We caught up with CEO and co-founder Sam Shank by phone to get his take on why his 130-employee startup, based in San Francisco, made the switch — and also how it is performing.
HotelTonight declined to comment on early media reports about its move to week-ahead reservations. What are the key points that were overlooked?
We’re thriving. We have well over 100% year-over-year growth in bookings, revenues, and transactions. We have a path to grow a great business.
We’re on track to be profitable with the same-day model. There was no need to change from that perspective….
We’re definitely not abandoning what we’ve been doing. We’re augmenting it and we’re extending it to meet consumer demand….
Our users had a broader definition of “spontaneous” than we did. Planning ahead by up to a week is important to them…
As importantly, hotels told us they were getting perfect info about occupancy demand once it came to be a week out for any date. They asked us to work with us to help fill up rooms in advance.
Hotels can often get a higher average daily rate by loading in advance. HotelTonight has among the lowest margins in the industry among third-parties, so hotels keep more of their revenue by using us.
Also, what’s been overlooked is that this was a technical achievement. Our platform was built for same-day and had to be rebuilt from scratch.
I’m pleased and humbled by the work of the team that kept speed, consistency, quality, and performance high.
Part of HotelTonight’s original pitch to hotels was that it was generating demand that wouldn’t otherwise exist. It made it possible for someone who might not otherwise stay the night at a destination to do so spontaneously. Now it seems like you’re cannibalizing a hotel’s existing pool of customers for mobile-based sales.
If hotels only want to do same-day with us, they can stick with that. It’s optional to expand.
We have added a trip-inspiration tool that should generate incremental demand. We call it “playlists.” They help surface interesting hotels at interesting locations around themes that users might not have considered.
One playlist today on our app for San Francisco is for a “spa retreat weekend” and it shows several hotels within or close-by to the destination that fit in that category.
We have millions of data points on hotel attributes and on reasons for going on a type of weekend. This is first of the ways we’re leveraging that for trip inspiration.
Another thing is that we rotate the inventory. We show up to 15 hotels, the most remarkable options within any given market. It’s unpredictable to the user which ones we’ll show.
So a loyalist to a brand can’t deliberately and always use us to book a stay at your particular favorite hotel, like The Ace or The Archer, on a particular date. You have to have some flexibility in what hotel you’d be willing to stay at.
So we bring in different demographics to the properties we feature, guests who may not have otherwise considered them in particular.
Has HotelTonight gone downmarket? When you launched, it was all high-end, boutique properties. Now you even have hostels in some cities, like London, thanks to the Crashpad feature.
We have always desired to be a mass-market brand.
In the original pitch deck for HotelTonight that I used myself to establish brand guidelines I called it “Guilt for Everyone.” In other words, we wanted not to be exclusive or elitist. We wanted to be affordable luxury.
We always had a variety of price points. When some people see that app is sleek, they assume it must only have four-star properties. But that doesn’t mean we can’t have value-oriented inventory.
What we see when a customer wants to stay in a hip or luxe hotel, and they want to go to the bar and enjoy the amenities, we see that same customer books a simple clean place to crash on a subsequent booking, probably because on that second trip they’re just going to be in town for a few hours and they don’t care as much about the hipness or luxury.
What’s the market research on hotel mobile bookings? What percentage of hotels booked on mobile devices are made in the week prior to arrival date versus the percentage that is same-day?
We haven’t seen definitive statistics, but PhoCusWright has published the most exhaustive estimates. [Editor’s note: See Tnooz story: Some eye-opening data on the size of the last-minute mobile booking sector.]
At launch Hotel Tonight seemed to aim to have direct relationships
with all of its hotels. Today, do you sometimes connect with hotels via XML feeds?
We connect with hotels in a bunch of different ways, some of which involve XML.
We work with legacy GDSs. We connect directly with various hotels and chains and their central reservation systems. Anyway a hotel wants to work with us, we’ll support.
RELATED: More on HotelTonight
In the startup’s early days, before it had enough partners to make a dent, it invented fake hotels to make its app look more substantial.
It also hired athletes who knew nothing about hotel distribution rather than poach sales reps from online travel competitors because, it claims, it knew that hotels disliked third-party channels and it wanted to be a fresh face.
For more tidbits like that from HotelTonight’s lessons learned, see this video of a talk given by COO Jared Simon: