Tinggal pivots to online managed services for budget hotels

  • Shifts from being an online marketplace of budget hotel rooms to a managed-service provider
  • Aims to manage 400 family-run budget hotels in Bali, Jakarta by the end of the year

 

Tinggal pivots to online managed services for budget hotels

 

JAKARTA-based online marketplace Tinggal is gearing up to transform itself into a company that bringw digital transformation to the budget hotel industry in the country.

Speaking with Digital News Asia (DNA) in Jakarta recently, Tinggal co-founder and chief executive officer Arjun Chopra says that the company is now finding its tune with a new business model that goes beyond promoting budget hotel rooms and solves an industry pain point.

Indonesia received 10.2 million international visitors in 2015 with the average spend of US$1,208 per visit, contributing a total of US$12.26 billion to the country’s foreign reserves, according to the data from the Central Statistics Agency.

Seeing that there is still room to grow in the industry, and given the government push to make tourism one of the new catalysts of economic growth, many players are looking to penetrate the sector.

As many family businesses, have started to look for opportunities and are build their own accommodation business, this space is getting crowded, and each player is competing with almost the exact same business model.

“When it is not a peak season, business will be hard for these hotels as they will have less occupancy, and there is no sophisticated system or method that they can use to boost occupancy.

“These hotels are mostly run by families. We are not just trying to generate sales for them, but we are trying to fundamentally solve the problem that they have, where we can enable them to sell more,” he says.

This is what Arjun says will be the main difference between Tinggal and other online budget hotel aggregators.

The national average occupancy rate for non-star hotels is only 33.21%, compared with 53.92% for starred hotels in 2015.

Arjun says that since the shift, there have been a couple of hotels that are exclusively managed by Tinggal. The company is targeting to acquire 400 hotels to manage by the end of the year, focusing on the two main markets of Jakarta and Bali, as Arjun wants to set the right focus as Tinggal is going through a transformation.

“We do not want to spread ourselves too thin by trying to acquire hotels in 10 to 15 cities. It is better for us to focus on two or three cities, but really work on the technology to make it better, learn, and then scale up,” he says.

Compared to the previous marketplace model, where Tinggal sold thousands of rooms, with this new model, Tinggal has been able to drive sales exclusively for 100 rooms every day, for the past three months.

“It is also a shift from quantity to quality. Now that we can get hotel partners exclusively, without changing their name to ‘Tinggal Rooms’, we maximise the sales of our partner hotels, and give more impact to their whole business,” he adds.

Tinggal secured a US$1 million seed funding round in February 2016 from Mangrove Capital, Simile Venture Partners, angel investor Vikas Saxena and Wudstay CEO Prafulla Mathur.

Online platform as a solution

With 17 years of professional experience, Arjun worked for eBay India, PayPal Asia Pacific, and Intuit before he founded the Singapore-based on-demand platform connecting homeowners and repair and maintenance service providers EasyHomeFix in 2013.

“I have always been working in the platform industry that connects supply and demand, and I have seen how this platform fundamentally changed the way people live,” Arjun explains when asked about why he started Tinggal in Indonesia.

He also says that the travel industry is one that entrepreneurs will not want to miss, as it is always growing, thanks to growing demand as well as supply, especially from low-cost carriers that offer budget flights.

“The budget traveller group is booming right now. Traveling has become very easy and affordable. When people want to travel, they only need their smartphone. They can book everything from their palm, from flight to hotels to tours and activities,” he adds.

The transformation journey

Established in March 2016, Arjun says Tinggal is a journey for him and the whole team, as they started as a platform to ensure that customers get a high standard of budget accommodation.

“We identify good budget hotels and we mark a small room inventory from them.  We then listed and marketed them, ensuring that what customers see is what they really get in reality,” explains Arjun, saying that the current market problem is that what the customers see in pictures is different from the real experience.

He says that this model worked really well, as the team succeeded in securing over 350 hotels with more than 3,000 rooms managed in a “very short amount of time”.

However, Arjun explains that there are some challenges in the first approach, including an unsustainable business model.

“There are lots of discounts in the market of budget hotels, competition is high and the margin is lower.

“Also, we were only standardising the room experience and not the hotel experience. This caused mixed review from customers because even though the room experience is good, the customers still need to face the same receptionist, cleaners, and people that work for the hotel,” he says.

Arjun realised that merely managing rooms will do nothing to nurture Tinggal’s partnership with the hotel as there was no real connection, no discussion on what they could do to make the whole experience better.

“The next challenge came from the online travel agencies (OTAs), which are also Tinggal’s partners. They simply did not like us because we created multiple listings for one hotel on their platform, making it look messy and as a result, disturbed their user experience,” he adds.

Arjun also says that Tinggal started in Indonesia with an objective to learn, and after a year of operations, the company now has identified the place where it can pivot and really solve the core problem while creating a network than can grow on its own.

Solving the core pain point

Looking at all the challenges, the team started to talk to their existing hotel partners to look for a problem they could solve. What the team found on the ground was that these budget hotels were mostly family-run businesses, and they have limited knowledge of the online space. They also have limited resources and bandwidth.

“These hotels they run by margin. They do not partner with traditional travel agencies, which means they need to turn to online resources. However, they haven't been using the online space effectively due to the lack of knowledge and resources.

“The situation becomes worse when you finally advertise your hotel but you face competition from other budget hotels near you. This impacts their occupancy and profit,” he explains.

The next pain point for these hotels is data and inventory. Arjun says that budget hotels typically uses manual processes for booking management. As a result, cancellation and check-in data are all abandoned or not recorded well, and they do not know their own inventory.

That was when Tinggal decided to test its newest approach by becoming a managed service provider, where it creates the online system for booking management and connects it to some of the large OTAs.

“By doing this, we have the real-time view of the hotel occupancy status. Any cancellation will be recorded, and updated, and any rescheduling will also be shown and updated, all in real time,” he says.

Tinggal also developed marketing solutions to increase the marketability of its hotel partners by creating more imagery, video, and other content.

“What we have seen from the quality content is increment in bookings, as well as revenue. We were able to sell the same room at a higher price and receive better reviews from customers,” he says.

This is the model that Tinggal is adopting now, as it is sustainable and creates a deeper relationship with hotel partners. It is also scalable and offers high value.

 

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