As Airbnb prepares for its much-anticipated IPO,
Amit Saberwal, co-founder and CEO of RedDoorz, predicts that good travel companies will emerge out
of COVID - and there will be a lot of focus on getting these companies public.
“The good companies that will emerge will go on
to become your unicorns and you’re going to have a lot more activity in
the public market for these companies,” he says.
“Some of these companies should have gone public
a few years ago, but the private market was more profitable, but that has
changed.”
Asked if one of these good companies could be
RedDoorz, Saberwal says, “We have always stated that publicly, that’s our
aspiration. Personally, I want to return our investors’ money and some kind of
public event would be a logical conclusion.”
Could another logical conclusion be an
acquisition by a global company? After all, a company that has deep domestic
markets right now could be interesting to global companies that have breadth
but not depth?
“We can’t rule anything out. We have a good
domestic story, there’s a lot of capital available to good companies which can
go into growth mode,” he says.
“Why don’t we think of a scenario where we work
with people with more capital and look at acquisition targets rather than us
being a target?”
RedDoorz, billed as Southeast Asia’s largest
online hotel management and booking platform, was launched in 2015 and late
last year, raised Series C funding of $70 million. Saberwal said
unicorn status was within reach “in the next three years”.
“This is still possible, this is still an
aspiration,” Saberwal says.
Salary cuts reinstated, continued quest for
profitability
For now, it’s about survival, and Saberwal says
fast decisions made early on have enabled it to “dodge the bullet” so far. In
fact, it reinstated salary cuts in July, something it promised to do if targets
were met.
In February, when the first signs of trouble
appeared, it scrapped plans to launch in Thailand, furloughed and laid off
staff and cut as much costs as possible. In March, it cut senior management pay
and later wage cuts for remaining staff.
“It was something I didn’t like to do but we had
to do it because we still couldn’t balance the books. We said the salary cuts
would be till December but these are the targets and if you achieve the
targets, we will reverse the cuts, so the team really rolled up their sleeves
and worked really hard. They met the targets, so we have reversed the cuts,” Saberwal
says.
He is mindful of the fluidity of the situation
and he is confident that he has a leaner, smarter company (staff numbers have
been reduced to 950) and the goal hasn’t changed – to achieve profitability.
“That was always the plan for 2020, it got accelerated. We’ve done everything
we need to do.”
Entering positive recovery territory
RedDoorz is in positive recovery territory, Saberwal
says. He called out the Singapore government for its pragmatic and supportive
approach to tackling the crisis.
“Some of our properties are serving stay-home
notices, and this piece of business has been really helpful. The Job Support
Scheme (JSS) has also really helped. The Singapore government operates at a
level that is unheard of and I can say this because we have operations in many countries,
including India, where our tech team is,” he says.
“The JSS, the S$320 million in domestic tourism
vouchers they are giving out, the training of employees, internships for
youths, reskilling of older workers – they are way ahead and they will be the
first off the block when things start to look better.”
In Indonesia, he says, “Domestic recovery is
happening. Again, the Indonesian government has been very pragmatic and
things are starting to look better. The Philippines is in a different place, a
different pace – but I think slowly things are looking better even there.”
Saberwal referred to the most recent interview on Channel News Asia with
Raghuram Rajan, India’s former Central Bank governor, who says advanced industrialized
countries and emerging markets had to have two different strategies in the
handling of the pandemic. “He wasn’t critical but he expressed concerns about
prolonged lockdowns because the human cost in many markets is much higher.”
On other markets, he says, “Vietnam was looking
up and will come out of it, but whatever people say, Vietnam has a high
dependence on international travel. Like Thailand – the infrastructure is more
geared up for international tourists, just like Bali.”
Recovery in Indonesia is happening in cities
like Jakarta and Bandung, because they are domestic travel destinations, and
what’s helped RedDoorz is its depth and breadth of local inventory in second- and third-tier cities.
“Ninety-six percent of our business was domestic
in Indonesia. Even in the Philippines, we were predominantly domestic,” he
says.
Hygiene Pass, Hope Hotline launched, tech
accelerated to improve operations
Responding to the crisis, RedDoorz launched its
Hygiene Pass for employees as well as for its hotels, with certification from
an independent body in Indonesia. It borrowed the idea from the SG Clean initiative
started in Singapore and adapted it for Indonesia. In July, more than 300
properties received the certification.
“We accelerated tech in our operations, looking
at the whole piece from customer service to quality property management,” he
says.
“Previously, as a startup, when you have a
problem, you throw people at it and then eventually you throw tech at it to
make it more efficient, except we had to grow up really quickly and we needed
tech to replace people really quickly especially in the operations side. This
was a big piece for us.”
It also launched a “Hope Hotline” in Indonesia,
a mental health support program for employees, hotel partners and the industry,
in collaboration with KALM,
an online counseling service.
Weaning off “immediate fix” of online
marketing, digging deep into CRM to drive direct business
Asked what thinking COVID-19 has challenged him
on, he says, “I think it would be more around availability of future venture
capital at acceptable terms and the need for us to be self-sustaining became so
much more urgent.”
He adds, “This has been a wake-up call. We are
charting our own destiny. We have become far more mature from a cost
perspective for a startup of our tenure. We started controlling costs, we
started leveraging our own CRM to generate business without spending money, so
I think the overall health of the business is going to be much better.”
With no funds to spend on Google, it dug deep
into its CRM and SEO. Its branding work last year also paid off in driving more
direct traffic – about 75% of its business already comes direct.
Because its business is more domestic, it was
able to do more localized searches, as opposed to a more global search like
London to Jakarta, it could do Jakarta to Bandung. “We can choose our markets
in a way which is domestic so there are a lot of alternatives available for
us.”
Says Saberwal, “Online marketing
is like a drug, because it’s an immediate fix. When you want to grow, and you
are not able to hit your targets, you spend money and you hit your targets, and
you just have to be very efficient about it because you want to spend a finite
amount to get finite results.
“The problem happens when startups want to grow, they move from
this really efficient customer acquisition to a highly inefficient model to go
for growth because the market is rewarding growth. Well, that’s changed.”
As Saberwal sees it, there is a pre-WeWork
world, a pre-COVID/in-COVID world and post-COVID world.
“In the pre-WeWork, people were just going for
growth and growth was rewarded. Then reality set in and people started looking
beyond top line growth, so companies were being valued less, due diligence
became stronger and people realized there is no unlimited money which is going
to keep coming in,” he says.
“This period, in-COVID and post-COVID, it’s
about survival. You do what you have to do to survive.”
Commenting on news that some travel companies’
Google accounts have been suspended because of non-payment, Saberwal says, “One
of the first things we decided was we had to pay people and we worked out a
payment plan for everybody so that we could spread our payments over six
months.”
Saberwal says even though it is not spending any
money on Google now, that’s not to say it won’t go back to advertising on
Google. “The only thing is, there will be a level of efficiency, which we will
maintain. We are also big believers in Facebook, and we will also be spending
on brand but in survival mode, I am prepared to forgo a few hundred bookings if
it means spending money I don’t have.”
He adds, “We have to adapt to the fact that COVID
is going to be here for a while. I think 2020 can be written off but by 2021,
there will be more clarity.
RedDoorz’ mascot, Reddy the honey badger, has
never been more appropriate at this time, says Saberwal.
“It’s fearless and this trait has helped us a
lot. The fear of COVID has made people react irrationally, some have
over-reacted. Its ability to hunt too is useful at this stage. We have to be
fearless and be good hunters to survive this,” he says.
*This article originally appeared on WebinTravel.