Hotel Tonight's growth accelerates in France and beyond (Part I)

The market for last-minute travel is certainly not a new one.  Starting during the first dot.com boom, online last-minute travel tended to focus entirely on price without giving much thought to quality and user experience. Years later, Hotel Tonight, a SF-based startup founded in 2011, is looking to change all that, proving that a high quality, fairly priced, enjoyable last-minute travel experience is possible.
With 13 million users globally, travelers are starting to flock to Hotel Tonight. They started their international roll-out two years ago and now can now boast of 2.5 million users in Europe. Given the massive number of tourists that flock to France each year, France, and especially Paris, has quickly become one of their top and fastest growing markets, hitting 304% growth in reservations in 2014. As they’re looking to accelerate their expansion around the world, they’ve recently brought on-board e-commerce veteran and expert Amir Segall as VP International and head of their ever-important Paris office.
I had the opportunity recently to meet with Hotel Tonight cofounder and COO Jared Simon, Amir Segall and French Market Manager Marie Hardel.
In the first of a two-part series, I first speak with Jared Simon who elaborates on Hotel Tonight’s ambitions as well as the distinct value they bring their customers.
What are your aspirations for Hotel Tonight?
Interesting question.  If you had asked me that question two years ago my answer would have been very different. I think our vision at that time was a lot more constrained, which was to carve out and own the niche for last-minute travel bookings. After achieving our goal of becoming the leader in last-minute bookings, when then thought, what’s next for us?  At that time we were also raising a new round of funding from a set of investors who were bigger thinkers and got us thinking about this much larger vision that is now the collective vision of the company.
Technological platform changes, such as offline to online, happen every so often. When they do, they create amazing opportunities because they require a different skill set to optimize for a new channel that didn’t exist before. So, for example, offline travel companies used to be very effective, but didn’t have the skills to compete effectively in the online world. Companies that emerged and did have those skills, such as Booking.com and Expedia, became iconic companies because they epitomized this new era. We believe this transition to mobile is every bit as dramatic and perhaps even more so in terms of how it impacts consumer behavior.  As a result, it requires a new DNA, a new way of attacking the market.  I think we have it because we are uniquely positioned at the crossroads of mobile exclusivity and hotel exclusivity. So, our vision is to become the dominant hotel booking tool for the mobile generation.
Would you say that Hotel Tonight has more of an upscale positioning?
This is a perception we’d like to change. We understand where it comes from, but we don’t view the experience we offer to be ‘exclusive and ultra high-end’ at all. The experience on Hotel Tonight is high quality, but that doesn’t mean the hotel product is necessarily expensive. Our view is that the same customer may have different needs in-terms of hotel pricing or experience depending on the mood or situation they’re in. So our mission is to be accessible no matter what your particular use case is. What we do focus on is hand selecting the hotels we work with so that each hotel, regardless of price, is the best hotel in that price category.
What do you offer hotels to make them want to work with you?
If a hotel is going to work with a third-party, what they need is a someone who can bring them customers that they wouldn’t have gotten otherwise. That’s the premise that we start from.  If you look at online travel agencies, they’re working from a situation where the only way they can grow is by stealing share. What they’re ultimately doing is stealing share from the hotels they’re representing through bidding on the hotels’ own keywords. The hotel then needs to turn around and pay the online agency a commission for a booking that they possibly could have gotten directly (if they hadn’t worked with the online agency). This isn’t productive for the hotel. So our view is that incrementality is important, which is a big reason that we focus exclusively on the last-minute traveler.
Also, the way our system is constructed, you can never predict what hotel will be displayed on Hotel Tonight at any one point in time. If a traveler really wants to stay at a particular hotel, they’re not going to book through Hotel Tonight.  They’re going to book in advance to make sure they have a reservation. However, if they’re booking last-minute and aren’t concerned about which hotel they stay at, they’ll book on Hotel Tonight, have a great experience, and then next time they travel to that city they’ll book directly with the hotel. So we actually bring new customers to the hotel. So, in essence, we’re not competing with the hotel for that customer.
The second thing we bring is a different perspective on who we view as our customers. We view ourselves as a two-sided marketplace with two sets of customers that are both important to us — people who book and the hotels. For both, we’ve built a set of products and tools that are valuable to them, otherwise they wouldn’t come back to us. So we treat both like they’re customers, which means the customer’s always right, they should be treated with respect, etc. The interesting thing is, in the travel sector, this is not the type of approach hotels are accustomed to.  For example, the online travel agencies don’t view this as a two-sided marketplace and, as as result, hotels aren’t treated with the same level of respect. They are forced to deal with things like overly restrictive contracts, a host of obligations, price matching requirements, etc. Our approach towards hotels doesn’t sound like rocket science, but for the them, this is a revelation.
 
Next week in part II, we’ll talk with the Hotel Tonight team about their business in France, global expansion and the ‘Airbnb effect’.