TLabs Showcase on travel startups featuring US-based hotel distribution system Hotelmine.
Who and what are you (including personnel and backgrounds)?
Hotelmine, a Groups International brand, is based in Houston, Texas and is a startup “direct connect” distribution model for the online leisure travel market segment.
The company was founded by Tom Costello and Chris Wenz who have been involved in both the group and leisure travel market segments for more than 15 years and have designed and developed patent-pending technology solutions that serve both of the aforementioned markets.
CEO and Co-Founder Tom Costello is an accomplished entrepreneur whose career includes more than 25-years of experience in the hospitality, corporate travel, meetings, and special events industries and is a highly regarded authority in the field of online meetings and events solutions.
COO and Co-Founder Chris Wenz, a ten-year veteran of the hospitality industry, is no stranger to new business ventures and has designed, developed, and implemented online housing and event solutions that facilitate the procurement and management of guest rooms for both groups and individual leisure travelers.
What financial support did you have to launch the business?
The company is privately owned and operated.
What problem are you trying to solve?
The costs associated with the distributing a hotel’s inventory through an indirect third-party channel is the most expensive distribution channel to-date.
This indirect distribution model resulted in hotels paying abnormally high merchant commissions estimated at $5.4 billion in 2010 that went into the pockets of online travel agencies (OTAs) like Orbitz, Expedia, Travelocity, Priceline, and Hotels.com in 2010.
As a direct connect distribution channel, Hotelmine can lower a hotel’s distribution and conversion cost by up to 80% as compared to the same transactional cost as charged by an OTA.
Hoteliers need a robust direct online strategy accompanied by adequate marketing funds to be able to:
- Take advantage of the steady growth in the Internet channel.
- Shift bookings from indirect (OTA) to direct (hotel website) online channels.
Describe the business, core products and services?
Hotelmine has developed a proprietary, patent-pending technology that combines the power of B2C with a robust peer-to-peer social media architecture that allows members to book direct with a hotel and to share their research, travel plans, and transactions with family and friends.
Hotelmine offers more than just a rate on a guest room and members can choose from a variety of options that include Deals of the Week, Hot Dates & Rates, Packages, and Last Minute Deals. We even provide our members with the tools to help them find the best rate on ten guest rooms or more.
What makes Hotelmine different is that we’re not a travel agent and we don’t have anything to sell. Unlike mega-OTAs and travel agents who charge a commission, booking fee or markup wholesale rates, we don’t.
When a member sees something that suits his taste or budget, he books directly with the hotel by calling the hotel or through the hotel’s website booking engine.
Who are your key customers and users at launch?
Our key customers will include full and limited-service hotels that are privately owned, franchised owned and corporate managed as well as hotel management firms.
A user is anyone who is searching for more than just a rate on a hotel room.
Did you have customers validate your idea before investors?
We talked with literally hundreds of hotel owners, hotel sales and marketing representatives, hotel management companies, end-users, and software development companies who are involved in our space.
The feedback and response has been overwhelming and continues to spur us on, with great anticipation, to the successful launch of the site.
What is the business AND revenue model, strategy for profitability?
We will introduce two different marketing packages that are specifically designed to meet a budget and marketing strategy of either a full or limited-service hotel.
The price point for either package is affordable and we offer our hotel partners a plan that would require a small percentage of the annual subscription rate and the balance spread out over quarterly invoiced payments.
SWOT analysis – strengths, weaknesses, opportunities and threats?
- Combined 35-years experience in group and leisure travel markets
- Experience in development and implementation of technology solutions
- Excellent existing relationships with hotels at both the corporate and local level
- B2C platform combined with robust P2P architecture
- API under development
- A new business model for an industry that historically lags two years behind
- 40 percent of U.S. leisure/unmanaged business travel bookings booked online
- Affordable low-cost entry for hotels
- Search methods changing from search engine-based to social media-based
- GDS channel is in steady decline
- Cost of indirect booking eight times the cost of direct booking
- Commission leakage in 2010 to third-party sites estimated at $5.4 billion
- Educating consumers on the “direct connect” value proposition
- Lack of strict rate parity
- Economic instability combined with double-dip recession
Who advised you your idea isn’t going to be successful and why didn’t you listen to them?
A former VP suggested that there was no room for a direct channel distribution model in a crowed market dominated by Orbitz, Travelocity, Priceline, and Hotels.com and hotels would not be interested in the service.
We did not listen to him because we receive our direction and inspiration from a much higher source.
What is your success metric 12 months from now?
- Expand our hotel content to include Canada, Europe, and the Caribbean.
- Continue the development of our mobile solution.
- Launch a web-based application that will enable hotels to engage with prospective customers the minute they start to think about travel.