The truth of the matter is that everyone loves a seamless travel experience, from taxi & takeoff to landing. When people like me hear the word “travel”, we first think of “transportation”. However, ‘accommodation’ is a very big part of travel, and it is also a big business. Take Airbnb, an American startup in the online accommodation industry; founded in 2008, and as of June 2015 it was valued at $25.5billion.
There are a few startups in Nigeria that have also entered the online Accommodation space, and one of those players is Hotels.ng.
What is Hotels.ng?
Hotels.ng is an online travel agency specializing in hotel bookings within Nigeria. It is a multi-sided platform that connects travelers and accommodation providers (mainly hotels) through the web. The word ‘multi-sided platform’ means that it enables direct interaction between at least two sides of the platform. Since this is a post on Hotels.ng’s business model and not on multi-sided platforms, you will have to stay tuned for a future post mainly about ‘Multi-sided’ platforms.
Facts, Funds, Founders & Figures
- Founder: Mark Essien
- Founded: 2012
- Headquarters: Lagos
- Staff: 54
- Coverage: 7,164 hotels in 320 cities across Nigeria
- Bookings made so far: 1,000,000+
- Social media: Twitter (23.4k) Facebook (112,542 likes) Instagram (12.5k)
The Business Model Canvas
Hotels.ng’s business model shall be laid out using Alex Osterwalder’s 9 blocks Business Model Generation Canvas. See the diagram below.
Each block in the canvas will be expanded upon below:
1. Customer Segment
Hotels.ng has two main customers as the canvas above shows:
⇒ Accommodation providers: hotels, motels, inns, apartments, suites, etc.:
- who want more customers
- who do not have their own websites but still want online visibility
- who want a broader platform to advertise their premises
Right now, Hotels.ng’s primary focus is Hotels. But a brief look at their terms and conditions shows that their services can extend towards events hall bookings. It is doubtful however if Hotels.ng will deviate from this hotel’s path anytime soon, especially as they begin to focus on expansion out of Nigeria. Also, services like events hall bookings might be a little difficult to incorporate into their existing services because of the name Hotels.ng. Customers might be confused with the name.
- who travel a lot on business
- who travel for events and functions (event/party planners and attendees)
- who travel for the holiday
I am going to hazard a guess here by saying that Nigerians do not have a culture of holiday travels to other parts of Nigeria that are not their hometown, (until we go to London or America we haven’t traveled …). When we do go to our hometowns, we are going to our family homes, or likely staying with a relative *sorry no opinion poll was taken to arrive at that conclusion. What the above therefore means is that these types of travelers will not make up a significant percentage of Hotels.ng’s customer segment. Business travelers and people who travel for events/functions will make up the bulk of their traveler segment.
2. Value Proposition
Hotels.ng offers great value propositions to both sides of its customer segments. Below are a few of these values:
⇒ Accommodation providers enjoy:
- increased online visibility
- an extended customer base
- an easy sign-up process
⇒ Travelers enjoy:
- ease of booking their accommodation online
- payment flexibility
- the convenience of comparing various accommodation providers at once
- travelers receive hotel recommendations and reviews
- Discounts and deals
3. Customer Relationship
Hotels.ng establishes customer relationships in a few ways. One is through ‘personal assistance’ by their team of customer service personnel who handle customer inquiries and complaints, amongst other things; and the other is through their hotels.ng community forum.
4. Key Resources
Hotels.ng’s key resources are their Staff team totaling 54 Nigerians at the time of writing this post and their website. Their staff is responsible for everything including; sourcing accommodation providers, creating and updating online profiles of accommodation providers, payment verifications, payments to accommodation providers, customer service, and so on. They also engage freelancers to help signup/onboard new hotels. These people are freelancers and aren’t classified as full-time staff. Hotels.ng is big on Inbound marketing (Content creation) as an SEO strategy, so they also engage many freelance writers.
Hotels.ng’s main distribution channels include:
- Social media
6. Key Activities
I am sure there might be more activities Hotels.ng is involved in, but the ones I identified are the 4Ps:
I will take each ‘P’ in turn:
- Platform management: this is key, as the whole Hotels.ng operation lies on the platform. As more hotels join the platform, online profiles are created for them. Updates are also made on price changes on behalf of accommodation providers, amongst other things.
- Promotions: the most recent promo I saw Hotels.ng do was a ‘story writing challenge’ with a prize winner of
N20, 000.00. Other promos include the funny travel stories competitions
- PR: from Techpoint to BellaNaija, to Techcabal, to Nairaland, to name a few, it is clear that the Hotels.ng founder, Mark Essien believes visibility is important to his startup. While I will not go into this in any great detail in this post, I believe Hotels.ng enjoys ‘trust transference’ from customers through Mark’s PR duties.
- Payment: this relates to the payments Hotels.ng makes to their accommodation providers after deducting their commission from the total amount paid by the traveler. As with every business, there might be a need for things like refunds due to book cancellations or trying to match a price a customer saw on another website, etc.
7. Key Partners
⇒ Hotel owners:
They are very important partners. While Hotel owners pay no listing fees on the platform (which is obviously a great incentive for them to sign up with the platform.) Their actions (price, quality of service, quality of rooms, etc) can, however, have a negative or a positive effect on Hotels.ng’s brand.
.⇒ 3rd party payment processors:
They process online payments made by travelers.
8. Cost Structure
Hotels.ng’s cost structure is not unlike most other startup companies. Their costs include legal fees (which include: a one-off company registration fee, rent, legal/contractual agreements), office fixtures, utilities, and staff salaries (which is the biggest cost driver for Hotels.ng), Marketing and Advertising etc. The startup saved some tech development costs at its inception because of Mark’s tech skills. This is one of the great advantage of having a technical founder.
9. Revenue Stream
So how do Hotels.ng make money? Hotels.ng’s main source of revenue is through a referral fee (commission), which they receive from hotels for referring travelers. The exact percentage of earnings that hotels give to Hotels.ng as a thank you for connecting them to travelers is not stated on the website. With my little knowledge of Multi-sided platform startups in other parts of the world, my guess was that their commission would not be above 25%. With some of my double07 moves, I later found out that their ‘percentage’ charge is a little complicated. The percentage is not a set figure applicable to all the hotels equally. The percentage figure that Hotels.ng charges an accommodation provider is subject to a major factor in the charge of the accommodation provider: ‘PPR-Price Per Room’
Simply put, the better the discount given on ‘PPR’ to Hotels.ng travelers, the lower the commission Hotels.ng might charge the hotel.
Hotels.ng does not charge hotels a fee to feature their rooms on the home page, however, the hotels that give the best discounts to customers get the privilege of being featured on the home page, specifically under the “today’s top deals”.
In spite of this, however, according to a Hotels.ng staff, Hotels.ng does not receive any commission less than 10% for each room booked through her.
- One of the biggest risks that multi-sided platforms like Hotels.ng faces is the risk of intermediation. To significantly reduce this risk, I recommend a few things:
⇒Have a point-based system for both hotels and travelers to encourage them to interact with the platform beyond their first transaction. This point system should have a financial implication for the hotels. The more repeat travelers they have, the less discount they pay. For travelers, their accumulated points can be used for future bookings.
- The ‘date of last update/amendment’ to the Hotels.ng’s ‘terms of service’ needs to be clearly stated on their platform for many reasons including legal.
- Show the number of people that have booked each hotel. Why? The strange ‘social proof’ phenomenon.
- Hotels.ng has to insist that every accommodation provider provides pictures of their facility before they become active on the platform. Those pictures should be used instead of the pictures of the folded white sheets. Accommodation providers are listing for free, so, this demand is the least they can do.
- Honestly, many more customers tend to rant than rave, so, for the select few who actually take the time to write a review, whether ranting or raving, there should be a system in place that rewards them. In the event of either a rant or a rave (especially a rant), the hotel in question should make a statement, apologize and promise a better experience.
- Hotels.ng should ensure that its workforce is not fragmented. At this young stage of the startup’s life, basic questions like how to get my hotel on the home page of the platform should be easily answered by every staff member, whether they are directly involved in the process or not. See lesson 13 in the Sam Walton autobiography review.
- Lastly, Hotels.ng should uncomplicate her commission charges.
Hotels.ng does not run a perfect system yet (I don’t think any company ever really does). There are many things that still can be improved upon, but with continued great leadership and team, She has just begun to scratch the surface of greatness
I speak on behalf of Nigeria when I say that we are proud to have had Hotels.ng begins in Nigeria, and I wish her the very best as she expands to other parts of Africa and attains world domination.
- I mentioned above that Hotel.ng’s fine print stated that they can also render services like event hall bookings. After the first publication of this Article, Spark and Hotels.ng invested in Oga Venue, an venue booking website.
- In January 2018, Hotels.ng launched Hotel.africa and Fly.africa as part of its expansion plans across Africa. According to research online, Hotel.africa has signed up over 25,000 hotels across Nigeria. For the Fly.Africa, the Startup intended to get into the travel space and attract customers looking to buy local and international flight tickets. As of the time of this update, both the Hotel.africa and Fly.africa expansion seems to have been halted. The URLs aren’t pointing to a live site. While some of the customers they would have served with these new ventures would have been existing customers I don’t know what happened. For the Hotels.africa part I would assume that if Hotels.ng used the same strategy mentioned above to sign up hotels across Africa, i.e people going hotel to hotel to sign them up, the cost might have been unsustainable.
- Osterwalder A., & Pigneur Y. (2010). Business Model Generation: A handbook for visionaries, game changers, and challengers. Wiley.
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This Post Has 18 Comments
Thanks a lot for the post
you are welcome. thanks for the comment
Really feel so indebted to you right now! Got a startup in the works and was actually looking up available info on Hotels.ng’s business model and operations. Nice job you’ve done here, cheers.
Thank you so much for leaving a comment Chijioke. Apologies this reply is coming late. I left blogging for a while when I started my business but I am back now with my own website. Startupdemands is still live though. What’s up with that startup you have in the works? Have you gotten it off the ground? please check out my new site. It has all my old posts from startupdemands and I have also started a podcast. Check out the first episode here http://www.eyinimofe.com/podcast/podcast-intro/ it’s still under construction so please any ASK (Actionable-Specific-Kind)feedback will be appreciated. thanks a lot. Hope to hear back from you. stay insightful.
Super impressed to the level of detail of this post. Keep it up.
Thank you so much for leaving a comment Boye. Apologies this reply is coming late. I left blogging for a while when I started my business but I am back now with my own website. Yeah, it was a lot of work actually lol. most blogs I see are very surface level… more quantity than quality… I plan to create more time to do some research on more companies. This is my new site. It has all my old posts from startupdemands and I have also started a podcast. Check out the first episode here http://www.eyinimofe.com/podcast/podcast-intro/ it’s still under construction so please any ASK (Actionable-Specific-Kind)feedback will be appreciated. thanks a lot. Are you in the startup scene too? hope to hear from you soon. stay insightful.
IN-DEPTH ANALYSIS! GREAT JOB!
Thank you so much for leaving a comment Oladipupo. Apologies this reply is coming late. I left blogging for a while when I started my business but I am back now with my own website. Yeah, it was a lot of work actually lol. Most blogs I see are very surface level… more quantity than quality… I plan to create more time to do some research on more companies and write. This is my new site. It has all my old posts from startupdemands and I have also started a podcast. Check out the first episode here http://www.eyinimofe.com/podcast/podcast-intro/ it’s still under construction so please any ASK (Actionable-Specific-Kind)feedback will be appreciated. thanks a lot. Are you in the startup scene too? hope to hear from you soon. stay insightful.
Well written and informative piece.
I found the “Money Tree” particularly interesting. Considering how much investment they got, how long do you reckon it would take for them to break-even and go into profit?
And what’s the implication for the company in terms of control, considering how much has been injected in by independent investors.
Please respond, we young entrepreneurs need to know when to seek for funds in business and when to just hang in there. With huge investment, there’s an artificial boom, but what’s the long term implication?
I commend you ladies for this innovative blog and look forward to reading more of your write-ups.
Thanks a lot for your comment Adekunle, I’m glad you liked the post.
I appreciate your questions as well and will do my best to answer each one in order
1. Regarding the break-even question, according to many interviews given by the founder Mark Essien (you can find them online), “Hotels.ng is already profitable”.
2. Regarding the control question, The beautiful thing about getting investments is that there are no hard and fast rules. No matter how much is invested, it’s up to the parties concerned to draw up their own terms. The level of control investors would want over the business would vary among investors
Note however that it is unreasonable to collect money from someone and except they will not have an opinion about major decisions the company makes or should make. That’s the reason why you have to be every careful when choosing an investor. Many investors bring years of experience to the table as well as money. Don’t think about the money alone. In the end, it’s like a marriage
3. When to seek funds varies depending on the idea, the business and the vision of the founders for the business. A great rule of thumb however is that founders should validate their ideas and the market first before seeking funding. Do an MVP (a post on this will be coming soon). The stats from the MVP can give you a strong footing in front of possible investors.
Don’t look at the investment like an artificial boom, look at it as investment that allows you to accelerate the growth of your business and do things you couldn’t have done with the money you had before. If you play your cards right, and you are ready for the growth, the long term implication of an injection of capital could be to move a founder closer to actualisation of his/her vision for the startup. However if you are not ready for growth, an injection of huge capital can actually cripple the company.
I hope you I have been able to answer your questions.
Pls subscribe, so that you can be notified about our future posts. Watch out for an insight post on a Nigerian startup in the food and beverage industry coming soon 😉
Great example of what is possible by the new generation of Nigerians. Knowledge sharing of this nature will help to lay a good foundation for our young cadre of business owners.
Good luck with the blog.
Thanks a lot for your comment DGA. It was a pleasure to write it. We hope you follow our blog to get email notification of our future posts. Cheers and stay insightful
Really informative. u did a good job
Thanks a lot for ur comment Regina. It was a pleasure to write. We have many more posts like this one coming soon. Follow our blog to get Notified of our next posting. Cheers
Thanks a lot for your comment PatientlyBe. I am glad you liked the post. Our next post will be out by Friday. Pls follow us (click the ‘follow’ button by the top right corner of the screen) to get an email alert when we upload our next post. Cheers and stay insightful
Insightful information for Entrepreneurs, Looking forward to more. Great job!
Great information for Entrepreneurs…. Looking forward to more. Great job!
Thanks a lot for your comment Mr. Akin. It was indeed my pleasure to write this post.
For the love of good content