‘Even as a highly-fragmented landscape, we use data and learnings to better understand the social and cultural nuances as well as behaviour patterns’, he says

It is no mean task to succeed in a highly fragmented market like Southeast Asia and a highly competitive atmosphere — unless you have a great understanding of the customer behaviour and cultural requirements of each market. RedDoorz had realised this early on and adopted a hyper-local approach to win customers and partnerships with hotels.

The startup, headed by Founder and CEO Amit Saberwal, has just bagged US$70 million to make the first close of its Series C funding led by Asia Partners, with the participation of Rakuten Capital, Mirae Asset-Naver Asia Growth Fund, existing investors Qiming Venture Partners and IFC. It is now set to expand its footprint in the region.

In this email interview with e27, Saberwal shares more details about the competition and the company’s plans.

You have just secured US$70M from a set of prominent investors to expand in Asia. Can you share the details of your expansion plans? 

The US$70 million is the first close of our larger Series C funding. We will be focusing our efforts to grow in the markets we operate in across Southeast Asia (Singapore, Indonesia, the Philippines and Vietnam), where we intend to penetrate deeper in our quest to increase market share and solidify our position as the market leader in the affordable travel and hospitality industry. 

We are also opening up new markets within the next 12-18 months. We also plan to enhance our data and tech capabilities and solutions, where we plan to set up a second technology and development centre in Vietnam, following our first in Delhi, India.

How did you convince your new as well as existing investors to keep investing in RedDoorz even as your close competitor with a much deeper pocket is fast gaining market share in India and offers more investment opportunities?

We have a well-thought-out and prudent business plan that we are steadily executing. We are on track to double our business to one million occupied room nights in December this year — an industry-first in Southeast Asia’s travel and hospitality segment.

Also Read: RedDoorz bags US$45M as its competitor OYO is fast expanding in Southeast Asia

We’ve successfully developed a business model focused on Southeast Asia, a model that works for us. We’ve grown at a rapid pace to scale in a disciplined and sustainable manner with good unit economics. This approach has attracted investors to trust us and continue to back RedDoorz with high ambitions of growth. 

Do you think the budget hotels market in ASEAN is not tapped to its potential yet? Is there more room for new players? Where is this industry heading for? 

While competition is rife, the budget hotel market in Southeast Asia still has ample space to grow. Among all the players so far, less than 3,500 of the 120,000 budget hotels have been accounted for.

According to Roshan Raj Behera, business partner at consulting firm RedSeer, Southeast Asia has more than 120,000 budget hotels in the three-star or below segment as of 2018, providing RedDoorz with the right environment to grow even more. The industry is also driven by a growing middle class that will be 350 million strong by 2022, based on Bain & Company’s Understanding Southeast Asia’s Emerging Middle-Class report.

The Phocuswright Travel 3.0: Mobile Rising in Southeast Asia study has also revealed that Southeast Asians are prioritising their discretionary spend on travel and tourism.

There is a lot of headroom for growth and room for new players to enter the market. 

With competition intensifying, how do you look to differentiate yourself? Do you aim to leverage technology to further improve the customer experience? What is your USP? 

At our very core, we are a tech company. We have developed our innovative tech solutions such as RedFox, our dynamic pricing system, and RedEagle, our proprietary supply management solution, that support our partners in better understanding supply and demand patterns, as well as recognise trends and patterns using advanced Machine Learning and AI technologies. 

Our USP is our deep understanding of the consumer in Southeast Asia at a granular level, from country-to-country, city-by-city. Even as a highly-fragmented landscape, we use data and learnings to better understand the social and cultural nuances as well as behaviour patterns. 

As we have built a sustainable and rapidly growing business on consumer data, we also deep dive on our understanding of the consumer to make improvements to customer experience — whether it’s to the properties or overall experience following a stay at a RedDoorz property. 

RedDoorz is built upon a strong tech solution. We see the future of our business as technology-enabled and technology-driven, in order to sustain future growth.

Can you walk me through the AI features you introduced for your hotel partners? Do you have more such innovations in the pipeline? Do you think new-age technologies like AI and IoT have big roles to play here?

We have introduced RedFox, a dynamic pricing and inventory management tool for revenue optimisation and operational excellence, to our hotel partners. It is a data-driven system that can identify trends by incorporating multiple indicators on user interactions, marketing, and transactional datasets. RedFox also helps in price forecasting by applying a large volume of distributed data, including geography, occupancy rates, profitability, type of day and general seasonal factors, which are related to the time of the day. 

There is a broader scope for AI and IoT, which we’ve been utilising and will continue to invest in to improve our service offering for our hotel partners and consumers alike.

We plan to build our second technology hub in Vietnam to complement the current regional tech hub in India, to further develop technology that can drive business strategies. 

Do you plan to venture into uncharted territories, in terms of introducing new products and solutions to generate more revenue and to remain distinct?

We are looking at penetrating the markets we cover even further, as well as entering new markets in Southeast Asia — a primary focus area for us. We are building upon our deep understanding of the Southeast Asian consumer, to test new product lines and services that will cater to their immediate needs and desires – based on our own data and insights. 

Our main focus is to grow our customer base while retaining their loyalty. Our hotels and rooms offer excellent value-for-money for our customers and we will expand upon the different options available in order to meet their accommodation needs and requirements — this is why we have introduced RedDoorz Plus and RedDoorz Premium

While Oyo has taken an aggressive growth strategy, RedDoorz has always taken a slow and steady approach. Is it a conscious decision to go slow?

What sets us apart is our deep understanding of the Southeast Asian landscape, especially the markets we operate in. Southeast Asia is a highly-fragmented market that takes time to understand. We don’t look at Southeast Asia from a purely macro perspective, but also on a much more “hyper-local” one. Our hyper-local approach sets us apart from our competitors.

We are always looking to expand upon our learnings around social and cultural norms in each of the markets we operate in.

We see it paying off, given that we have attracted new investors while retaining existing investors. Our results of achieving 500,000 occupied room nights in July 2019, and growing five times year-on-year, also show that our approach has been successful. 

In some Southeast Asian markets like Indonesia, you are taking Oyo head-on. How do you plan to sustain growth in these markets? What are your customer acquisition strategies, given Oyo has committed US$200M for Indonesia?

We cannot comment on anyone else capital ‘commitment’. What does that mean actually in any case? It’s just a statement in the press. We have access to enough capital to execute on our own business plan which we do in a smart and capital efficient manner.

We see competition as a positive thing; it pushes us to grow and offer an added and improved value to win our customers’ hearts and thus sets us apart from them. 

At RedDoorz, we will continue to build a strong relationship with local hospitality owners to refine not only the quality of their properties but also elevate the skills of their on-ground staff through our training and development programs.

What are your inorganic growth plans? Do you see yourself merging with any company or acquiring small players in the future? What are your ultimate aims?

We will remain focused on growing our business within Southeast Asia. We want to the preferred option for affordable hotel accommodation in Southeast Asia by offering high-quality rooms with clean linen and bathrooms, free Wi-Fi, satellite TV, bottled mineral water and the essential toiletries — all as standard — to ensure that those who stay at a RedDoorz property receive best-in-class customer experience. 

What are the current trends in the budget hotels segment in Southeast Asia?

The budget travel and hotel segment in Southeast Asia has seen incredible growth over the past decade and continues to grow.

According to e-Conomy SEA 2018 study by Google-Temasek, online travel is the largest and most established of the four verticals of the internet economy in Southeast Asia, reaching US$30 billion in gross bookings value (GBV) in 2018 and heading towards US$78 billion GBV by 2025.

There will be a surge in independent travel as younger Asians grow more affluent and desire to go on solo trips.

Furthermore, the demand will be driven by a rising middle class that will be 350 million strong by 2022, according to Bain & Co.

I assume you would have received multiple acqusition offers from bigger players. Have you ever considered a merge with bigger players like Oyo? 

I think it is too early for us to even think on these lines. We have chartered our own independent path and for now that path is to have our own exit

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