As most road warriors would know, when it comes to traveling in emerging markets such as Southeast Asia, most major cities only have one or two 5-star hotels where all business travelers and tourists converge. Below that there is a huge drop-off in quality which is exactly the pain point that Amit Saberwal identified when launching his budget-hotel booking and branding service called RedDoorz. Saberwal understood his market well and created incentivized systems to support a win-win-win experience between the hotels, the guests and his company.
RedDoorz is one of Southeast Asia’s leading budget hotel online booking platforms. The company operates in more than 50 cities across Indonesia, Singapore, Philippines and Vietnam and targets Southeast Asia’s $52 billion travel market, with over 1,000 properties and servicing over 700,000 stayed-rooms nights thus far in the region. Impressively, the company officially exceeded the 3 million customer mark this year, proving that their overall strategy and execution is sound.
“We’re a budget accommodation player, and you can think of us as a Marriott for two-star and below kind of hotels. The other way to look at us is like an Uber for the small properties, where we do the customer acquisition and branding and the customer service for these small properties. The properties deliver a level of service which is dictated by our brand’s standard,” says Saberwal.
Hotelier by training, entrepreneur by trade
Saberwal began his career as a hotelier in India. As director of sales and marketing for a large boutique hotel chain in India called The Park Hotels, he was fully aware of the needs and demands that weary travellers would have at his properties. In 2005, Saberwal noticed the growing online travel scene in India and joined a startup called MakeMyTrip which he helped grow into a successful billion dollar company. MakeMyTrip went on to IPO on Nasdaq just five years later. From there, Saberwal used his unique background in both hotel management and online travel, he launched RedDoorz in Indonesia in July of 2015.
Saberwal knew that to scale any sort of business successfully he would need to invest heavily in technology, people, product and process. But after researching budget hotels in Southeast Asia, he noticed a huge gap on the technology side.
“We actually started off by saying, ‘Okay, what if we become the technology enabler for these small properties? A single property or 10 properties can’t afford the kind of product management or online technology that 400 or 500 properties collectively can afford. Let us be the backend engine that would actually drive business to these properties.”
As time went on, Saberwal quickly realized that the properties he was targeting were still nameless and therefore would have a problem getting discovered. It was then that he came up with the idea of the RedDoorz brand, which stood for a certain set of values which would drive more customers to the properties and increase repeat visits.
Saberwal chose Indonesia to launch RedDoorz not only because it is one of the largest markets in Southeast Asia, but also because the country already has a very robust domestic-travel ecosystem. The properties his company works with are commercially-run small hotels akin to a Motel 6 in the U.S., as opposed to B&B accommodations or AirBnB rentals. Most of the properties were family-owned and profitable, but with a lower than ideal occupancy rate of just 50%.
“When the properties joined RedDoorz network, the average occupancy for our Jakarta properties is 86%. We bump up the occupancies, and the property owners start earning a lot more money. They’re happy to be a part of a large network or brand which is now very well recognized in the market,” says Saberwall. “It’s a franchising model in a way, except that our DNA is technology. We execute like a technology company, but our enabler for growth is real estate.”
Onboarding and value add
RedDoorz uses an AI based forecasting engine to determine demand in a particular area, adding as many properties as possible until demand is saturated. Once an agreement is made with the owner of the property and the hotel is onboarded, all signage and branding, even down to the toiletries and WIFI hotspots, are branded as “RedDoorz”. The consistency in quality and customer experience at such a low price point attracts customers to stay loyal.
“The fundamental difference that our brand promises to our customers is that you will get a clean room, a clean bathroom, absolutely spotless linen, free WIFI, which is good quality, which is controlled by us. You’ll get mineral water to drink, which might not be a big deal in many of the developed countries, but in some countries, it is an essential thing. And, you’ll get 4 Star-quality, branded toiletries of RedDoorz. You’ll get it at a price which is between $20 and $30 a night. It’s very, very good value for money,” describes Saberwal.
All staff members at properties onboarded as RedDoorz are required to complete an extensive training program to ensure that the quality of service remains high. As for the revenue model, instead of the typical franchise model of a brand and marketing fee plus revenue split, Saberwal decided to keep things simple with a hurdle rate. After an agreed upon threshold, RedDoorz begins to share the profits, but below that hurdle rate the property owner keeps everything. Finally, RedDoors offers a loyalty program called RedCash which can be earned and used for future stays. This is a critical aspect of doing business in Southeast Asia where only 12% of consumers own credit cards so most transactions are done with cash.
A bright future of explosive growth
Saberwal’s hard work has clearly been paying off. As the fastest growing startup in the travel vertical, the company was able to grow their revenue by 6 times in 2018 versus the year prior. After recently securing a $11 million bridge round last year backed by big name investors such as Temasek and Jungle Ventures, RedDoorz aims to raise another Series B round in the near future to fuel their Southeast Asian expansion. Saberwal’s vision remains the same as it was on day 1–to disrupt the Asian hospitality industry by building the leading affordable travel platform in the region. This involves continued investment into local teams, infrastructure, technology and customer experiences. Saberwal aims to focus on local payment solutions solutions (e.g. Go-Pay wallet in Indonesia and Momo Wallet in Vietnam) with the upcoming funding round.
“The travel market is absolutely exploding in the region. There, the youngsters are traveling more and more. They want to travel. They want to backpack. It is one of the fastest growing markets worldwide. It’s a great opportunity. It’s undercapitalized, but things are changing rapidly in that sphere. We build everything based on customer wants & needs and rally our entire offering (hotel operations, market expansions, our technology solutions, marketing programs etc) around what customers really want. We are customer-centric to the core, and this is probably one of the main reasons why we grew so fast and disrupted the entire traditional hotel chain in our markets.”