When Inder Sharma bought the domain Hotel.com during the Internet boom in 1996, he was very confident that this would become a big business one day. But, rather than running the site, which offered discounted hotel room reservations, he sold it to Expedia for $7 million in 2002. The reason behind selling the venture was not because Sharma had no funds to run Hotel.com, but because he thought he lacked the managerial skills required to run the company.
“My strategy is to build a good company and give it to the professionals to run. I can’t run a company, I am not a good manager,” Sharma told TechCircle.in.
He has previously started companies not only in hospitality but also in healthcare and real estate. In 1996, he launched Hotelsupplies.com, an e-commerce company for the hospitality industry. He ran the firm till March 2003, when it was bought by US-based Choice Hotels International Inc.
Another firm, Medibuy.com, a healthcare marketplace firm founded in 1997, got acquired by Global Healthcare Exchange, a healthcare technology company that provides supply chain solutions.
Sharma – who in his own words builds businesses to sell – is again looking to establish another one with the hope of selling it later at ‘correct valuation’. This time round, the Indian American serial entrepreneur has placed his bets once more in the hospitality sector. He established HotelBids.com, a hotel reservation platform, in June 2016 in India. He plans to launch the firm’s US operations by April this year.
HotelBids: The concept
US-based HotelBids Inc. allows users to make last-minute bookings at their own price. A customer has to place a bid by quoting a price for hotels in a particular area and by cross checking the amenities on offer. All hotels in that area will respond to a bid. A customer can put one bid on hold for three hours and wait for more hotels to respond to it, eventually booking the best option.
“Every hotel cannot sell all their rooms. Nearly 10-20% of rooms are vacant all the time. HotelBids offers hotel owners business on 30% of unused inventory. That’s why they are ready to offer us low rates,” Sharma explained.
Sharma founded HotelBids along with Aneesh Chopra, the founder of app development firm Paavu Technologies. Chopra, who also oversees technology for HotelBids’ India operations, owns 10% stake in the company, while Sharma holds 67%.
India launch and traction
HotelBids, even though funded by American hoteliers, first launched in India. The platform claims to have got 3,500 hotels across 100 cities on its platform within three months of setting up operations in India. In addition, it has also tied up with hotel aggregators like Treebo, Axis Rooms, Vista Rooms, OneClikk and Revguru. However, the firm is yet to add the inventories of these aggregators. Once that happens, the number of hotels on HotelBids will go up to 8,000.
Sharma claims it is easier to work with aggregators because of the access he gets to hotels in their network.
“For instance, an aggregator has 1,20,000 rooms total and everyday almost 22,000 rooms remain empty. To fill those rooms, they are ready to even take Rs 2,000 for one costing Rs 5,000 per night. They are not ready to display that rate to anyone but will offer it if someone asks,” he said.
HotelBids claims to have done around 1,800 to 2,000 bookings on its platform till date, with the average booking price between Rs 1,000 and Rs 1,500.
Earning revenues and expansion plans
Sharma raised an initial investment of $1 million for HotelBids, which he received from the Asian American Hotel Owners Association (AAHOA), where he has been associated with for 20 years. Twenty percent of this capital was deployed for product development, 30% on operations, and the rest went into branding and marketing.
He was emphatic about launching the venture only with the support of the AAHOA.
“Strategic money is better than your own money, otherwise I won’t do it. There was no point in starting without their support. Why would I compete with other OTAs (such as Expedia, MakeMyTrip and Yatra) in the market?” he added.
Besides being investors, hotel owners from the AAHOA use Sharma’s platform over others as HotelBids charges them a commission of only 10% of the booking amount, he claims. Regular OTAs, on the other hand, charge a 25-30% fee.
But can HotelBids generate adequate revenues on commissions of just 10%?
In the US, the average booking price is $60-70. Levying 10% commission on that amount gives him around $5 a night. The AAHOA owns 24,000 hotels, which is approximately 1.7 million rooms.
By earning 10% or $5 for each of the 1.7 million rooms, Sharma claims he can make commissions worth $850,000 everyday, “This equals to $25 million a month or $300 million a year, which is more than what MakeMyTrip is making today,” he added.
However, HotelBids will not charge hoteliers in the US and India any booking commission fees for the first year of operations. In India, hotel owners on the platform will have to pay the fees from June.
Sharma said that India would account for 10% of the entire business.
HotelBids expects to have 15,000 to 20,000 hotels in India, and 10,000 to 15,000 hotels in the US in the next 12 months.
Beside the US, the firm will set up shop in Europe and Sri Lanka this year. Sharma will hand over operations of the firm to strategic and/or financial partners in these countries. The booking commissions will be equally shared between Sharma and the partners.
Competition and acquisition plans
Sharma is not too worried about MakeMyTrip or Yatra launching a similar service as he feels they cannot focus on running two products simultaneously. “It would be like cutting their own leg. The business has to be run by a third party, and once successful, these players can acquire it,” he added.
Besides expanding to other geographies, HotelBids will focus on developing its brand, for which it is looking to raise about $10 million. Sharma said he is in talks with SAIF Partners and Venture Catalysts in India, besides some US-based individual investors.
An acquisition is not on the cards in the near future, revealed Sharma.
“My plan is to first build the momentum, inventory, customer base and value, and then sell it off. Maybe in the next 18-24 months,” he signs off.