In light of Airbnb buying HotelTonight, Skift looks back at the many copycats of the mobile-first hotel booking agency. Where are they now?
After Airbnb bought HotelTonight, our thoughts turned to the many clones of the startup.
When CEO Sam Shank and chief technology officer Jared Simon co-founded HotelTonight in 2010, they had to popularize the new concept of mobile-only, last-minute, curated hotel bookings.
However, before long, roughly a dozen other companies with strikingly similar business models popped up around the world.
HotelTonight defended itself by out-raising the copycats. It collected about $117 million from investors. It also sourced its inventory directly from hoteliers, and general managers could easily see how it was driving lower-cost, high-value bookings. Some copycats became resellers instead.
Earlier this month, Airbnb said it would acquire hotel booking platform HotelTonight for a little more than $400 million, with about half in stock.
“The acquisition by Airbnb certainly represents the end of an era for stand-alone, last-minute, mobile-only hotel booking,” said Joe Haslam, chairman and a co-founder of HotHotels, a Spanish company that once took eleventh-hour consumer bookings and now operates as a back office hotel booking platform for mobile.
“Sam and Jared deserve much credit for creating the category, and it’s fitting the era ends with them,” Haslam said.
Perhaps the scariest copycat came from Booking.com, which in 2015 launched a Booking Now app separate from its main app. Booking Now prompted shoppers to reserve lodging up to 48 hours in advance. The app would “probably kill HotelTonight,” predicted Wired magazine. Yet the online travel agency abandoned the separate app after less than two years.
HotelTonight faced a tension between maintaining profitability and competing against Booking.com, Expedia, and other better-capitalized players in online customer acquisition.
“I think the HotelTonight business model didn’t work in Europe the way it did in the U.S.,” said Stefan Menden, founder and CEO of JustBook. “I’m aware of at least five serious European companies that followed the HotelTonight idea, including three financed startups and two corporate apps. All of them are gone, and to my knowledge HotelTonight never did any serious business in Europe itself, despite hiring local teams.”
On the one hand, constraints led it to innovate. For example, it took advantage of Facebook’s ad product for promoting app downloads before the giants adopted the tool at an industrial scale and drove up the costs. CEO Sam Shank was also early to using LinkedIn’s platform as a free way to promote his startup among potential recruits.
Yet skeptics doubted HotelTonight had a large enough addressable market of time-constrained higher-end travelers.
Over time, the company conceded some points. By September 2017, HotelTonight began pivoting to become a more all-purpose and generic hotel booking brand. It expanded its booking window and, bowing to predictions, added a desktop browser version.
HotelTonight’s many smaller rivals faced similar strategic and practical obstacles.
ReallyLateBooking may have been HotelTonight’s earliest clone, though accounts differ. Roberto Gil Del Sol recently recalled that in 2010 he belonged to an online forum about a programming language, CoffeeScript, when he noticed another participant, HotelTonight’s chief technology officer, who mentioned his startup idea in passing to the group. Gil Del Sol discussed the idea to a friend, Pablo Pazos, and together they created something similar.
Launched in July 2011, ReallyLateBooking became months later one of three winning startups in a Madrid startup competition. It received investment and mentoring thanks to SeedRocket.
Fatefully, the founders accepted investment from eDreams Odigeo, an online travel agency conglomerate that was preparing to list on the public markets in 2014. The investment helped the company boost customer acquisition efforts and get consumers to download the app about 300,000 times, said Gil Del Sol.
However, Odigeo’s funding came with “no drag-along” provisions that gave it the right to refuse any other outside investors getting involved. After a few months, Odigeo lost faith in the startup and effectively shut it down, in a disastrous outcome for its early investors. But the experience fortified the founders for other business adventures.
Perhaps the next-most-successful of the HotelTonight copycats was founded in India. CEO Deepak Negi founded NightStay and reportedly raised more than $10 million to expand its. Last year, India’s digital wallet and fast-growing travel player Paytm bought it for a reported $20 million. Nightstay co-founder Nasr Khan will lead the hotel-booking services at Paytm, while Negi has left to work at a digital agency.
Another startup, HotelQuickly, looked set to soar, early on.
Having co-founded the company in 2012, CEO Tomas Laboutka built a team of 100 employees over time to bring mobile-first, last-minute hotel booking to Asia. Consumers downloaded the company’s app more than 3 million times, signed exclusive partnerships with more than 5,000 hotels, and listed more than 200,000 other properties through resale agreements, Laboutka said.
In 2016, HotelQuickly acquired Tonight Japan, a clone built by Eiji Araki. By 2017, HotelQuickly tripled its annualized transaction volume to about $100 million. However, challenges piled up, too.
“The skyrocketing customer acquisition cost some of the players were paying became, in our opinion, well beyond the point of sustainability,” Laboutka said.
“A growth-at-any-cost mindset could be attributed partly to the increasingly pronounced oligopoly of the two global travel players,” Laboutka said. “But the landscape also changed with the ever-rising dominance of Facebook and Google and the evaporating impact cheaper ad networks could offer.”
Lack of penetration of mobile payments services at the time and the complexity of a multi-country strategy also mattered.
The founders looked to find a buyer for the business who could provide the capital to take the company to the next level. They sold to Rising Sun Merchant Services.
“In August 2017 we decided to sell with a shared vision and promise of synergies across other travel portfolio companies as well as of additional technological expertise,” Laboutka said.
Rising Sun didn’t deliver on the promise.
Late last year, the parent company Rising Sun allowed HotelQuickly to suddenly leave hundreds of its customers stranded after the brand rang up a debt of about $12 million to Hotelbeds, a wholesale supplier of many its rooms, according to one source. In November Hotelbeds and other suppliers began to cancel the bookings.
“We help our travel buying partners source hotels through our technology platform and HotelQuickly was working with many similar providers,” a Hotelbeds spokesperson said. “As is standard across the industry, the travel agent or OTA [online travel agency] acquiring the booking is always responsible for all aspects of the reservation, not least responsibility for settling the hotel bill. Sadly, if they fail to do this, cancellations will follow and this is what many other wholesalers were forced to do in this case.”
Rising Sun declined to respond to our interview request.
Since then, Rising Sun has reconstituted another acquisition, online trip-planning forum Travelbook, into a site that offers bookings for hotels and other products.
In September 2011, Stefan Menden, founder and CEO, launched JustBook in Germany and quickly expanded into Spain and UK. It raised about $4.5 million. Then in December 2013, flash-sales site Secret Escapes acquired it, and the service eventually disappeared.
The founders became the spearhead of Secret Escapes’ effort to expand into Germany, Austria, and Switzerland and later the Benelux countries and Scandinavia.
“Many of the old JustBook-team are still with Secret Escapes today more than five years later,” said Menden. “I left the company only last November to pursue a new entrepreneurial endeavor after I bought language travel group Eurocentres.”
“App store marketing was definitely a challenge and the main reason why we added a desktop browser booking site,” said Menden. “We faced and won a legal battle against one of the big online travel agencies [HRS, or Hotel Reservation Service] over best-price guarantees. This, in turn, gave us a lot of positive PR – but the whole process was time-consuming and expensive.”
HotHotels’s founders, Joe Haslam and Conor O´Connor, said they had already been working on a hotel booking app in Spain when HotelTonight came out. They debuted their product in January 2012 and eventually joined the accelerator Techstars Boston.
“In mid-2015, everything looked great,” said chairman Haslam. “But then we lost our momentum after an acquisition inquiry didn’t go through. We no longer take direct bookings. Our current plan is to buy out the investors and go again with a new interface. We have a number of integrations that are still valuable.”
In early 2012, CEO Josue Gio co-founded LastRoom, which at its height worked with 550 hotels and many hotel chains in Mexico and also resold inventory from Expedia and Booking.com.
It shut up shop at the end of 2014. Why did things end the way they did?
“Our biggest problem was the funding,” said Gio. “We just raised $150,000 at a time when Mexico’s venture capital and startup scenes were only starting.
“I think consumer travel startups of all kinds face a problem related to how booking a room is not a habit for most consumers,” said Gio. “So the tech is irrelevant given the importance of marketing, and without funding, it is hard to do marketing.
“Before LastRooms, I never thought that ‘to fail’ was a positive thing, but now we know that can be a productive experience,” said Gio. “I’m happy to have learned, and now I’m investing in LATAM startups with Arkfund.”
The list of lookalikes goes on.
Spanish startup Blink, founded in 2011 by CEO Rebeca Minguela, went on to raise about $2.5 million in funding. In late 2013, Groupon acquired Blink. For a while, it offered bookings under the Blink by Groupon brand until, in 2015, it shut down the effort.
In mid-2012, a few entrepreneurs in Brazil created Hotel Hoje. But by late 2014 it had fizzled out.
In 2017 Bengaluru-based RoomsTonite shut down after a brief life.
In mid-2012, VeryLastRoom debuted in France, and CEO Nicolas Salin raised more than $2 million for it. But by January 2018, it had ended up in the deadpool.
Send in the Clones
So what’s the next concept that’s inspiring uncannily similar businesses to pop up around the world? Oyo, an India-based hospitality and tech company that has popularized its flagship product of branded budget hotels. Variations on the model include Mexico’s GuruHotel and Colombia’s Ayenda Rooms.
Oyo itself represented a pivot from an earlier company, OravelStays, which was in some ways a clone of Airbnb, which has also inspired a raft of imitators.
Expect the clone wars to continue.
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Tags: booking.com, hoteltonight, online travel agencies
Photo credit: Sam Shank, CEO of HotelTonight, speaking at the Skift Global Forum in New York City on October 9, 2014. Skift