Booking Holdings’ investment into South Korean accommodation startup, Yanolja, its first foray into that market, was motivated by two key factors – the market opportunity as well as Yanolja’s unique model “which includes tens of thousands of hotels installed on its PMS”, said Agoda’s vice president of corporate development Timothy Hughes.
Timothy Hughes will be speaking at WiT Japan & North Asia
Hughes, who spent nearly three years studying the market, said, “I knew nothing about the market and it was a lot of fun, getting to know the different players and where they sit. It was an intellectual challenge, it is a different culture, as well as a financial challenge, learning to negotiate a deal.”
Together with GIC, Booking Holdings committed US$180m into the accommodation startup which, since its launch in 2015, has secured a total of US$242 million in funding.
Said Hughes, “For the last four years, South Korea’s outbound has been booming. It is the fastest growing market and the ninth largest outbound market in the world, and the second largest in Asia. On a population of 55 million, there were close to 30 million trips made last year.
“The economy is doing relatively well and there is equal activity from international and local players. We were amazed by the number of local players. South Korea also has its own ecosystem – chat, metasearch, the way people engage with content is different. You can’t go in with your Google playbook and expect it to work. Plus, Yanolja is run by smart people, its P&L is sensible and there was no crazy valuation.”
Alongside its booking service for accommodation in South Korea, Yanolja also runs a chain of 200 properties in the country under its own brand, as well as owns ZEN Rooms in South-east Asia. It also provides PMS services for property owners that use the platform for third-party distribution.
Crossing the wall between booking and on-property experience
Other than inventory exchange, with Yanolja’s properties made available on Agoda and eventually Booking.com and Yanolja hosting inventory from Agoda and Booking.com on its own service, Hughes said the deal would involve other exciting projects related to the fact that it has “tens of thousands of hotels installed on its PMS”.
“The booking to property experience journey is still broken. It is easy to book a hotel online but it’s hard to check in. If we can do more with the PMS system, we can speed up check-in and check-out and improve on-property communication,” he said.
This is the space that several startups are exploring and trying to solve – what Hughes calls “the wall between the booking and on-property experience”.
“If we can cross this wall, we can collaborate with hoteliers on a bunch of things.” He recalled an experience at Movenpick Dubai “where the staff touched three items, and a piece of paper, to check me in. It staggers me”.
“Let’s work together to speed up the check-in process, let us charge the credit card for you. It is about enhancing the relationship with the customer. Travellers think it is odd that this process is broken.”
“Out of 100 customers who repeated, only four repeated at the same hotel”
He is aware that hoteliers might be resistant towards working with OTAs on this process because most hoteliers see an OTA booking as an opportunity to convert the guest into a direct booker, not the mention the fact that hoteliers already regard OTA as a major disruptor to their business.
Hughes said. “Hoteliers have to understand what sort of customers are coming from OTAs. After two years of studying repeat bookings at Agoda, we found out that for every 100 people who repeated, only four repeated at the same hotel, and fewer than nine repeated at the same chain.
“Our customers are not those who stay in the same hotel, same chain. Hoteliers need to maintain a robust direct business just as they need a robust third party business. There are better ways to think about direct business than manufacture repeat business on a customer base that is not thinking the same way. Maybe they should think about how they can generate more money through f&b and upsell – the things we would like to do if we can get connectivity into the PMSes.”
Commercial agreement with JTB part of Agoda’s investment in Japan
Meanwhile, Agoda’s business in South Korea is growing – from 8,000 listings to now 21,000 and it has a team of 300 in-market. Japan is another growth market with listings having grown from 29,000 to 64,000 and from one office three years ago, it now has seven offices with a team of 200 in that market.
As part of its investment in the market, Agoda has signed a strategic partnership with Japan Travel Bureau which Hughes described as “a close commercial agreement to strengthen their hotel bookings for domestic and inbound”.
While he said Japan is a substantial market, it is not as fast growing for obvious demographic reasons. “Personally, like the rest of the world, I want to go to Japan – it’s a great inbound story, a great product. It is such an inbound market at the moment that one has to be careful not to get lazy.
“Domestic is hard to crack, the more you localise, the more complicated your architecture gets. Outbound is a good business, but it’s not a growing market.”
Asked about the trend of more young Japanese travelling abroad in recent years, Hughes said, “That’s good but there are just not enough young people.”
Taiwan is another core market that is growing – from 9,000 to 15,000 listings and is supported by a team of 40. Acknowledging that Taiwan tends to get overshadowed by bigger markets such as China, South Korea and Japan, Hughes said Taiwan was an interesting market with one of the most progressive societies in Asia.
Recently, he said, Audrey Tang, Taiwan’s first trans-gender minister and the world’s first openly transgender minister, who’s focused on the digital economy, came to speak to the Agoda team in Bangkok. Charged with jump-starting Taiwan’s stagnating, $130-billion high-tech sector, Tang had an early start in the tech world, dropping out of school at 14 to start a search-engine company, and at 19, she left Taiwan to work as an entrepreneur in Silicon Valley.
“As an Australian, I feel an affinity to Taiwan – 25 million people, and often overshadowed by bigger countries. It is a very progressive society and she told us how before any development gets the go-ahead, there is a gender impact assessment. How amazing is that?”
Looking beyond travel tech to fintech, data and mobile and doing deals, left and right
As for future investments, Hughes said it is looking beyond travel tech. “We are as much about fintech as travel tech. We also have more data than we could possibly know how to quantify and so we are interested in data science and data analytics. We are a mobile business, with more than 50% of business done on the app, so mobile tech is at the heart of Agoda. We are looking at companies with very little travel expertise and combining their skills with ours.”
One of its most successful acquisitions was Israeli startup Qlika, a PPC marketing optimization company, which it bought in 2014. “Two members of our C-suite – COO and CMO – are from that business.”
Hughes, who had just returned from a travel tech event in Israel, said that Israeli startups were really good at the tech level. Agoda has 10 staff working in Tel Aviv and about 50 Israelis working in its Bangkok office.
One area that Agoda is working on is payments. He said there were two things happening in this space – the range of options that consumers now have and the visibility consumers have. “There are lots of costs still associated with payments and one thing the Internet loves to do is drive costs out and make it more efficient. Take credit card foreign exchange charging which is still high. If it’s too expensive, entrepreneurs will find a way.”
On the rise of superapps, he recalled something he said at a WiT conference 10 years ago that if you wanted to understand how things would look in three years’ time, look to the USA. “Now it’s look at China and see what they’ve done to the future of cash. These superapps, like WeChat, are incredibly impressive businesses but it’s hard to predict how far product expansion can go.
“At one point, portals said they would be the one place you go to and that proved not to be true and consumers were happy to surf around. Mega apps do have one advantage over portals – and that is payments.
“I believe mega apps have a place for certain services they will be strong at but specialists produce better products and consumers are different and have particular desires that one place cannot satisfy.”
As for its partnership with Grab, which wants to be an everyday superapp for South-east Asia, in which it is powering the accommodation option, Hughes said, “Travel is a bunch of single corridors and a consumer is not stuck in one particular corridor. They are floating around the ecosystem and they get to pick where they want to book. So we have to do deals, left and right, to enable them to book where they want.
“Travel, as an industry, has been built on friendship and competition at the same time. Grab’s user rates are incredible, they have consumer recognition and high frequency usage and so far, it’s been very positive.”
Note: Tim Hughes will be speaking at WiT Japan & North Asia, opening in Tokyo, this Thursday and Friday. There’s still time to sign up.
• Featured image (Agoda’s Singapore office) credit: Agoda
