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RedDoorz' latest funding round includes two interesting new investors, Qiming and MNC Group, and it says a lot about the potential of budget accommodation in Southeast Asia, which is also being pursued by Oyo.
Next to Oyo, RedDoorz looks pretty docile. But its latest funding raise of $45 million shows it’s standing up to the 800-pound gorilla of the budget accommodation market that’s pounding its chest throughout its Southeast Asian turf with deeper pockets.
The Series B round is led by Chinese venture capital firm Qiming Venture Partners, which has offices in China and the U.S. It counts companies such as Meituan-Dianping and Mafengwo among the entrepreneurial enterprises it has backed since founding in 2006.
Qiming is joined by another new RedDoorz investor, MNC Group, whose founder, Indonesian tycoon Hary Tanoesoedibjo, is a business partner of Donald Trump on two Indonesia projects. One is the Trump International Hotel & Tower in Bali, a conversion of the former Pan Pacific Nirwana Bali Resort, which MNC acquired in 2013, and the other an integrated development with a theme park, resort, hotel, and golf course in Lido, Sukabumi, West Java.
For Qiming, the investment in RedDoorz appears the first time it has ventured outside China in a Southeast Asian company, it and comes amid interesting times in the budget accommodation sector.
Oyo’s recent jaw-dropping move in positioning itself for an $18 billion IPO within two to three years may open wider the eyes of investors on the sector, which still is greenfield. Investors may also be liking RedDoorz’ sole focus on Southeast Asia and its slow but steady expansion in the region, which is in stark contrast to Oyo’s aggressive push globally.
“We have seen the trend of budget hotel chains in China about 15 years ago and believe that standardized accommodation at affordable prices will appeal to consumers and business travelers in Southeast Asia too,” said Helen Wong, a partner at Qiming.
“As online penetration of the travel industry grows, RedDoorz will be a key beneficiary with the most extensive network of hotels in the region. The company has executed well to become number one [in Southeast Asia], delivering strong value to hotel owners in user acquisition, technology, and customer service. We look forward to working together with them and sharing our learnings from the China market.”
Other key investors in the round are existing RedDoorz backers Hendale Capital, International Finance Corporation, and Susquehanna International Group.
David and Goliath in ASEAN
RedDoorz, founded in 2015 by former Make My Trip executives Amit Saberwal and Asheesh Saxena, says it has more than 1,200 properties, 800 of which are in Indonesia and the rest in Singapore, Indonesia, Vietnam, and the Philippines.
Total number of rooms isn’t available, but as of December 2018, RedDoorz had 680 properties and 17,000 rooms, of which 13,600 rooms were in Indonesia, its biggest market.
Oyo is also focusing on Indonesia, where it has placed $100 million for expansion, and Vietnam, where it is investing $50 million. Oyo targets to grow to 20,000 rooms in Vietnam alone by the end of next year.
Saberwal isn’t available for further comments about the latest funding at press time, but in an earlier interview with Skift, he said RedDoorz was targeting to grow to at least 12,000 hotels with 420,000 rooms throughout Southeast Asia by 2022.
In contrast, Oyo has said it will have over 25,000 hotels with at least two million rooms in Southeast Asia by 2023.
RedDoorz investors appear unfazed by Oyo competition in Southeast Asia. Their statements said they like RedDoorz track record and model.
“We believe the company’s track record in the online accommodation booking and hotel management is a brilliant solution for the independent hotel owners across Indonesia and provides great value for mass-market nationwide customers,” said MNC Group president director David Fernando Audy.
“RedDoorz has a scalable business model and a practical solution for the fast-growing online travel booking industry, especially in Southeast Asia. We will support RedDoorz to grow the brand in Indonesia and overseas.”
Amit Saberwal, founder and CEO of RedDoorz. Photo: RedDoorz
At a recent technology conference in Hong Kong, RISE 2019, Saberwal said RedDoorz was on track to reach one million occupied room nights per month by the end of this year, from 500,000 room nights per month as of July, which he said is an industry first in Southeast Asia’s travel and hospitality category.
“RedDoorz has consistently outcompeted its rivals and over-delivered on the expectations of all stakeholders in building this business. We look forward to RedDoorz’ continued success and value-creation for the region,” said Anurag Srivastava, co-founder and managing partner of Jungle Ventures.
There is also enough to go round in the Southeast Asian market without worrying unnecessarily about Oyo’s march in the region, RedDoorz said.
The company believes the region has more than 120,000 budget hotels in the three-star or below segment as of 2018. It pointed out that Southeast Asia’s hotel market is thrice as big as India’s travel market and is valued at $17 billion. By 2023 this is expected to reach $23 billion.
Budget travel is undergoing a huge transformation across Southeast Asia, it added, as middle-class millennials adopt travel as a lifestyle with a focus on cost efficiency.
The latest round brings RedDoorz total funding to over $64 million, according to Crunchbase data.
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Tags: budget hotels, oyo, reddoorz, trump
Photo credit: RedDoorz Plus @ Thamrin, Indonesia. RedDoorz