UPDATE:
Since this article was first published on 7 March, Zaranga has removed any references to "name your price" or "name your own price" from its website and marketing materials.
This is as a result of an alleged trademark infringement brought to the company's attention by Priceline Inc.
ORIGINAL:
Popularized by Priceline, the name-your-price model has been quite popular for a certain segment of the travelling population. Never before has this model been cohesively applied to the vacation rental sector.
A new Y-Combinator-backed startup Zaranga aims to change this by offering dynamic pricing. The startup allows users to not simply pay whatever the homeowners are asking - they can also offer a price that they're willing to pay.
The company says of the pricing inefficiency problem they're addressing:
[The company] was borne out of the co-founders' [Anirban Bardalaye and Amitav Chakravartty], frustrations with existing options for vacation rental reservations. While Anirban was frustrated with the amount of time and manual effort it required to book vacation rentals, Amitav had been a victim of a scam. None of the existing vacation rental sites seemed to tackle these problems.
The team of 8 is currently limited to the areas surrounding San Francisco, including Lake Tahoe, and plans to extend their geographic range as they start to gain traction.
The company estimates that, out of an estimated $54 billion US vacation rental market, $23 billion is professionally managed - and is the company's prime target.
By retaining a portion of transactions crossing the service, the company stands to have a solid revenue stream that can be extended with value-add services for the very property managers that benefit from the Zaranga platform.
Q&A with co-founder Anirban Bardalaye:
Describe what your start-up does, what problem it solves (differently to what is already out there) and for whom?
There are three key problems that Zaranga solves:
- Painful vacation rental reservation process: Compare your experience of booking a hotel with that of a vacation rental, and you will know exactly what I am referring to here. The gold standard still is travellers connecting with a bunch of owners/property managers, talking to them typically during work hours, paying them by a credit card over phone or sending them a check and then taking printouts of contracts, signing them and faxing them back! Even with online booking enabled vacation rental sites, the reservation process involves manual steps – you either have to wait to get a quote from an owner and with all sites, you still have to send them signed contracts before they can confirm your booking.
- Lack of confidence in a booked vacation rental: Search for ‘vacation rental scam’ on Google, and you will find lots of examples of travellers getting swindled, much like the experience that Amitav had. The scams are not limited to Craigslist. You will find numerous instances where these listings were on reputed sites such as VRBO or HomeAway. And in a majority of these instances, the travellers did not have any recourse and lost their money, not to mention a spoilt vacation!
- Rigid pricing that is not optimal for anyone: While deals are common in the vacation rental industry – think 7th night free, 3 for 2 in March etc., pricing that varies by inventory, proximity to trips etc. do not exist. This results in either property managers/owners leaving money on the table – why give a 3 for 2 discount when there are no other available houses in the market – or travellers not getting the best possible deal – for an available house for a trip starting the next day.
Why should people or companies use your startup?For exactly the reasons that I mentioned earlier. First, Zaranga makes it very easy for travellers to find and book vacation rentals. There are no manual steps. Majority of bookings are instantly confirmed with booking being just 3 clicks away! Zaranga’s responsibility does not end when a booking is confirmed. Zaranga handles security deposit resolutions and mediates between travellers and property managers if any issues are reported.
Second, travellers can be assured of no scams as Zaranga primarily works with licensed property managers. Professionally managed properties also means that travellers can sleep easy if something goes wrong with their house during their trip – there is always an emergency contact for them.
Finally, Zaranga allows travellers to name their price on Zaranga, which is a win-win situation for both travellers and property managers. While travellers can score great deals, it allows property managers to increase desirability of their properties, especially for last-minute rentals and for hard-to-fill dates without having to resort to hard discounts.
Furthermore, with listings at Zaranga being free, property managers are more likely to pass on the savings to travellers by allowing them to name a price below published rates.
Other than going viral and receiving mountains of positive PR, what is the strategy for raising awareness and getting customers/users?
We are very local-centric. We focus primarily on weekend destinations around metros, which allow us to have a targeted marketing program designed for locals. We also understand our target customer demographic quite well, so we reach out to them via blogs that they read, advertisements in sites that they visit and sponsorship of clubs that they belong to.
We are also very active on our blog and social media, including Facebook, Twitter, and Pinterest, where we have built up a decent following.
Of course, positive PR is very important and we are continuously innovating to ensure that we provide an experience and service that is far superior than existing alternatives.
How did your initial idea evolve? Were there changes/any pivots along the way? What other options have you considered for the business if the original vision fails?
The vision of Zaranga hasn’t changed since we started, but we have become laser focused on our execution and priorities. Talking to our customers allow us to continuously get meaningful feedback, test our hypotheses, and fine tune our approach.
The thought that our original vision will fail has never crossed our minds. We know that there is a problem out there and we are heads down trying to address it.
Where do you see yourselves in 3 years time, what specific challenges do you hope to have overcome?
Our goal is that in 3 years time we have complete brand awareness and people associate us with a hassle free way of booking vacation rentals. Obviously, that is easier said than done and will require us to execute flawlessly and have the necessary resources to continue innovating at a fast clip on all fronts.
What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?
Besides all the things I described earlier?? The vacation rental industry is a laggard compared to the rest of the travel industry when it comes to technology adoption.
Additionally, the problems that we are tackling are quite gnarly from a technology and a logistical standpoint, and that is why you see majority of vacation rental companies shying away from them.
Our lofty goal is to make the experience of vacation rental reservations at par with the rest of the travel industry. Just like you can book an airline ticket at one in the morning and do not have to wonder if the airplane would be there when you show up, your experience with vacation rental reservations should be no different!
Tnooz take:
Dynamic pricing is an interesting development in the vacation rental market. This segment of the travel industry is fiercely competitive, with companies varying from Airbnb to VRBO to Flipkey to TripAdvisor all vying for a chunk of the billions.
Beyond dynamic pricing, the focus on property managers is intelligent, as they are generally more sophisticated than casual home renters - and are much likely to reward businesses that boost their bottom line by increasing occupancy and decreasing costs. Overextended property managers are also much more likely to support companies that save them time through clean interfaces and regular bookings.
The limited geographic scope is the most significant hurdle at the moment, which will surely be addressed soon. Zaranga can focus their energies on the market closest to home, and can grow quickly as they learn to excel in their home market. As long as the company is listening to the feedback, and quickly iterating its product for its growing customer base, this limitation could most certainly turn into an advantage for solid and repeatable growth down the line.
Snap poll:
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