n 2015, Amit Saberwal started RedDoorz in Indonesia.
A hospitality executive, Saberwal cut his teeth at MakeMyTrip before he started out on his own. What Oyo is to India, RedDoorz is to Southeast Asia. As things stand today, the company manages 680 hotels across Indonesia, the Philippines, Singapore, and Vietnam.
That’s about 17,000 rooms across 40 cities. RedDoorz has raised around $30 million in venture capital from a whole host of investors: 500 startups, Innoven Capital, International Finance Corporation, Hendale Capital and Jungle Ventures among others.
The intensity of the impact
Saberwal says that he is keenly watching Oyo’s moves in the region. “They certainly make a lot of noise,” he said, speaking on the phone from Singapore. “But I think Southeast Asia is large enough for two to three players. It is not like in India where I notice this effort to corner a large part of the market and become a majority player.”
It is not for nothing, as at the heart of this pursuit is money.
For both the hotel and the company hoping to manage it.
A few questions should help us think through this better: A. How much more money (revenue) can a hotel management company like RedDoorz make for the hotel owner? B. Are independent budget hotel owners in Southeast Asia happy to let go of their hotel just like in India? C.
Listing the space
How desperate are OTAs to ensure that there are no middlemen between travelers who land on the site/app and hotel owners who list their rooms? After all, OTAs are nothing but middlemen in the transaction chain; why should everyone take a piece of the action and keep making the large pie smaller? D. A larger, existential question; do budget hotels really need managing?
A quick digression here to meet another subject in our Southeast Asia sojourn. Meet Zuzu Hospitality Solutions.
Started by two former Expedia executives in Singapore, Dan Lynn, and Vikram Malhi’s asset-light business idea is that independent budget hotels in Southeast Asia do not need managing. They only need a technology platform that can help them make more revenue.
Zuzu has been in business for about three years and works with close to 600 hotels in the region. “The problem for a small hotel is that they don’t get much love from the big OTAs,” said Lynn, speaking on the phone from Singapore. “So how to price themselves, from a hotel’s perspective, that’s what we do.”
Sure, back to money. A hotel’s behavior is directly proportional to the occupancy rate. Now because Southeast Asia is big on tourism, occupancy rates of hotels aren’t abysmal. Much worse could be the state of affairs like in India, where hotel owners maintain physical books of accounts, but that’s not how bleak things are there.
How significant it is?
The average occupancy of hotels in the region is upwards of 50%. Some markets are higher, like Singapore and Thailand. “So think of it as this is what you are getting from working with OTAs,” said Kapoor of Videc. “Depending on which market you are in, the upside that a company like Oyo or RedDoorz brings can be significant.”
Saberwal claims that RedDoorz has a track record of a minimum 30% increase in revenues for the hotels the company works with. “While we work with all OTAs, and we recently got integrated into Go-Jek [a super-app of Indonesia], on our platform, we have a 65% repeat rate from customers.”
The company has been able to get this far without getting into minimum guarantees. “We are a quiet company and we don’t bribe our partners to be part of the network,” adds Saberwal. “We run a capital-efficient business. So we will standardize the hotel, train the staff, rate the hotel on several quality parameters, but we don’t get involved in running the hotel operations.”
Oyo, of course, has its foot on the pedal and plans to do more than just management.