Room 77 employees take a break from "turning hotel search inside out" or whatever else they do at company headquarters. New CEO Drew Patterson (center, on the couch) thinks these are very early days for hotel metasearch. / Room 77

Drew Patterson, who recently became Room 77′s first CEO, does a perceptible double take at the seeming absurdity of the question.

“How is Room 77 going to meet the challenge of being relatively late to the party?” he’s asked.

After all, the first crop of travel metasearch sites, including FareChase, SideStep and Qixo, are now distant memories of a bygone Travel 1.0 era, and notable players such as Skyscanner and Kayak have each been refining their products and building traffic for about a decade already.

How, then, are travel startups such as Room 77, which only debuted its hotel-metasearch business about a year ago, and Hipmunk, founded in 2010, going to compete against the bigger and and more-established players?

It may be late, but it’s still early

Patterson believes it’s actually early rather than late.

“It’s the very early innings of the shift to mobile,” Patterson says, noting that a massive shift in consumer behavior is under way as travelers reach for their smartphones and tablets, often even when the desktop is within easy reach.

“Mobile is the catalyst,” Patterson adds.

Patterson argues that travel search is a great fit for mobile as travelers won’t need a plethora of apps, they may be on-the-go searching for a hotel, and can benefit from streamlined side-by-side comparisons “when there’s no keyboard and screen real estate” is scant.

In some ways, as relatively new and funded travel startups, Room 77 ($43.8 million) and Hipmunk ($20.2 million) find themselves in similar situations. How are they going to break out of the pack in the battle for global traction, and site and mobile visitors?

“It all starts with the right product,” Patterson says.

Is Room 77 different enough?

In that regard, one can make an argument that Room 77 currently has a more differentiated product than Hipmunk’s.

Sure, Hipmunk has its much-touted and attractive user interface and Agony index, and can adeptly enable users to search for hotels based on the location of their business meetings, too.

But, consider some of Room 77′s differentiators:

• Room 77 offers simulated room views for around 1 million rooms at hotels that are three stars and above, and also features insider tips for choosing specific rooms, hotel floors, or vantages (pick a room facing E. 33rd Street) at around 16,000 hotels.

• You can book about 200,000 hotels on Room 77 without having to navigate to another hotel or online travel agency website, and many of these properties enable guests to delay payment until hotel checkout, a spokesperson says. Customers can also book hotel stays from the Expedia Affiliate Network and Getaroom.com without leaving Room 77.

• In addition to displaying rates from various online travel agency and hotel websites, Room 77 also shows AAA, senior, government and military rates.

• At four- and five-star hotels booked on Room 77, you can indicate your room preferences and Room 77′s Room Concierge service will attempt to get you a specific room type or location to match your likes and dislikes. During the booking process, guests can also give hotels special requests such as putting flowers in the room for an anniversary etc.

The tortoise and the cheetah?

Patterson argues that Room 77′s site speed is a differentiator, too. Around the Skift office, we informally gauged the pace of Room 77′s loading of hotel search results against those of Hipmunk and Kayak. Room 77 may have been a tad quicker, although this was far from a scientific study, and the contest was close.

However, the speed of TripAdvisor’s hotel metasearch results seemed like a tortoise compared to Room 77′s cheetah.

Breaking into seeming talking points mode, Patterson says Room 77′s “speed, intelligence and relevance is second to none.”

Founded in 2009 by Brad Gerstner, a former co-CEO of National Leisure Group and avid travel industry angel investor, who serves as Room 77 chairman, the company first focused on its room view technology after having acquired OpTrip and TripKick for their tech and talent.

Changing views about the business direction

Room 77′s room views, created by plotting a room’s latitude, longitude and altitude, and then marrying them with Google Earth, are still part of the site, but they are relegated to the lower portions of the page. Many hotels weren’t exactly enamored with the idea of giving consumers the option to book a specific room, which was Room 77′s ultimate intent, although there is indeed some of that going on in the hotel industry today.

At the time, Room 77 enlisted hotel guests with its iPhone app and spent a lot of energy in the early days collecting hotel floor plans to build the world’s largest database of hotel rooms.

That process may be ongoing, but Room 77 pivoted toward hotel metasearch and got into it in a meaningful way about a year ago.

Independence, with a few dependencies

With 38 employees, Mountain View, California-based Room 77 has implemented a different funding strategy than its Hipmunk competitor and neighbor in nearby San Francisco.

In January 2013, Expedia, Concur, Sutter Hill Ventures, General Catalyst Partners, Felicis Ventures, and a bunch of angels, including Rich Barton, Erik Blachford, and Spencer Rascoff, participated in a $30.3 million Series C round, bringing Room 77′s total funding to $43.8 million.

With its $20.2 million in funding from the likes of Institutional Venture Partners and Ignition Partners, not to mention Ashton Kutcher, Hipmunk doesn’t have Expedia- and Concur-like strategic investors, and Hipmunk CEO Adam Goldstein argues this gives Hipmunk a competitive advantage with potential partners because it is “independent.”

Investments from Expedia and Concur send a signal about Room 77′s direction and strategy, Goldstein argues.

In fact, Goldstein says: Hipmunk is “one of the last independent metasearch companies in the U.S.,” and “one of the fastest growing.”

Patterson of Room 77 isn’t buying Goldstein’s analysis, saying: “I’m not sure they [Hipmunk] could make up more asterisks on what they are number one in.”

Patterson says Expedia and Concur are “passive investors” in Room 77, and they don’t have seats on Room 77′s board.

Still, Patterson says, “we are in active discussions with those guys.”

Expedia, Trivago and Room 77?

It may not be too far-fetched to speculate that one day Expedia, which recently poured $632 million in cash and stock into German hotel metasearch site Trivago, taking a majority stake, could one day consider acquiring Room 77 outright. If it paired Trivago in Europe with a growing Room 77 in the U.S., then Expedia could build a base to begin to challenge Priceline-Kayak in the global online travel battle.

Patterson doesn’t touch that speculation, but says Room 77 is “well-capitalized,” which gives the company “enormous flexibility.”

Room 77 is experimenting with online marketing through different channels, although the key would be to find the right ways to engage consumers, and not just buy traffic, Patterson says.

“Having that kind of dry powder,” Patterson says, referring to Room 77′s funding, “creates flexibility. Do we want to go offline [with advertising]? We have the capital to do that.”

Hotel metasearch is a crowded field with intense competition. Search engine marketing is very expensive, and titans of metasearch, such as Kayak, undoubtedly command better unit economics than startups like Room 77 and Hipmunk because of their much smaller footprints.

And, let’s not overlook TripAdvisor, which will undoubtedly play a huge role in shaping the market.

However, even with those disadvantages, amply funded travel startups such as Room 77 and Hipmunk are currently focusing mostly inward on their products, and aren’t in a huge hurry to play the big, paid-marketing game.

After all, if you believe Room 77′s Patterson, these are the early days.

“The smartest investors in this category see huge growth to come in search,” Patterson says. “We are playing with where the business can be five or six years from now, and not the next quarter.”

This is the second of a four-part series on funded travel startups, looking at where they started and their strategies for breaking out of the pack.

Part 1: The real-world challenge for travel startups, as mirrored in Hipmunk’s story 

The post Will Room 77′s deep pockets and strong hotel product get it a seat at the table? appeared first on Skift.

Handout photo of the ocean liner "Vision of the Seas" of The Royal Caribbean Cruise Ltd. sitting quayside in Saint Nazaire Handout / Reuters

Senator Chuck Schumer calls the cruise industry’s new passenger bill of rights “a step in the right direction,” but he will be querying the cruise lines on how it will be enforced.

“While I believe that this passenger bill of rights is a step in the right direction towards increased accountability for the cruise industry and ensuring the safety and well-being of its passengers, I still have many remaining questions, both on the content and how the bill of rights will be enforced,” Schumer tells Skift.  ”I will be asking the industry to respond to a set of detailed questions, and will continue to insist on changes to ensure the safety and well being of their passengers.”

Taking a classic page from the crisis-management playbook, the Cruise Lines International Association yesterday issued its own International Cruise Line Passenger Bill of Rights (see below).

Many of the provisions either codify standard industry practices, such as the right to transportation home if a sailing is terminated because of a mechanical failure, or have so many loopholes that the the “rights” end up being mere possibilities.

The New York Senator in March called on the cruise industry to adopt a Cruise Ship Bill of Rights, with the inspiration coming from the tarmac delay rules in the airline industry.

The cruise industry has been under pressure since the Carnival Triumph fiasco earlier this year and a long list of other mishaps, including the Costa Concordia tragedy in 2012. Industry leader Carnival Corp. has even lowered its profit projections for 2013, citing its need to lower cruise fares even more than anticipated to get people to sail.

In one of Schumer’s provisions, he had called for “the right to disembark a docked ship if basic provisions cannot adequately be provided onboard.”

CLIA’s version of that plank in its cruise passenger bill of rights leaves a lot of wiggle room, stating:

“The right to disembark a docked ship if essential provisions such as food, water, restroom facilities and access to medical care cannot adequately be provided onboard, subject only to the Master’s concern for passenger safety and security and customs and immigration requirements of the port.”

In other words, if food and water can’t be provided, but there is access to medical care, then perhaps the right to disembark becomes fleeting.

CLIA’s inclusion of “the right to an emergency power source in the case of a main generator failure,” indeed breaks some new ground, but it lacks specifics as to what this consists of: a flashlight in every room or a redundant, backup generator with enough juice to power hotel services onboard the ship?

Other provisions, such as the right to have a toll-free number listed on the cruise line’s website, seem common sense.

Schumer will be sending cruise lines questions about these provisions to gauge how they will be enforced, and perhaps in the end passengers rights will be strengthened.

Or if Schumer finds that there isn’t much support for pushing the cruise lines to take stronger steps, then CLIA will have succeeded in forestalling stiffer measures.

Here’s CLIA’s International Cruise Line Passenger Bill of Rights:

1. The right to disembark a docked ship if essential provisions such as food, water, restroom facilities and access to medical care cannot adequately be provided onboard, subject only to the Master’s concern for passenger safety and security and customs and immigration requirements of the port.
2. The right to a full refund for a trip that is canceled due to mechanical failures, or a partial refund for voyages that are terminated early due to those failures.
3. The right to have available on board ships operating beyond rivers or coastal waters full-time, professional emergency medical attention, as needed until shore side medical care becomes available.
4. The right to timely information updates as to any adjustments in the itinerary of the ship in the event of a mechanical failure or emergency, as well as timely updates of the status of efforts to address mechanical failures.
5. The right to a ship crew that is properly trained in emergency and evacuation procedures.
6. The right to an emergency power source in the case of a main generator failure.
7. The right to transportation to the ship’s scheduled port of disembarkation or the passenger’s home city in the event a cruise is terminated early due to mechanical failures.
8. The right to lodging if disembarkation and an overnight stay in an unscheduled port are required when a cruise is terminated early due to mechanical failures.
9. The right to have included on each cruise line’s website a toll-free phone line that can be used for questions or information concerning any aspect of shipboard operations.
10. The right to have this Cruise Line Passenger Bill of Rights published on each line’s website.

The post Sen. Schumer reacts to the cruise lines’ self-imposed cruisers’ bill of rights appeared first on Skift.

A city once better known for Pablo Escobar and cocaine wars is now being heralded as the “Silicon Valley of South America.”

In an effort to make Medellín an innovative business hub and leader of contemporary urban design, the city has also become one of the more buzzed about international tourist destinations.

Happy locals equal happy visitors

Urban renovations have changed the landscape of Medellín over the past decade.

The city’s efforts received recognition when then Wall Street Journal named it “Innovative City of the Year” in 2012. After a series of online polls, Medellín beat out Tel Aviv and New York with the most enthusiastic social media endorsement of the city’s progress and innovation.

In a statement following the contest, Urban Land Institute described Medellín’s transformation as follows:

Few cities have transformed the way that Medellín, Colombia’s second largest city, has in the past 20 years. The city built public libraries, parks, and schools in poor hillside neighborhoods and constructed a series of transportation links from there to its commercial and industrial centers. The links include a metro cable car system and escalators up steep hills, reducing commutation times, spurring private investment, and promoting social equity as well as environmental sustainability.

Efficient public transportation is at the forefront of the city’s efforts leading to the construction of a Metro rail network and cable car system that have changed the way locals and tourists access their city.

The city’s Metro network, completed in 1996, had a significant social and cultural  impact that connected neighborhoods, markets, and businesses.

Similarly, the Metrocable finished in 2004 cut many locals’ commutes in half, making jobs and opportunities easier to reach. One of the three gondola lines was constructed primarily for tourists and transports visitors to the nature preserve Parqui Arvi.

More recently, the city has worked towards creating bus systems and a bike-share program.

Private and public partnerships are key to developing infrastructure in Medellín and its progressive use of public space that now includes the Botanical Garden, libraries, the Medellín Interactive Museum.

The city is currently planning a park that would be built entirely above the city, says Juan Camilo Quintero Medina, CEO of Medellín 2018, the city’s bid to host the 2018 Summer Youth Olympics. 

The city also accredits technology with making the city safer. The number of homicides and thefts have significantly decreased in Medellín since the 1990s, due in part to the installation of security cameras around the city.

Homicides reached a peak of 381 per 100,000 residents in 1991, but has since decreased to just 60 homicides per 100,000 residents.

Colombia’s rising tourism sector

Medellín’s growing tourism industry resulted from improving the lifestyle of the city’s residents, which in turn made city visits a better experience for tourists as well.

The number of international and domestic visitors have consistently increased over the past 5 years, growing at an average annual rate of 16 percent.

The Colombian Vice Minister of Tourism Tatyana Orozco explained the country’s strategy for increasing tourism to Skift earlier this month.

“[We are] investing with the private sector and different cities in infrastructure such as hotels, convention centers, we are building national parks, we are building marinas,” said Orozco, “We are doing everything to strengthen our infrastructure… so that more tourists can come in.”

In a recent tweet, Orozco announced a scholarship funded by the Ministry of Commerce, Industry, and Tourism for students and professionals that want to study tourism.

Abierta convocatoria 2013 para becas turísticas… Ya no hay razón para no estudiar turismo!!mincit.gov.co/publicaciones.…

— tatyana orozco (@tatyanaorozco) May 21, 2013

Orzoco says Colombia looks to Mexico as role model in terms of tourism; it also had to overcome violence, corruption, and infrastructure challenges to create an attractive destination.

Colombia competes with countries like Costa Rica and Peru that enjoy better country branding in the U.S. The competition is one reason why Colombia chooses to highlight very specific experiences with destination branding, explains Orozco.

Creating better country branding

Despite the city’s impressive progress, many foreigners still think of drugs and crime when they hear Medellín. Colombia is investing significant time and money to tell foreigners what the country and state are really like today.

The country’s early attempts at rebranding were met with scoffs and questions marks, but recent state and independent campaigns have had more success.

An independent marketing campaign that started as project leading up to Social Media Week New York went viral after highlighting the country’s name is spelt with two “o”s. Last month the government’s Colombia Country Brand launched its largest marketing campaign ever with a 10-day event in Times Square.

Medellín is also using technology to improve its reputation via social media.

Medellín Convention and Visitors Bureau spent the past year increasing its social presence and redesigning its website, which was launched just last week. The city plans to investment more in digital outreach in the coming year.

“For this year I planned to increase the capacity of the whole strategy, conceiving it not only as a website but rather a wider digital promotion strategy: email marketing, social media, advertisement, mobile apps, editorial content, digital CRM, stakeholder-based contents and local industries involvement,” MCVB project leader Daniel Urrea Pena tells Skift.

A thriving city attracts business travelers

Medellín does not just want to be seen as a destination for a short vacation, but a city where companies want to be based and international corporations come to do business.

Medellín’s Ruta N initiative encourages innovative tech companies to base themselves in Medellín in order to “increase the city and region’s competiveness.”

The city also launched tax incentives to draw businesses to the city. Businesses involved in certain clusters including energy, construction, tourism, and information technology would be exempt from property and industry and trade tax.

According to the International Congress and Convention Association, Medellín hosted 28 international conventions in 2012, earning it the 87th spot on the list. This is far fewer than its Brazilian counterparts Rio and Sao Paulo that hosted approximately 80 meetings each, but does represent an area of growth for the Colombian city.

Ten direct international routes are now flown from Medellín.

The post Why turning Medellín into the Silicon Valley of South America is great for tourism appeared first on Skift.

Sen. Krueger re-iterated her stance that the law as written was indeed directed towards the type of rental activity that takes place on sharing and vacation rental sites. Airbnb has stated that 87% of its hosts are renting the units they live in, but the senator argues that a much larger portion of the activity on these sites is carried out by unscrupulous agencies and landlords than the sites would have users believe.

A portion of her statement follows:

The real problem here is the devil-may-care attitude companies like Airbnb have taken toward the legal consequences for their users. Whether it’s laws like New York’s, or it’s the basic terms of use of a potential user’s apartment, companies like Airbnb or Flipkey are recruiting private citizens into their business model without sufficiently warning them that it may not be legal and could even lose them their homes. That’s pathologically irresponsible.

New York’s law deals with a serious problem — our city’s chronic residential housing shortage has reached a crisis level. The bulk of listings on Airbnb and similar services in New York City are not individuals or small entrepreneurs renting out one or two rooms from time to time to supplement their income — they are large, ongoing illegal business enterprises taking residential apartments entirely out of the market and using them as unsafe, illegal hotel rooms. This is bad for visitors, who don’t get proper services, safety, or security in these illegal accommodations, and bad for New Yorkers, who are suffering under a housing shortage and can’t afford to have residential apartments illegally taken out of the market.

I am open to discussing good-faith efforts to improve our law, but the only proposals that have been put forward so far would gut the law, making it practically unenforceable and leaving New Yorkers without any recourse against illegal hotel operations compromising the safety and security of their homes.

The post New York State Senator says Airbnb’s actions “pathologically irresponsible” appeared first on Skift.

Tablet Hotels CEO and co-founder Laurent Vernhes. / Tablet Hotels

The online hotel booking market is relatively packed, and standing out from the pack is difficult for any brand. The leadership at thirteen-year old Tablet Hotels, takes the position that each new entrant that may promise something new or unique is actually either a validation of its model or an opportunity to further evolve.

Tablet Hotels features a limited number of hotels in nearly 900 destinations around the world. In a market like London, for instance, you’ll find fewer than 60 properties, as opposed to over a thousand on Booking.com. The promise of Tablet is a specialty property at the lowest possible cost, and it has a history of delivering.

In addition to the listings, Tablet’s site also offers a magazine and a series of travel guides that offer a mix of inspiration and information that it hopes will help guests make smarter decisions before and after booking.

Skift sat down earlier this month with Tablet Hotels CEO and co-founder Laurent Vernhes in the company’s New York office.

Skift: Can you talk a bit about the origins of Tablet Hotels?

Laurent Vernhes: I got the idea to create Tablet out of need. I spent about ten years working as an expat in various parts of the world, but mostly Asia.

I was traveling every week to a new location. Some consultants in the U.S. will go to Cincinnati for three months, and then to Cleveland, and then to Kansas City, or something.

In my case, it was Bangkok, then Kuala Lumpur, Bombay, Jakarta. I was living in hotels, literally. When I decided to have that kind of career, my fantasy was to have a life like James Bond. I would have women all over in all of the cities

Very quickly, I realized it was not going to be like that.

Traveling for business is not that exciting. You have to work very hard to make it exciting. It’s hard work. I didn’t give up. I tried very hard to make traveling for business as a life exciting.

I realized that part of that was picking your hotels carefully because the of region. Basically, there are two types of hotels. There are hotels that are commodity products; it’s all about amenities, price, location. Then there are hotels that have soul, some personality, something, whether it’s design, or it’s with service.

If travel is your way of life, it’s important to find a hotel that has soul. It can be a big hotel, a small hotel. It’s not the matter of size. It’s not a matter if it’s part of a chain or not part of chain. You just need to find a hotel.

I was doing a lot of acquisitions of small companies on behalf of a very big company when I realized that I wanted to be like the guys whose companies I was buying. I wanted to be one of those people rather than CEO of a large division or large entity within the multinational thing. There was no dream there for me.

The dream was to be one of these people that had that freedom of thinking for yourself and doing something about it. I wanted to be like them. I’d say that I wanted to be an entrepreneur. The most interesting thing for me was to create the product I needed. That product was, basically, the ultimate hotel guide, which would restrict your selection to hotels that have a soul of some kind and eliminate all the commodity versions of hotels.

Skift: When you stepped in a little over ten years ago, it was pre-flash sale, pre-Jetsetter type of thing. You had legacy, stuff like Conde Nast Johansens and Small Luxury Hotels and things like that.

Laurent Vernhes: Marketing companies.

Skift: There was probably some overlap in some of the properties. But, how did you step into it and say, “I don’t want to do that marketing thing?”

Laurent Vernhes: I knew these marketing companies. There is nothing wrong with them. But I knew why I couldn’t rely on them. I couldn’t rely on them because they were charging hotels to represent them. They were marketing companies. They were also not comprehensive in terms of their selection.

There are a lot of great hotels that wouldn’t be in these books because they just didn’t want to pay these companies to be in the books. They were not entirely reliable either because their business model was built up on having as many hotels in the book as possible. So they were trying to find this balance.

As a traveler, that was not getting me the answer I was looking for. In fact, their business model was not marketing to travelers but marketing to travel agents. That’s what they do. They go to travel agents and say, “We have this collection of hotels why don’t you…we have this seal of approval.” That’s what they do. They were not meant to be catering to travelers directly.

As a traveler, I wanted a guide that had total integrity in terms of the selection. Therefore, it couldn’t charge hotels for being in the guide. Otherwise, you defeat the whole idea. It couldn’t be funded by advertising because who is going to advertise on your site? It’s going to be the hotels. If you do that, then it’s the biggest possible conflict with your editorial mission.

That’s why we became quite innovative actually at the time. Since then we have a couple innovations. The innovation was to merge editorial and commerce. In our case, we are a hotel guide merged with an online travel agency, and that was really new. Only the Internet could allow that, and there is no conflict. You sell what you recommend.

In our case, if our users tell us, “This thing is going down. You should remove it,” we’ll remove it. The hotel didn’t pay us to be on the site, so we’re completely free to do that. We just sell what we think is great, and our users confirm our work, members or travelers confirm it’s great.

Skift: How do you keep that pure because that’s the challenge, right? You guys have a financial incentive to include as many things as possible, so how do you always come down on the side of the consumer?

Laurent Vernhes: No, but it’s not. The financial incentive is not to add as many hotels as possible. The financial incentive is to take as many bookings in these hotels as possible. It’s a big difference.

Skift: You talk about removing something. How often do you need to remove something?

Laurent Vernhes: On a regular basis. Currently, it’s around 1,800 hotels on the site. Over the past 10 years, we’ve probably removed over 300 hotels. Hotels go through — just like anything else in life — they go through changes.

Skift: You’ve been around for ten years. What’s been the key to your survival during that period? This industry has changed dramatically since when you started. Other people have come around and gone away.

Laurent Vernhes: The key to survival has been that integrity I was talking to you about. The soul of the curation was that we wanted to be the best hotel guide we could be.

Now the word “curation” is a big buzzword — curation, curation. We’ve been doing curation from the beginning. That’s what it was all about. I used to call it “editing,” being an editor, editing a guide. Now Jetsetter, in particular, uses that buzzword of “curation.” What’s new about that? Nothing is new, except they are pushing it because they are not doing it.

If you look at the hotels there, half of them are great, the other half…

Skift: Need to fill the rooms?

Laurent Vernhes: …are hotels that agreed to do these crazy private sale things. Because they are cold calling hotels, “Do you want to do this?” “Do you want to do this?” In that case, they need to supply a never-ending stream of private sales.

In a way, that’s the difference between copycats and the company that they are imitating. Often the company they are imitating has the soul, and the copycats don’t. It’s just opportunity. Often companies that are the true pioneers disappear because they don’t manage to turn that soul into a sustainable business at the other end.

That soul kept us going and kept us relevant to people. Then the question is how do we maintain our competitiveness as a business? Are we going to increase our competitiveness?

A couple of things. One is, in terms of features, people like private sales, so let’s give them private sales. Except we give them private sales just in the hotels we cover. We’re not going to go desperately looking for private sales from any hotel that will do it because that’s not our main business model.

We follow the trends. Now HotelTonight, I think, is very interesting, and we’re hoping to launch Tablet Tonight in the next couple of months — Tablet Tonight, Tablet Tomorrow, why not? We can. Now we have. The reason why we can do this is because, in the process of all these 10 years, what we’ve developed is something that’s not visible but critical, is the technology.

We have so much technology. It takes a lot of technology to make technology disappear. In other words, to make your user interface ever more easy to use, you need to build a lot of technology. A lot of this technology is creating ever more efficient ways to have access to the best availability and the best rates in the hotels we want. That’s the role of technology, to make that seamless, to make that easy for the hotels, to make the data easy to use from a user interface for travelers. It takes a lot of technology.

If you are creating “Tablet” now, we wouldn’t be able to…we would have to invest a very large amount of money in technology to just match the user experience. That’s something we didn’t have in the beginning. Now we connect the extranet, direct connects with all kinds of sources of inventory, they push inventory to us, all this stuff. If we hadn’t built that, we would be dead by now.

Skift: Have you guys built your own inventory system that the hotels tie into?

Laurent Vernhes: That’s what’s enabling us. Now, like this Hotel Tonight thing is really interesting. It’s giving a way for hotels to get rid of inventory. It’s great. Everybody loves it. Can we do it? Yes.

Skift: Are you taking the same approach that you took with flash sales where it’s: We see a trend, people like these deals, but we’re going to continue working with our core of recommended hotels? It’s the same thing where it’s like, people want to do it now, we’ve got the hotels and the relationships, just add the element of time…

Laurent Vernhes: We are doing it in the hotels we are selecting. It’s still within our universe of being a hotel guide, and we only features hotels we believe in because they are our hotels. They are unique and they have a soul. Within that, we stay within the guide, but we need to add all these features that help people get better prices and get what they want basically.

Skift: Your relationships with hotels, I’ve probably, over the past five years, I’ve probably booked through you guys, or my wife has, at least eight or nine times and whatnot.

Laurent Vernhes: Thank you.

Skift: I would say in almost all the cases, if not all the cases, we received an upgrade. We’re not Tablet Plus members or anything like that. What do you guys do? How are you delivering customers in a way that makes them want to give me an upgrade even though I paid a pretty cheap rate?

Laurent Vernhes: It’s a few layers, actually. We approach these hotels as partners because we are in there for the long-term with them. If you approach hotels as a commodity product, they are interchangeable. If it’s not this one, you say, “OK.” Put yourself in the shoes of Expedia. “OK, Starwood. You don’t want to do a deal with us. It’s OK. We’ll do this other chain. Same thing. What’s the difference? We don’t care.” That’s the way that they negotiate.

We don’t negotiate this way because we like this hotel because it’s so unique. We’re not going to tell them, “Tough luck. Let’s do a deal with the other one. We don’t care.” Because we care. That’s the whole idea.

Skift: There’s only one that you love.

Laurent Vernhes: We love this one, so we’re going to work harder in creating that working relationship. What I’m going to try to squeeze them at every opportunity. We think of it as a partnership. We have a good relationship with hotels, Where Expedia is just completely ruthless about the whole thing.

I think Booking is smarter. They do it in a more sophisticated way, but basically they are completely ruthless.

There’s nothing wrong with being that. But that’s not very consistent with what we are trying to do which is we pick these hotels because they are great. We need to think about it as a partnership not as, “Well, if it’s not this one, it’s the next one.”

Second, we want to be not just the best place to find the best hotels, but the best place to book these hotels. What do we do about the booking portion that means that you’re going to get treated better when you book through us than when you book through the same hotel on Expedia? Obviously some hotels are a mini-travel agent, online travel agents. What can we do to make sure the hotel is going to treat our client better”

The initial premise is that we don’t try to squeeze the hotel, and this goes a long way actually. The second thing is that we increasingly are doing proactive customer service. We are calling these hotels and telling them, “We have this client coming. It would be good if you did this and that.”

Our ambition is to be the best place to book a hotel, even better than booking the hotel directly with the hotel.

Skift: You mentioned Booking.com. How do you guys go about customer acquisition online. Booking.com spends a little bit of money. Priceline spends some money on search engine marketing.

Laurent Vernhes: Not as much as Expedia.

Skift: How do you guys go up against that and get discovered?

Laurent Vernhes: We can’t match their marketing money, unfortunately. We have something that they don’t have which is a high level of loyalty and that goes back to our product and our mission.

It’s fair to say people don’t have a personal relationship with Expedia. They feel more often like they have a personal relationship with Tablet.

We’re not a commodity site. We don’t write marketing copy about the hotel. When we write the descriptions, it’s not the typical description you would read on an online travel agency site.

There is one hotel that we put on the site, if they disagree with the description and we tell them if there is anything factually wrong about the description, let us know, we’ll correct it.

There is this hotel and they were unhappy with the way we were talking about their hotel. There was nothing factual about it. They just didn’t like the tone. This is our site. If you don’t like it, then we won’t talk about you. If you disagree then we shouldn’t display your hotel because clearly there is a disconnect here. So we removed the hotel from the site. That kind of integrity is what’s creating the loyalty. It’s helped us a lot and people see that in us.

Skift: What have you learned especially in the last year with last-minute bookings that has caused you guys to say, “OK, we need to do Tablet Today?”

Laurent Vernhes: We used to have a last minute section of the site. We dropped that. We dropped it for reasons of pure programming because that portion of the site was killing the site itself because the programming was so bad. It was doing well. So we had to remove it because it was diminishing our ability to scale the site. Now we’re coming back to it. For sure, last-minute bookings are a very significant portion of bookings. It’s a key battlefield in terms of prices and availability. We need to offer hotels, tourists, to give us the best availability and the best rates for last minute bookings.

In fact, if you think of bookings for today and tomorrow, already it’s about 12 percent of all of our bookings are tonight and tomorrow already. The behavior of travelers is strongly biased towards last-minute bookings already. It’s something that we haven’t done enough in terms of getting hotels to give us even better rates for that portion of the supply.

That’s what we’re building now.

Hotel Tonight has done that very effectively and very well. We need to match that or exceed that. In fact, so we’re going to do it for tonight, for tomorrow, and for the next 14 days.

Skift: What’s the launch on that?

Laurent Vernhes: I hope June. We launch about June-ish.

Skift: What percentage of your users are Tablet Plus members?

Laurent Vernhes: The percentage that’s interesting is what is the percentage of bookings made by Tablet Plus members, and it’s over 20 percent. That’s significant.

Skift: What’s your rate of keeping Tablet Plus members?

Laurent Vernhes: It’s over 80 percent. We’ve made great progress on that. Tablet Plus is where we experimented with a lot of proactive customer service. We email people before their stay. It’s unprompted. It’s gone a long way.

Skift: You guys survived the flash sale onslaught.

Laurent Vernhes: We did, and the flash sale flameout.

Skift: Was there a period during that when you guys were panicking or like, “How are we going to do this”? People weren’t talking about you as much as they were talking about everybody else.

Laurent Vernhes: We launched our flash sale too, so we got a bit of traction from having that too. We were not panicking because we were growing. I always thought private flash sales were a great marketing tool, more of a marketing tool than a production tool. As a marketing tool, it served us too.

But I was looking at these companies doing just that, and to me, the only way they were going to survive was if they ended up copying us or trying to. What I mean by that is, have something for everyday, not just be flash sale, but be a good online travel agency.

You’ve got to be able to turn that marketing gimmick into becoming a true online travel agency, a good one. It looks like they were not successful at making that transition because it’s actually more difficult to be a good online travel agency than to run a flash sale operation. It’s a lot more difficult.

Jetsetter, they had a ton of money, and they burned and burned and burned. I could see they were trying to switch to basically full-on copying us, but for some reason, they underestimated what it takes.

I had to calm down some of my colleagues because they were looking at this and thinking, “Oh my God. They are going to take over this whole thing.” I had to tell them, “Look, it will only survive if it’s a real business. Right now, all we know is that they are really good at spending a ton of money. The jury’s still out on whether or not they can build a sustainable business.” Frankly, when I was looking, I didn’t think they were.

If you’re patient enough, it’s a matter of survival. The question was how much more money they had to spend to make it to a level of sustainability. The problem with VCs is that the more money you spend, the less patient you are, the more you want your site to be dramatic.

Even if you get to some level of where it actually makes sense, but if it’s not comparable to the vast amount of money you spent, you let it go. I’m very familiar with these dynamics. I’ve done Tablet the hard way. No VCs, completely independent.

We never had that money to spend before. Now we have more money because we are a bigger business. Obviously, as you grow, you get the means to do things on a bigger scale, but we never had that “Oh, we have five million to spend on getting the word out,” ten million or whatever it was. They’ve gone through a lot more than that, but I don’t know how much was for marketing. Who cares? [laughs]

I know because I used to buy companies. I know about building a business, a real business. I know it’s not easy. You don’t do it just like that. It’s not as easy as just throwing money out there to get the word out.

Skift: You’re self-funded, no VC money. What’s your endgame? Do you want to retire and pass Tablet down to your children or is it something where you want to sell?

Laurent Vernhes: No. It’s a good question. Somehow, I bumped into creating a family business. That was not the objective. I mean family as in the family of people who started this business. I don’t mean the family with children.

Since we don’t have a large outside investor, it’s become a traditional family business, so the option is there to actually keep it that way. I don’t want to load my kids future with that future. “This is the future. Good luck with it.” No, I think they have to create their own future.

The post Skift Q&A: Can an independent hotel booking site survive and thrive? appeared first on Skift.

If this apartment is rented for less than 30 days it is illegal. / Airbnb

Yesterday a New York City judge ruled that Nigel Warren, a tenant in who rented his apartment to a user on Airbnb would have to pay a $2,400 fine for breaking a New York State law that prohibits almost all rentals of apartments for less than 30 days in the city. The New York Times‘ Ron Lieber began covering Warren’s case in November, and he was seen as something of a canary in the coal mine in the industry; so much so that Airbnb sent legal representation to advise Warren.

Still, he lost, and he’ll have to cover the fine.

Airbnb responded to the ruling by issuing a statement which read, in part, “This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed.”

The problem is, the decision was exactly in line with the plain text of New York law (you can read the full senate bill here). The law was written to deal with the growing number of apartments in New York City that were being used to house by-the-night transient visitors. Although Airbnb has consistently argued that this was a movement by the threatened hotel industry to ban short-term rentals, it was actually a years-long movement by tenants and community groups to prevent the wholesale takeover of buildings zoned for residential use by landlords eager for the higher incomes short-term rentals could bring. In fact, some of the more brazen landlords had legitimate hotel brands as their illegal operations, such as a Marriott ExcuStay in Chelsea.

It’s important to note that while Airbnb has become the poster child for the fight in New York, it’s about any short-term rentals that don’t abide by the city’s laws. Earlier this month, the city’s largest housing development had to remind its tenants that they would be evicted if they took FlipKey up on its open solicitation to use their units for short-term rentals.

We covered the issues specific to New York City earlier this year in the story ”Airbnb’s growing pains mirrored in New York City, where half its listings are illegal rentals.”

In the interest of making things clear, here’s the official Skift cheat sheet to Airbnb rentals in New York City:

How do I know if a rental is illegal in New York City?

If the rental period is for less than 30 days and the person renting you the unit will not be present, the rental is illegal. There are a few tiny exceptions (such as when it’s for an entire house that meets a relatively rare residential classification), but not in the neighborhoods that visitors actually want to stay in.

Really?

Yes.

What if the landlord is the one doing the rental?

Then he or she could real be in for trouble, if the city decides to crack down.

One of the reasons New York State passed the law in July 2010 was to do battle with landlords who were replacing tenants with by-the-night renters, effectively turning apartment buildings into hotels, but without the zoning or safety requirements. Airbnb has always downplayed the number of units that fell into this category, but they were in the thousands before October 2012, when the most notorious operator, Smart Apartments LLC, was sued by the city for over $1 million and shut down for operating hundreds of illegal rentals, often taking over entire buildings in the city’s most desirable residential neighborhoods. Smart Apartments was a marketing agent operating on behalf of landlords, and chose to promote its units on sites across the web, including Airbnb.

This isn’t just a problem for Airbnb: Online travel agencies such as Expedia were booking rooms in illegal hotels throughout the city, too. And it still does. This Central Park Suites hotel listed on Expedia is not a legal hotel.

Shouldn’t an owner or tenant be able to do what he or she wants with an apartment?

There are all sorts of restrictions on owners and tenants. They can’t open a homeless shelter, nightclub, office, manufacturing plant, or youth hostel without the proper zoning. (It’s easy to open up a house of worship, but that’s another matter.) Renting an apartment for a transient guest changes the nature of a property and affects the quality of life of other residents, from security, sanitation, and noise, to the cost of a yearly lease as well as basic maintenance and wear-and-tear issues.

There are bigger issues about how it affects neighborhoods, too, but we’ll leave that to urban planners to explain.

Aren’t hotels scared of the disruptive power of revolutionary services like Airbnb?

“Scared” may be a strong word, but they certainly aren’t happy with the competition. Hotels don’t like the fact that Airbnb and its peers are able to make money off transactions that hotels would face stiff fines for. And they don’t like the fact that the cost of meeting safety and zoning regulations, as well as the high cost of room taxes — which often go to fund infrastructure that makes travel easier — are one reason why hotel rates aren’t competitive with peer-to-peer sites. Like any other industry, they’re going to try to squash the newcomer trying so steal market share.

Can’t we all just get along?

Airbnb’s CEO likes to share loopy ideas about how one day we’ll all give up property and share to our hearts’ content. But really, the sharing economy is about upstarts creating great new products and services that allow them to slice off business from established powers. And they’ve proven to be really good at it.

While some of the revenue for companies like Airbnb has heretofore been unrealized, many of the dollars would have otherwise gone to hotels. There’s no sharing taking place here, just smart business.

What’s next?

In San Francisco, city leaders are trying to figure out how more short-term rental units can be made legal. Nationwide, HomeAway CEO Brian Sharples has taken the role of the adult in the room and has shown that in cities like Austin, Texas, hosts and the city can work together. He’s spearheading a group called the Short Term Rental Advocacy Center that’s teaching hosts how they can begin a dialog with local government to make sure rules are fair on both sides.

Any across-the-board solution, though, will come with more regulations and reporting that we currently see in the market. Hosts will have to start reporting income on tax returns if they don’t already, and they may be required to purchase different insurance policies and meet licensing requirements from local municipalities.

That’s likely to scare off people like Nigel Warren who are just trying to make a few bucks on the weekends they’re out of town. And this uncertainty about fines and penalties for hosts is what really scares short-term rental companies.

The full decision in the Warren case:

Download (PDF, 81KB)

The post Is Airbnb illegal in New York? Definitely not, but many of its hosts break the law appeared first on Skift.

Hipmunk CEO Adam Goldstein, left, and co-founder Steve Huffman. / Hipmunk

Hipmunk co-founder and CEO Adam Goldstein, 25, believes his flight and hotel metasearch company can one day be larger than Kayak, and with $20.2 million in funding and revenue that has trickled in from the moment Hipmunk debuted, he thinks he has the time to prove it.

“We think we can be bigger,” Goldstein says, referring to Kayak. “We think we can do it.”

With Priceline closing today on its $1.8 billion acquisition of Kayak, you can picture the Kayakers reading Goldstein’s boast, and breaking out in giggles as they pour their champagne (or whatever the favorite libation is over there).

After all, in the first quarter of 2013, nine-year-old Kayak reported more than 357 million user queries from desktops and mobile devices, 3 million app downloads, and $82.3 million in revenue. And, Kayak was in the black, wrangling net income of $2.1 million.

As a private company, founded in 2010, Hipmunk doesn’t break out a lot of numbers, although Goldstein says the overall business, including searches, bookings and revenue, has been “more than doubling every year since we started.”

Although these sorts of measures can be notoriously unreliable, Compete’s U.S. numbers peg Hipmunk’s monthly unique visitors at a fraction of Kayak’s, and even show Hipmunk trailing rival Room 77, which debuted its core hotel-comparison shopping product in late 2011, more than a year after Hipmunk burst on the scene.

Debatable

It’s hard to debate Goldstein’s premise that Hipmunk can one day beat Kayak because it is an open-ended goal, there are so many variables, and anything’s possible.

Then again, it is difficult to debate Goldstein about anything because he was the captain of the MIT debate team during part of his 2006-2010 stint at the school, although he doesn’t try to aggressively score points when recounting Hipmunk’s journey.

Goldstein was in charge of arranging the debate team’s national and international travel, and he found that it took so much time and was so frustrating that it led to what he calls an “aha moment” during his senior year about working on a travel startup.

The idea at first was to build a travel agency, one that would enable consumers to quickly make decisions based on a comprehensive array of choices, including flights, hotels, cars, trains and buses.

One of the first people Goldstein talked to about his ideas was Reddit founder Steve Huffman, whom Goldstein met during his high school years at what he describes as a “nerd conference,” Foo Camp.

Huffman, who would become Hipmunk’s co-founder, was experiencing his own frustrations about travel search as he was commuting across the country to visit his fiancé.

Goldstein says Huffman initially was skeptical, saying: “Why would we want to get in a fight with those guys?” referring to powerful, entrenched online travel agencies and existing metasearch players.

In retrospect, most people would think Huffman’s warning was on point when you consider that if Hipmunk were to aggressively engage in search engine marketing these days, it would face an uphill battle of competing for keyword real estate with hotels, other metasearch companies and online travel agencies, including Priceline, which spent $403.1 million in online and offline advertising during the first quarter.

“Suckage” and “Agony”

After graduation, in June 2010, Goldstein and Huffman were accepted into Y Combinator, and they had a three-month deadline to launch a product and pitch it to investors.

“We hadn’t written a single line of code yet,” Goldstein recalls. “We didn’t know what we were building yet, either.”

They decided to start with flight metasearch, and after a few weeks when no one would return their phone calls, they eventually struck a partnership with Orbitz as Hipmunk’s initial data source (ITA Software came later) and booking partner.

Huffman and Goldstein had come up with an attractive user interface, something that would get a lot of buzz and feature an Agony index, which would remove the pain of flight search by succinctly sorting flights based on price, duration and the number of stops.

They got Hipmunk online a week before Y Combinator’s demo day, and what was to become the Agony index was initially called Suckage.

But, the two entrepreneurs figured a lot of publications wouldn’t write about something with such a vulgar-sounding name so “literally the day before we launched at Y Combinator,” the co-founders ran a thesaurus search on “pain” and decided on “Agony” as the name for their now well-known sort option.

Approaching three years later, Hipmunk has raised $20.2 million in total funding, with a Series B round of $15 million, led by Institutional Venture Partners and with participation from Series A leader Ignition Partners, having been completed in June 2012.

Not in anyone’s pocket

With Kayak transitioning into the Priceline fold, Expedia taking a majority stake in German hotel-metasearch site Trivago, and Expedia also leading a $30.3 million Series C round for Room 77, Hipmunk finds itself as “one of the last independent metasearch companies” and “one of the fastest growing in the U.S.,” Goldstein says.

For the record, Room 77 CEO Drew Patterson says the company’s investors, which include Expedia, Concur, Sutter Hill Ventures, General Catalyst Partners, Felicis Ventures and a bunch of angels, are “passive investors,” and none sit on the Room 77 board.

But, Goldstein argues that Room 77′s investment path sends a signal, and that Hipmunk enjoys a competitive advantage as an independent force when it goes to striking hotel-partnership deals.

“The fact that we are not associated with their enemies is powerful,” Goldstein says.

Very positive reviews and loyal following

Hipmunk has garnered stellar reviews from the tech press and users for its attractive UI, ease of use, and its iOS and Android apps from their beginnings.

Recent initiatives include a revamp of Hipmunk’s mobile apps, and the option to book on Hipmunk (via Expedia in the background) instead of having to navigate away from Hipmunk and over to hotel and online travel agency sites. The mobile app for the first time features plenty of other online travel agency booking partners beyond Orbitz.

Almost everything Hipmunk does, from its flight and hotel search UIs, to its mobile apps, is pretty.

For example, take the Hipmunk Pricegraph, launched late last year and geared for consumers whose travel dates are totally flexible.

Pricegraph shows airfares over the next 90 days: Just view airfares and select departure and return dates from the graph, choose book this flight, and you can view a summation or full flight details before navigating over to United.com or some other airline or online travel agency site.

Goldstein says once people use Hipmunk, “they generally like it a lot,” and come back to use it again.

But how is Hipmunk going to get users to discover it and fight for eyeballs against larger players with much larger bank accounts?

Goldstein says Hipmunk still has much work to do in marketing, partnerships, and the product sides before it makes a decision on keyword marketing.

“While I think our product is the best in the marketplace already — and our users agree — I think we can still make it better, and we are going to do that, before we blow tens or hundreds of millions of dollars yelling it out to the world,” Goldstein says.

“It’s a little unoriginal to take that route that other travel sites have done in throwing money at it,” Goldstein adds, noting that Hipmunk may get creative in its eventual strategy.

Meanwhile, Goldstein acknowledges that Hipmunk erred in its initial focus on flights, and now most of its resources are directed toward improving its hotel and mobile products, with the latter being its “fastest growing piece of the business.”

Long-term outlook

Hipmunk can afford to hang around for a long time while it fine-tunes the user experience. It has $20.2 million in total funding, revenue coming in, and a relatively lean staff of 33 people. In contrast, Hotel Tonight, with some $35.7 million in funding, employs about 100 people.

Goldstein says Hipmunk’s financial situation is “great,” and while the company is now past its “early phase,” Hipmunk can afford to invest the “vast majority” of its resources into hotel search.

“We don’t have any need to raise money until we are ready to,” he says.

The problem, though, for Hipmunk, Room 77, Hotel Tonight, and other funded travel startups, is how do you achieve scale, and get into the position where your unit economics are so attractive that they spur even more growth.

“We are nowhere close to the size of Kayak,” Goldstein says, adding that he believes Hipmunk’s partnership deals are “competitive” with others in the industry. “There is tons of headroom and it’s going to take time to get there.”

Of course, being acquired by a larger company could always help a company keen on growth. (An acquisition can also totally screw things up.)

But, when asked what advice he would give to early-stage travel startups, Goldstein provides some hints about the preferred end-game, or at least the medium-term outlook.

He advises co-founders of travel startups to ensure they have “a common vision for what success looks like” as one co-founder may be wowed by an early acquisition offer, and the other may want to hold out for bigger and better things.

Says Goldstein, on the topic: “We have plenty of acquisition interest. But, we are interested in staying independent.”

This is the first of a four-part series on funded travel startups, looking at where they started and their strategies for breaking out of the pack. 

The post The real-world challenges for travel startups, as mirrored in Hipmunk’s story appeared first on Skift.

Game on.

Priceline says it paid $522.4 million in cash and issued more than 1.5 million shares of common stock to pay for the right to meld the travel metasearch company into the Priceline fold.

Kayak will operate as an independent company, as do Booking.com, Agoda, and rentalcars.com, within the Priceline Group.

The CEOs of Priceline and Kayak co-founders had something to say today about the whole thing.

“We are delighted to welcome Kayak as the newest member of The Priceline Group,” said Jeffery H. Boyd, CEO of The Priceline Group.  “We look forward to working with the Kayak  team as they build their business and expand the international footprint of their great products.”

“We are excited to join the world’s premier online travel company,” said Steve Hafner, Kayak CEO and co-founder.  “We believe that The Priceline Group’s expertise and worldwide reach will help us expand our business globally.”

Paul English, Kayak CTO and co-founder added, “Our focus will remain creating the best place for travelers to plan and book their travel and providing an effective marketing channel for travel suppliers and online travel agencies.”

Priceline’s acquisition of Kayak kicks off the next stage in competition among global travel companies. It has mostly focused to date on the standalone hotel business, as Expedia and Booking.com duke it out in Europe, Asia and Latin America, but now travel metasearch has been added to the mix.

The post Priceline completes acquisition of Kayak appeared first on Skift.

Expanding on the organization’s online tools, VisitEngland launched a free marketing guide Speak Up! aimed at educating hotels, tour companies, and restaurants how to communicate with this important customer.

The guide explains why accessible is a better term than disability friendly (it includes a broader customer base) and points out other politically correct phrases. It also includes case studies of different hotels’ facilities and marketing strategies. One of the best examples is this Gilbey Films video highlighting the extra measures that the W Hotel London takes to be considered an accessible business.

VisitEngland’s ultimate goal is to become a destination that is known as welcoming and accessible to travelers with disabilities and mobility challenges, a tourism market that the report estimates is worth £2 billion.

Other tourism boards, independent organizations, and even startups are also targeting this group of travelers that need to know specific details before booking a trip.

The full guide from VisitEngland is embedded below:

The post VisitEngland teaches businesses how to attract travelers with special needs appeared first on Skift.

This week’s SkiftSeedlings speaks to that breadth of opportunity by including everything from a media company looking to launch the world’s largest consumer travel event to a small device that tracks employees’ driving behaviors.

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