HotelTonight burst on the scene nearly seven years ago as a unique and exquisite mobile- and tonight-only hotel booking app that spawned a host of competitors — startups and major players among them — all over the world.
Skift tech editor Sean O’Neill traced HotelTonight’s evolution here, including its latest pivot into a hotel-booking service that enables guests to book hotels 100 days in advance.
Sam Shank, HotelTonight co-founder and CEO, posted a Reuters story on LinkedIn the other day that pointed out that the startup would now have to go head to head with Expedia and Booking.com.
Shank wrote: “Proud of the HotelTonight team and their relentless quest to reinvent the online travel agency for the mobile era. Great things ahead!”
Rock, Paper, Scissors
But will HotelTonight wither at the prospect of directly competing with the Priceline Group and Expedia, which collectively spent roughly $6.5 billion on advertising in 2016, and is increasing that spend this year?
Will HotelTonight run into a brick wall on the customer acquisition front as Hipmunk did, and end up with an underwhelming exit for investors as Hipmunk did in 2016 as a tuck-in buy for SAP/Concur?
Shank argues that HotelTonight’s mobile advantages will trump that marketing spend, and that curation beats inventory comprehensiveness. The latter has been a signature plank in the growth of online travel companies until now.
HotelTonight’s prospects are hotly debated across the travel industry, and Skift reached out to assorted travel-industry brainiacs to weigh in with their ideas on what’s ahead for HotelTonight. One of the things we asked them, too, was whether they thought there were parallels for HotelTonight in Hipmunk’s exit, which is believed to have been for less than what its venture capitalist partners invested.
Here’s what the travel intelligentsia said:
Adam Goldstein, Hipmunk CEO
Adam Goldstein: “Competition is tough in online travel. Every company needs to look carefully at how it can gain reach. In the past, we did it by expanding our verticals and platforms; now we’re expanding our audience to small businesses with Concur Hipmunk.”
Paul English, co-founder Kayak and Lola
Paul English: “One of the most brilliant things about HotelTonight is their name — it got them traction. I think they will have challenges stretching that brand to 100 days.”
Asked why HotelTonight would have trouble transitioning to a 100-day booking window, English added:
“There is another issue for them as well. When they were niche and tonight only, they negotiated great rates on a small number of properties. It would be harder to do this at scale. But I think Sam [Shank] is amazing.”
Steve Hafner, Kayak co-founder and CEO
Steve Hafner on the move to a 100-day booking: “It will help, but ultimately Sam has a losing hand. Next up…an HT website that accepts bookings.”
Nadav Gur, Founder and CEO Servo Labs, WorldMate founder
Nadav Gur: Mobile as a platform has come of age. It’s no longer a first-mover platform as it was when they [HotelTonight] got started, but rather a platform where to get customers you spend money — just like the Web. HT was great at moving fast and introducing a fresh business model and a fresh user experience, which allowed them initially to acquire users at a very low. That ended somewhere around 2014 and now it’s back to the arbitrage between acquisition cost, conversion rate and margin — which Booking.com and Expedia excel in.
“[Now-Priceline Group CEO] Glenn Fogel told me in 2011 that ‘unless you have inventory no one else has — it’s virtually impossible to compete with us and Expedia.’ HT had that in the last-minute inventory, but for Expedia and Booking this was not so hard to copy given their existing distribution relationships. And then it’s back to my point about who optimizes acquisition cost versus margins.
“Personally, I also feel that for many of the original customers, this was a lifestyle product — stay at a posh hotel in your own town or its vicinity. That gets old eventually.”
Max Rayner, Hudson Crossing Partner,Ex-CTO Travelzoo
Max Rayner: “HotelTonight is a good example of two big trends: The first trend is that if a travel distributor wants to take on the Big Three [Priceline, Expedia and Ctrip] and that will require near-prohibitive amounts of investment. Look for the example of MakeMyTrip having to take money from Ctrip to continue growing. But the second is that a loyal audience and/or access to relatively unique inventory are valuable assets that can allow a minnow to prosper among the sharks. That’s where HotelTonight is ‘making their bed,’ betting that its core audience will now shop beyond ‘tonight’ without all the PPC [pay per click] costs of visit/booking acquisition that usually challenge smaller players.
“In a way, HotelTonight is now aiming for an outcome similar to Hipmunk’s. Hipmunk was also not able to break through into the ‘majors.’ but managed to offer enough unique value that it became quite valuable for an acquirer at two levels: proven innovative features, and enough audience loyalty that it wasn’t a bottomless pit of PPC spend.”
Gillian Morris, founder of HItlist
Gillian Morris: “The two companies — HotelTonight and Hipmunk — couldn’t be more different. Hipmunk was never distinct from the other metasearch engines: The ‘agony’ factor is a public relations gimmick that does not factor into most people’s purchase decisions, and the display was novel to some but confusing to most. Fundamentally they were offering the same exact product with the same UX as every other metasearch engine where you search for a flight from A to B on X date [optional returning Y date]. They got as far as they did because of Alexis Ohanian’s [Hupmunk chief marketing officer’s] marketing prowess and the Silicon Valley echo chamber that rewarded them with enough dollars to artuget a lot of PR.
“HotelTonight was a differentiated product from the beginning, first for its focus on last- minute bookings at steep discounts, which others weren’t offering at the time. Much more important was its decision to have a singular focus on mobile UX [user experience], and the product decisions that it made because of that: fewer, curated listings; a personalized log-in experience, and hassle-free booking.
“This focus on a good user experience has made them a hero among time-constrained higher-end travelers. I don’t think Hipmunk ever had anything differentiated enough to get people coming back to the platform, but HotelTonight has true loyal evangelists.”
Johannes Reck, GetYourGuide co-founder and CEO
Johannes Reck: “I think HT is a fantastic company that drove a tremendous amount of innovation in the mobile travel space. I love their user experience and product centricity. Also, Sam Shank is one of the best CEOs out there. He managed to completely turn the company around from a high-burner to break-even. That’s an incredible accomplishment and anyone who’s ever worked in a start-up company can attest to that.
“I think you’re article overemphasises the fact that they weren’t bought yet. Not every start-up wants to get bought (including GetYourGuide), as it means you give up control over how you develop your product.
“So in a nutshell, I think HT’s prospects are great: They are still growing at a considerable pace, have a highly loyal user base and a superior mobile product. It’s very likely HT can grow for a few more years and then go public.”
Jen O’Neal, Tripping Founder and CEO
Jen O’Neal:”Playing in a hyper-competitive market is hard enough. Playing in a slice of that market is exponentially harder and could limit HotelTonight’s longer-term growth potential. Opening up their booking window — and going after a larger market — is a smart move.
“We made a similar move early on at Tripping.com, when we pivoted from being a social travel site with a small market of mostly young backpackers to a becoming a metasearch site for vacation rentals with an enormous global market. Having been through the pains of a pivot, my advice is for them to move as fast as humanly possible right now, in full pursuit of their new direction.
“Sure, competition is stiff in the hotel space. But HotelTonight has three key things going for it: a beautiful product, solid (and growing) brand recognition and — most importantly — profits. If anyone stands a chance of going up against the big guys, it’s Sam and his team. I wish them a ton of luck.”
Dmitry Koltunov, co-founder and CTO of Alice
Dmitry Koltunov: ““Hipmunk and HotelTonight focus on solving different problems. At the core, Hipmunk optimizes the general search experience, helping consumers wade through all the options more intuitively. They gained market share by grouping and filtering travel options in a way that made sense, i.e. sorting by ‘agony,’ or removing travel options that were the same, but priced poorly. Growth for them was to get more clients — implying that UX would be able to defeat the big guys.
“HotelTonight solves the problem of curation and affordability with a slick user experience. They explicitly show a subset of hotels that can offer various levels of luxury, but all at a good price. Since curation is a part of the special sauce, expanding to longer range dates seems like a natural evolution. If guests like the HotelTonight selections and the UX they provide feels great, limiting options to 7-day booking prevents loyalty for trips planned ahead of time. Expanding the window could be a way for HotelTonight to capture more trips from the same loyal consumer base in addition to simply growing the customer base. It makes their product sticky.”
Martin Soler, Dryven partner, managing partner Soler & Associates
Martin Soler: “In my opinion Both Hipmunk and HotelTonight stayed at the early adopter stages. They haven’t ‘crossed chasm’ into mainstream use for hotels. Staying niche while the others moved on (Trivago, Skyscanner, for example).
“Hipmunk, as Skift pointed out, is pivoting to business travel. For HotelTonight, I’m not sure that will be an avenue unless they can prenegotiate rates en masse.
“It’s an amazing achievement that they managed to stay around for so long and not get wiped out by the likes of Booking. Even to the point where Booking shut down their last-minute app, while they have all the inventory.
“Moving to 100 days is a step to moving mainstream. They [HotelTonight] need to become a mainstream channel for hotels and top of mind for consumers in a market where booking hotels is a once- or twice-a year activity, and that means high cost of acquisition. Corporate travel is more frequent but not necessarily a very mobile activity. I believe they’re coming to a critical point where they need to make some choices that will reflect on their DNA and, more importantly, advertising budgets.”
Roman Peskin, co-founder and former ceo dealAngel
Roman Peskin: “HotelTonight is a bit of an outlier in the business to consumer travel startup world. They didn’t die and they are profitable, albeit marginally. One of the reasons for their modest success was that that its user experience is really freaking superior to practically anything out there. They did what startups should always be aiming at — they carved out a small niche market were they could dominate, and now they can expand into broader markets. However, it is doubtful they will be able to expand beyond a core base of consumer frequent travelers, who care about the aesthetics of user experience.
“Just like Hipmunk, HotelTonight could be utilized a lot better in the corporate travel space. Their streamlined user exerience and focus on curated offers is exactly what any major corporate TMC needs. There are two obstacles in this otherwise perfect mergers and acquisition situation: HotelTonight doesn’t have flights. Corporate travel tools that don’t have flights are dead on arrival. And expanding HT’s functionality with a flight-booking engine of equal quality as its hotel product is not an easy task.
“Just like Skift said in a past article: they raised too much money, 2.5 times more than Hipmunk. It would be hard to swallow for most TMCs except for the largest three. But American Express Global Business Travel already made their bet on KDS Neo,
BCD acquired GetGoing’s assets for cheap, although judging by the way they treat the product and the team, it is unlikely to ever become a big thing. I don’t know much about Carlson Wagonlit Travel although based on Kurt Ekert’s interview, I doubt they have their mind in the right place for such a bold move.”
Joe Haslam, co-founder and chairman of Hot Hotels
Joe Haslam: “Companies like Hot and HotelTonight had a window when we both did well, but once the market switched from Web to mobile, the big guns followed and gobbled it up.
“Big Tech is moving from a mobile-first world to an AI- [Artificial Intelligence-] first world. Customer experiences like Paul English´s Lola will be the future.
“A mile down the road from HotelTonight is Uber. Watch Uber acquire companies like HotelTonight and put together the perfect trip experience. With [former Expedia CEO] Dara Khosrowshahi now in as CEO at Uber, they have the perfect guy to do it.”
Justin Effon,co-founder and CEO of Alice
Justin Effon: “Things didn’t turn out too poorly for Hipmunk — they found an acquirer. HotelTonight is in a different position than Hipmunk was: HT is profitable. [Editor’s Note: Hipmunk claimed to be profitable from its early days.]
“But, in pivot, HT is becoming even more like an online travel agency and the online travel agency space is an established duopoly. Perhaps if HT does make headway here, it can hope for an acquisition [even if Shank prefers an IPO.]”