Last minute hotel bookings might save you money

The old adage that says always book well in advance when travelling might be in for some challenge as reverse bidding platforms to book hotel rooms emerge as a major contender to the traditional way of booking hotel rooms. Contrary to popular belief, last minute bookings are cheaper in such platforms as this is when one has access to that last unsold room in the hotel.

Platforms like FindMyStay, Bid2Travel, HotelBids have precisely identified this gap in the hotel booking space and have developed a technology driven two-way platform whereby the hoteliers can sell their unsold inventory, and the customer too gets a room at a price that the lowest of prices.

Hotel rooms are a perishable commodity; and according to estimates, as many as 1,50,000 room nights go unsold in India everyday. "This is the number for the organised sector,"says Rohit Khetrapal, Co-Founder, FindMyStay. His start-up, which has already broken even, has a booking rate of 2,000 rooms per month and Khetrapal claims that this is growing at 25-30% on a month-on-month basis.

In fact, FindMyStay is targeting to double the booking rate within the next six months.

As Abhinav Raghuwanshi, revenue manager of a 419-room property in Delhi, Hotel The Royal Plaza explained, "for large inventory hotels like us, this model really works well. We are able to exhaust the last minute inventory, which would otherwise have gone wasted." FindMyStay helps them sell over 300 rooms per month, in addition to the normal booking route. The hotel already has tie-ups in place with more than 25 online business partners. The average occupancy rate for the hotel last fiscal was 73%, however, according to Raghuwanshi, this year till date, associations with operators like FindMyStay have helped push the average occupancy rates to 80-84%.

Although start-ups had problems convincing hotel partners initially, with the segment clocking a 30-35% growth rate, hotels increasingly are waking up to the opportunity to earn revenues (for what would have otherwise been wasted) without diluting their average price points or for that matter their brand equity.

Khetrapal explains that when a hotel slashes the room rate of unsold inventory on an aggregator site last minute, it dilutes their brand. "However, in platforms like ours which are more opaque, the deal remains between the customer and the hotel," he adds. Add to this the additional revenue through food bills or spa and other hotel services that come in once a customer checks in.

Bid2Travel, founded by P S Saini, around 2011 is one of the first start-ups in this space. Saini too claims that his firm has broken even, but he has strategically decided to restrict his focus mostly on metro cities. "In case of leisure travellers, during peak season, there is no guarantee that a deal would work for the customer at the rate he wants. This model works best for business travellers and for cities which have large hotel room inventory,"he explains. Bid2Travel has a success rate of around 85% in Delhi and for other cities it ranges between 60-85%. This is the number of times the hotel accepts the customer's price bid.

His firm has tied up with over 500 hotels and is growing at 30% compounded annual rate. On the other hand, FindMyStay has tied up with 3,000 hotels and is planning to double that count within a year. "We have tied up with more than 3000 hotels and planning to double the count within a year, with key partners including the Lalit Group, The Park, Pride Group, Royal Orchid, Treebo and Lemon Tree," Khetrapal says.

As such FindMyStay has already raised pre-series A round from Indian Angel Network. "We will be looking out for series A from an institutional investor in a month or so. We are looking to raise $4-5 million," Khetrapal adds.

The domestic hotel industry is estimated to grow from $0.8 billion last year to $1.8 billion by end of 2016. With this, the number of unsold rooms would also increase at a commensurate rate, giving reverse-bidding start-ups more room to play. On an average about 16% Indians book their hotel rooms online, and this is growing sharply. This year the number is expected to touch 25 per cent of all hotel bookings.