With $11 M fresh funding, budget hotel platform RedDoorz plans regional expansion

Singapore-based RedDoorz raised $11 million in pre-Series B round. The funding will help the firm focus on its new lease model and penetrate deeper into the Southeast Asian market.

Southeast Asia’s online budget hotel booking chain RedDoorz has raised pre-Series B funding of $11 million. The fundraise comes in as an additional investment from earlier investors Asia Investment Fund of Susquehanna International Group, International Finance Corporation (private investment arm of World Bank Group), InnoVen Capital, Jungle Ventures, as well as new investors DeepSky Capital, FengHe Group and Hendale Capital, and others.

Present in Indonesia, Singapore, and the Philippines, the additional funding will be used towards RedDoorz’s regional expansion to help strengthen its position as one of the top online budget hotel marketplaces in Southeast Asia.

Earlier, in 2016, RedDoorz had raised $5 million in a Series-A round led by Asia Investment Fund of Susquehanna International Group (SIG), International Finance Corporation (IFC), the private investment arm of the World Bank Group, and Jungle Ventures.

How has it grown?

On the growth of the company, Amit Saberwal, Founder & CEO, RedDoorz says,

The scale of the Southeast Asia opportunity is mind-boggling. A lot of people don't know that. Our aim has always been to tap into Southeast Asia's $52-billion travel market, which is largely comprised of budget hotels rated three stars or below. We target to go up the value chain and offer the best predictable stay experience for our users across the region.

Started in 2015 by former MakeMyTrip executives, RedDoorz, in three years, has over 500 properties that service over seven lakh occupied rooms in Southeast Asia. In Indonesia, the brand is present in 16 cities, with over 3,000 hotel rooms on its platform.

John Wu, Founding Partner and Group Chairman, FengHe Group, which is one of the new investors in the platform, says they are familiar with the space RedDoorz operates in as they have seen similar hospitality models flourish and grow in China. He believes that RedDoorz has the potential to disrupt the budget segment in the hospitality industry in Southeast Asia.

Focus on an asset-light model

RedDoorz is an asset-light budget accommodation brand and service offering for hotels, resorts, inns, service apartments, B&Bs, 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.

The team had initially started off as a B2B tech player for small hotels. Amit says they tasted considerable success and had 450 retail SaaS (software-as-a-service) customers. However, the team soon realised that without a brand, hotels remain nameless and faceless, and their 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,” says Amit.

Venturing into lease model

RedDoorz recently launched its first fully-leased and operated hotel property in Singapore. The 65-room property near Marine Parade will be completely operated and run by RedDoorz. On the decision behind venturing into this model, Amit says,

We have so far been growing the franchise and marketer model in all markets. With the infusion of these funds, we will now tap into the fully-leased-out-and-operated model. With the right team, right set of investors and the right market opportunity, we are certain that we will be able to grow exponentially in this region and drive up our existing 65-percent customer repeat rate. We plan to have on board 100 such fully-leased properties, and 1,000 franchise properties in this region in the next 18 months.

For their first property, RedDoorz has chosen a colonial shophouse that displays Peranakan heritage.

With a strong international team on the ground coming from diverse backgrounds and deep knowledge of the local travel and hospitality sector, RedDoorz runs a full operations unit ranging from customer service, operations and product sales to branding, finance and marketing.

Market and future

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 companies serving the Indian market are targeting Southeast Asia. OYO, for example, is aggressively pushing into Southeast Asia with OYO Rooms, OYO Townhouse and OYO Homes.

RedDoorz has developed its own proprietary technology using data analytics to accurately forecast demand in areas that could have more hotels or properties to drive more footfall for travellers.

Anurag Srivastava, Managing Partner at Jungle Ventures, says, “We have been believers in the opportunities that RedDoorz has sought for and have always given our full support to the team led by Amit from our first investment round. We will continue to remain excited as the brand grows through their successful execution and journey to become the market leader in providing standardised high-quality accommodation for middle-class travellers across Southeast Asia.”