our key value proposition.

Vacation resort properties (and hotels) have sophisticated and powerful marketing programs to offer and book their available rooms. Most use trading partners and wholesalers such as Orbitz, Travelocity, Priceline and Hotwire.com who plug into the hotel reservation systems and market available rooms.

Importantly, there are price thresholds that protect the wholesalers and in effect set the minimum pricing in the market. RRBO is different – and markets available timeshare units at prices established by the owners of these units with pricing that is 30-50% below these minimum thresholds on a consistent basis.

Several resort property companies offered us the opportunity to list their available units on our site but it was clear that minimum price thresholds were required so that large wholesalers such as Orbitz could guarantee the lowest market prices in their marketing programs.

RRBO has declined these offers, as its business model and value proposition is contingent upon offering rentals with dramatic price discounts versus the large travel sites. RRBO – by offering rentals directly from individual owners who are motivated to rent and want to cover their annual maintenance fees, has a structural price advantage versus the resort properties and travel web sites.

Who are your key customers and users at launch?

When RRBO.com launched in June, 2010 there was detailed information on over 700 separate resorts and over 4,000 individual rental listings which is growing daily. Initially the focus is on the US and Caribbean, with some properties in Canada and Mexico.

Did your customers validate your idea before investors?

Yes, we spoke with dozens of timeshare owners to validate that they’d use an online rental tool if it were available as long as they didn’t have to negotiate and deal with individual renters. They wanted a solution like StubHub, and not one like Craigslist.

What is the business AND revenue model, strategy for profitability?

The company has a transaction-based business model. For each rental on the site, the owner will be charged a 15% fee of the rental price for marketing the rentals and managing the transaction if and when a unit is rented. (There is no charge to list a unit for rent, which is a competitive advantage versus listing sites such as VRBO and Redweek.com.)

Additionally, renters will be charged a 5% service fee on each transaction, which is consistent with comparable online services such as StubHub.

In time, add-on services such as travel insurance, car rentals, etc. will be added to the offering generating additional revenue for the company.

With an average rental price of $1,500, the company will initially make $300 (20%) per transaction and a gross margin in excess of 50%. The RRBO price advantage will be the key marketing message. The company projects that over five years it can capture 6% of the exchange and rental market (5,000 rentals per month) generating over $27 Million in revenue per year.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

Great product, seasoned team, solid transaction-based business model

Weaknesses:

Low market awareness, noisy marketplace, unmet market need.

Opportunities:

Can leverage platform in additional markets (e.g. timeshare sales, vacation homes).

Threats:

Ability to raise enough capital to grow business.

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

We spoke with dozen of potential investors when we were raising capital and many declined to invest for various reasons.

A common theme was that the economy was poor and it was a bad time to start a business. While it’s been difficult to raise capital in this environment we believe that our core value proposition is perfectly suited for this economy, so we’ve proceeded.

What is your success metric 12 months from now?

Booked vacation rentals. We expect to be booking 200 rentals per month 12 months from now.