Budget hotels RedDoorz aims to win Southeast Asia one city at a time
With the budget hotel segment in Southeast Asia pegged at $10 billion, budget brand RedDoorz is tapping technology to offer standardised and great value stays across the region.
Startup: RedDoorz
Founders: Amit Saberwal and Asheesh Saxena
Year it was founded: 2015
Where it is based: Singapore
Problem it solves: Accommodation
Sector: Hospitality
Funding raised: Series A funding
For 23-year-old Suhani Kumar, the trip to Thailand was a dream come true. It was her first international trip and everything was booked. The flights were booked, but what she was really relieved about was the accommodation. For, a good hotel room holds the potential to make or break a holiday.
The hotel market in Southeast Asia is as unorganised as the market in India. It is, therefore, no surprise that players like OYO, Pandabed and RedDoorz have made an entry.
RedDoorz is an asset-light budget accommodation brand and service offering for hotels, resorts, inns, service apartments, B&B, and guesthouses. It provides budget accommodation owners access to expert advice and assistance to standardise their offering and directly distribute online through its technology platform.
Beginning with Indonesia
Amit Saberwal, Co-founder and CEO says, “We started off as a B2B tech player for small hotels. We had considerable success and had 450 retail SaaS (software-as-a-service) customers. However, we soon figured out that without a brand, hotels remain nameless and faceless; our real ability to make a difference was limited. Once I heard of the OYO idea of branding properties I felt this was the piece that was missing. We had the tech distribution in place, but the brand was missing.”
Launched at the end of 2015, RedDoorz began to find a foothold by the beginning of 2016 by focusing on the Indonesian market. Today, the team claims to be one of strongest online hotel marketplaces in Southeast Asia, having serviced over 700,000 customers in Indonesia and covering over 3,000 rooms across 17 cities.
RedDoorz works with smaller, independent properties – a notch below mid-tier hotels – and standardises the stay experience. They tag the property of rooms, depending on their deal with individual owners. The team currently claims to have over 500 properties in Indonesia, notching up a total of 3,000 rooms.
The idea of starting up came to Amit Saberwal and Asheesh Saxena while they were working at MakeMyTrip. Working closely in the Asia-Pacific region, they found that the space was unorganised and felt that technology could change things.
High margin business
RedDoorz started with Indonesia, but now has a presence in the Philippines. The team is spread across India, Singapore, Indonesia and Philippines. It claims to have grown 11 times in 2016, with over 500 properties in Indonesia.
“This is with a clear path to profitability for all Indonesian cities by Q4 2018,” Amit explains.
He adds that RedDoorz has built a high margin business. The team claims to have close to 20 percent margins and has a repeat rate of over 65 percent.
By using machine learning, RedDoorz has also completely automated the revenue management processes of properties with rates changing every hour depending on projected demand and booking velocity. Room tariffs start at 99000 Indonesian Rupiah.
“We offer 24-hour customer service and loyalty points (called Red Cash), which seems to be working very well in Indonesia with repeat rates at over 65 percent,” Amit says.
The budget hotel market
The Southeast Asian travel market is today estimated at $60.6 billion.
Accommodation far exceeds supply at many periods of the year in prominent tourism and business hubs like Thailand, Bali, Singapore, Jakarta, and Kuala Lumpur.
Budget hotel players in the Southeast Asian markets include ZenRooms (by Rocket Internet), Bespoke Hotels, Nida Rooms, and Tune Hotels.
Apart from this, even Indian-born companies are targeting the Southeast. Oyo is aggressively pushing into Southeastern markets with Oyo Rooms, Oyo Townhouse and Oyo Homes.
Value proposition and future plans
The other competition for RedDoorz comes from large global and local hotel chains.
“The difference is that we are totally tech-enabled,” Amit says, adding that they saw potential in the fragmented budget hotel market in Asia - it was large enough and wasn’t about a “winner takes all” scenario.
Amit says they are focusing on building a solid business with good take rates. Their strategy is simple - go deep in one city, make it work, and then move to the next city.
Various platforms are trying to grab a larger chunk of the budget hotel aggregation market, estimated between $25 billion and $40 billion.
“Our value proposition compared to other hotel chains is that we are tech-enabled. This has strong resonance with the young adult market and early adopters who are tech-savvy (90 percent). With bookings on app and automated dynamic pricing, we have been able to scale faster (400 properties in two years) than other hotel chains,” Amit says.
RedDoorz is funded by Jungle Ventures, the Asia Investment Fund of Susquehanna International Group, International Finance Corporation (private investment arm of World Bank Group). 500 Startups was also one of its early backers.
In the near future, the team is looking to penetrate deeper into Southeast Asian markets.
