Budget hotel startup RedDoorz has closed $11 million in new funding to expand its network of budget hotels and guest houses throughout the Southeast Asian region.

The round is described as being pre-Series B and it comes from existing investors Sushquehanna International Group (SIG), World Bank’s IFC, InnoVen Capital and Jungle Ventures, with new investors DeepSky Capital, FengHe Group and Hendale Capital joining.The cash will let the company expand operations into new cities and new countries, including Thailand, where there are plenty of young travellers looking for budget hotel rooms

The company, led by CEO Amit Saberwal, brings together budget hotel owners under the RedDoorz banner and books their rooms via an online marketplace. Through the site, hotel owners get access to guests, and travellers can rest assured that RedDoorz-branded hotel rooms have clean sheets, decent internet, and trained staff. This concept was initially pioneered by India’s OYO, which is backed by SoftBank’s Vision Fund, but RedDoorz is one of half a dozen or so venture-backed efforts bringing the model to Southeast Asia.

Image source: cnbc.com

The company launched in Indonesia, before using earlier funding rounds to expand to the Philippines and Singapore, where the company just leased its own hotel to run. The company had closed a $5 million Series A at the end of 2016. Initially, it closed a $1.4 million seed round and it added $1 million in venture debt last year.

As it stands in Indonesia, where RedDoorz has been the longest and where it has most of its 500 properties — it claims to offer 3,000 rooms across 16 cities — the vast majority of customers are local and using the company’s Android app, rather than the tourist crowd. That crowd is roughly split between those on business and on leisure.

The Southeast Asian budget hotel market is currently worth between US$15 million to US$20 million, according to reporting by The Edge Markets in 2017. The real beneficiaries of this market are booking platforms that redirect tourists to budget hotels that offer the best deals. Most booking platforms in the region employ a standardised model, aggregating available rooms in hotels within a certain city and forming a network of available rooms across multiple cities. Some booking platforms are trying to creatively improvise their services by innovating around evolving customer needs, such as speed of booking, that RedDoorz particularly focuses on. The RedDoorz website is optimised to ensure that the booking form is displayed prominently on the landing page, which keeps guests focused on completing their booking.

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Cloud based hotel booking engine RoomCentral has raised USD 2 million from investor Karanpal Singh, managing director of Nameh chain of hotels. It is primarily focused at small and medium properties as a large number of hotels still rely on conventional methods to run their business. Many of them don’t use property management systems as the investment isn’t justified to them.

RoomCentral is a light cloud based system that is specially designed for lower end of the spectrum. Usually small hotels don’t get many direct bookings because of dull websites and badly integrated payment systems. RoomCentral can be integrated neatly with a hotel website, handle payment and sync the room inventory with OTAs. It also offers front desk tools and CRS to manage records and reservations.

Ibibo group recently bought stake in Djubo, a startup operating in the same space as RoomCentral. Djubo also offers tools to manage hotel bookings, inventories and synchronisation with OTAs. Along with that they also offer various templates for hotels to build their own website if they don’t have a good web presence. This will help small hotels get online and save a fraction of the OTA spends with direct bookings.

These tools are good for both the hotel property and OTAs. On one end they are helping hotels manage the property better while on the other end, OTAs can be updated about the status of hotels and won’t face backlash for issues like overbooking.

This could be a hot segment going forward as budget hotels make the shift towards technology. Ibibo is already working on Go Stays to compete in the budget hotel segment and Djubo can help with the seamless CRS systems for the same. Sources suggest that other OTAs will follow the same path making technology providers like Djubo and RoomCentral even more relevant.

RoomCentral: Website

Djubo: Website

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