RedDoorz CEO on SEA potential, performance marketing lessons and growing up fast

Digitisation accelerated among consumers as well as independent hotel owners

YEOH Siew Hoon interviewed Amit Saberwal, CEO of RedDoorz, Southeast Asia’s largest technology-driven hotel management & booking platform at Phocuswright Europe where they spoke about the breakout region of South-east Asia during Covid and how the pandemic made entrepreneurs like him think differently about customer acquisition, profitability and fund raising.

Q: Good to meet you in Fort Lauderdale
all the way from Singapore. Why did you bother to make the trip amid a

I represent the huge South-east Asia
market that is often overshadowed by India and China. It is a phenomenal
opportunity from the tourism and travel standpoint. The addressable market is
bigger, the hotel supply is available – you need good supply to create a good
business. I also wanted to pay tribute to my good friend and board member
Philip Wolf and remember him through this event. This would be the first
Phocuswright without him.

Amit Saberwal: “If I have to raise a billion dollars, then I have to create a story. What we want to do is create value. Not everything can be solved with money. If that were the case, Google would run everything.”

Q: Yes, South-east Asia has certainly
become the breakout region during Covid. Facebook’s 2021 Digital Consumer
report says 70m people – equivalent to the entire population of the United
Kingdom – have become digital consumers in the region. And its online retail
penetration is projected to grow 85% year-on-year by end-2021, and is now
larger than India’s or Brazil’s.

Yes, there’s been rapid digitisation.
Customers no longer want to meet people, they want seamless experiences, as
touchless as possible. What’s interesting is that full digitisation is also
happening in the 25-room properties – so it’s accelerated from both consumer
and supplier side, and it’s paying off for hotel owners. Hotel owners – who
were part of RedDoorz brand – report 15% higher occupancy than unbranded
similar products.

Q: It can’t have been easy the past 20
months though. I know RedDoorz takes pride in being a “honey badger” (your
mascot), and its key characteristic is fearlessness. But you must have been
afraid at some point at the height of the pandemic in markets like Indonesia,
Thailand and Philippines – you’ve raised US$150m in total (latest round was
Series C) and were on your way to becoming a unicorn, so there must have been
investor pressure?

Yes, it’s been challenging but we are
proud of the fact that we are an undoubted survivor – we were just rated the 6th best workplace to
work in in Indonesia and there’s no travel company on the list. The company has
a soul – our partners, employees, investors, stood with us in the worst of
times and we have come out much stronger.

I recall early on, all the investors
were trying to be helpful by giving us the bad news until we told them we read
the same papers and we said, “let us execute”, and we reassured them, we would
not cut down on the growth function – that means technology and business development.
And we executed our way out of it.

Q: What was the secret execution sauce?

The key trigger was, we moved very
quickly and took decisive actions early on. This included removing minimum
guarantees, shutting down Thailand and cutting down 40% of our workforce. We
are a leaner company now.

One positive outcome is the competition
has died off, there’s been rationalisation. Indonesia and the Philippines, our
revenues are higher today than pre-pandemic, 96% of our business is domestic
there. What happens in Bali, which is foreign dependent, does not apply to us.
Our business in Vietnam was affected because of the lockdowns but we remain
fully committed to the market. Singapore – we have reduced from 13 to 3
properties – we have no intention of growing the business in Singapore.

We have 2,900 properties across four
countries now – we were 1,600-1,700 before the pandemic. We adopted a
multi-brand strategy and grew supply.

Q: You now have five brands, RedDoorz,
your bread and butter; Urbanview, SANS and Sunerra – which is 3.5 stars, and
KoolKost for remote workers  – aren’t you in danger of going the same way
as traditional hospitality companies of having so many brands, it’s hard for
consumers to differentiate and it gets complex for you to distribute?

They are all shades of the same
type  of budget accommodation. We are technology first, we have no GM on
property, so we don’t have an issue with differentiation. What’s interesting is
during Covid, we were scared that if we shut down Google or Facebook, we would
lose our business and we didn’t have money to spend. But our customers kept
coming back to us directly.

We will likely never go back to
performance marketing on Facebook or Google. We are a hyperlocal business and
we have found that brand marketing works well on TV and you have to customise
the offering.

Sunerra – we are still working things
out. We like to experiment and we believe the business has a different rhythm.
Our ambition is to be the largest new age hospitality company in South-east
Asia. We don’t want a heavy asset model.

The doubts about Sunerra are
scalability – it takes effort to design and requires multi-owners. We love to
be where onboarding is easy, catering to the travelling salesman. There’s a
fortune to be made at the bottom end of the pyramid.

Q: Competition has died off but there are
also new well-funded competitors coming into the market – Yanolja, the South
Korean hospitality giant, which just raised $1.7 billion and VN LIFE in Vietnam
which raised US$250 million, will put some of those funds into VN Travel.

Every region would have a hyperlocal
player who would win. Yanolja has done a great job but in a different market.
It is a huge opportunity for multiple players.

The way I see the evolution of the
hospitality industry – Hospitality 1.0 – Taj owns and runs the properties; Hospitality
2.0 – Marriott manages other properties. Hospitality 3.0 which is us – using
technology to manage other businesses and assets, the way Airbnb uses
technology to run other people’s assets.

Q: What was the best tech investment
you made?

The best investments made were in
improving our algorithms around supply sufficiency, matching what customers are
asking for in that square foot area, improved by leaps and bounds –
hyper-localised recommendations. In our market, one side of the street vs the
other side, can mean a 20 minute travel time difference

Q: You were Employee #28 at MakeMyTrip
– and I believe when you started RedDoorz, it was called something else, you
started in India. Why did you not stay on to take on India?

India is like an elephant that
threatens to dance but never dances but lately has started to dance. We are
focused on South-east Asia.

Yes, when we started, we had a B2B
product but we learnt that in India, you can give the technology, but if they
don’t have the ability or intention or bandwidth to do it, you’re stuck.

Q: What does domination in South-east
Asia look like?

15-20,000 real hotels under our brand.
Empty hotels are like empty calories, they don’t make sense. Every hotel has to
make a certain amount of money every month.

Q: You have declared your ambition to
be a unicorn, that remains?

Covid has delayed us by two years. Our revenue profile is much better. Every dollar that is made on the core business, we make 50 cents on ancillaries, that was zero pre-pandemic. Our take rate is above 20%. We are making more money on half the room nights today.

Q: It’s interesting how some companies,
which were chasing unprofitable growth before, are now profitable. We had Eric
Gnock Fah of Klook speak at WiT and he said how they were now profitable in
markets like Hong Kong and Taiwan.

Yes, profitability is a choice for us now and that is a powerful position for us to be.. The revenue profile of RedDoorz is so much more sustainable. Chasing unprofitable growth – including us – those days are over. Covid was a wake-up call and we were made to grow up fast.

Now the new metric for the company is
MIB – Money In Bank.

Q: What was the old metric?

ORM – Occupied Room Nights. There are so many ways to present revenue. It’s time to cut the bulls…

Q: When’s IPO?

2023-24 perhaps, and I don’t see that
as the exit but the starting point for RedDoorz. It’s an event in a long

Q: There’s lots of talk about superapps
in South-east Asia and fintech. You interested in any of those areas?

I think the superapp story is not as
straightforward as it’s made out to be. Wallets, I think you have to think core
vs non core in every business. If you address the core well, everything will
fall in place.

If I have to raise a billion dollars,
then I have to create a story. What we want to do is create value. Not
everything can be solved with money. If that were the case, Google would run

We will focus on what we are doing and
keep on executing. And perhaps we will raise money next year.

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