Sam Shank, CEO of HotelTonight
In this weekly series, CNBC takes a look at the companies that made the inaugural Disruptor 50 list 10 years later.
Like many mobile-based and on-demand companies created in the early 2010s, HotelTonight saw similarities with two of the biggest disruptors in this category.
“This is how the world moves: with Uber, you push a button and you get a car; with GrubHub, you push a button and you get food,” said the CEO and co-founder of ‘HotelTonight Sam Shank during a June 2013 appearance on CNBC’s “Scream Box.”
“With us you push a button and you get housing,” he said. “We are the app for on-demand hosting.”
Launched in January 2011, HotelTonight sought to popularize a part of the travel and leisure industry that its founders felt had been overlooked: last-minute and same-day bookings.
“The original idea was to try to bring to the general public the idea that spontaneous travel is just more fun and rewarding,” said Jared Simon, former COO and co-founder of HotelTonight, in a recent interview. “It wasn’t a mainstream concept at all at first, and we got a lot of negative feedback about the notion.”
But HotelTonight quickly gained traction by building on its mobile experience which resonated well with a younger, more cost-conscious demographic.
“Back then, the process of booking a trip was like buying a house or applying for a loan,” Simon said. “The amount of information and time you had to give up kind of killed any kind of spontaneity in travel and just made it feel like a transaction, not an experience.”
Simon said travelers often tell them they “have been treated very badly by the online travel agencies that have been in place for years”, and HotelTonight instead tried to “prove that we can develop a real partnership with them”. . This led to a focus on things like simplifying the information you had to enter and providing more images and well-written descriptions of the rooms themselves, features that Simon says have “become much more ubiquitous now”.
Even the concept of last minute reservations has been embraced by some of the licensees. Booking.com launched its own Booking Now app in 2015, which it shut down about two years later, while several other clones popped up around the world with similar business models.
While Shank said in 2013 that the company would not seek to “take on the whole travel market“, HotelTonight made a shift over time to become a more hotel booking platform. traditional, expanding its booking window, adding a desktop browser version, and even leaning into more luxury hotel deals for their cost-conscious base.
In 2017, it announced a $37 million Series E funding round that took it to a valuation of $463 million, bringing its total funding to $126.9 million from companies like Accel Partners. , Battery Ventures and First Round Capital, according to Crunchbase. It even has partnership deals with Madison Square Garden and the New York Yankees, providing location-based deals to fans at sporting events and concerts.
“We were lucky to be in a space where we were one of the first mobile-only commerce apps,” Simon said. “It gave us some leeway and some space to work in because the bigger behemoths hadn’t figured out how to colonize that space yet, so we were able to come up with marketing concepts and other ways to do it. ‘reaching the consumers that gave us a beachhead and then took us to the next level with the MSG partnership and other areas where we were innovating beyond the core product.”
HotelTonight has grown to have over 25,000 hotels in approximately 1,700 cities around the world on its platform.
Ultimately, Airbnb acquired HotelTonight on its way to an IPO in March 2019 in a deal worth more than $400 million. Simon said the deal was something that “just made sense” as the companies “were very complementary in terms of product”.
At the time, Airbnb CEO and co-founder Brian Chesky said the move was “a big part of building an end-to-end travel platform.” The company also cited demand from and for boutique hotels to be on Airbnb. Airbnb said at the time of the acquisition that the HotelTonight app and website would work as before, which is still true.
However, less than a year later, the Covid-19 pandemic hit, which presented a new set of challenges for Airbnb to navigate while trying to build this end-to-end platform of which HotelTonight was to be a big part. part.
Jed Kelly, managing director of equity research at Oppenheimer & Co., said HotelTonight “operated quite quietly within Airbnb.”
“It hasn’t been a high priority for the company, judging by the last four shareholder letters, they don’t talk about it,” Kelly said. “When you see the Airbnb ads, it says ‘Made possible by hosts’. That doesn’t really scream hotels.”
An Airbnb spokesperson declined to make an executive available for comment.
Andrew Boone, managing director of JMP Securities, said that while HotelTonight likely helped Airbnb accelerate its relationship with hotels, he said “it’s hard to say whether it succeeded or failed simply because of all this happened that is exogenous to Airbnb.”
Part of the challenge, Boone said, will be to see how travel trends evolve in the future. Airbnb has taken advantage of the trend for travelers to choose longer stays at alternative accommodations, often outside major city centers, Boone said. HotelTonight, on the other hand, was more centrally located, often attracting guests who traveled for work at the last minute or stayed late after a show or sporting event, the travel and entertainment industries which also lacked more bouncy.
Simon said he believes that coming out of the pandemic there will be a greater desire for “spontaneous travel”, which was an initial guiding principle of HotelTonight.
“I think that’s one of those changes that we’ll see, that people are recognizing the value of experience and the value of not making plans and the value of living life as it comes.” he declared. “Travel will be back, and we’re already seeing a lot of evidence of that. Hotels will be at the center of that.”
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