The hospitality sector is a multi-billion dollar industry in Nigeria.
According to Agusto & Co. report, the sector was worth approximately $3 billion in 2015; maybe, that is why it is one of the well funded verticals in Nigeria startup ecosystem. The major local players like SlimTrader, HotelNowNow, and Hotels.ng have an estimated funding up to $5million. If you add Jovago (now known as Jumia Travels) and Wakanow to the mix, the funding valuation probably rises to $15 million or more.
The hospitality startups are filling a big “hole”…..
In the hotel booking business, the primary customers are those people who are shopping for hotels accommodation. Traditionally, hotels are usually booked on arrival, or pre-booked via travel agents. But, a lot of things can go wrong with this model and this is the gap to capitalize on. For example, here are some of the pain points of this industry that online hotel booking platforms help to resolve.
From the customers’ side there are issues including difficulty in making booking ahead of stay, lack of recommendation to determine your choice, payment, loyalty programme and so on.
From the hoteliers’ sides, there is the “fear factor” of having low tenancy, managing billings and repeat businesses.
By solving these problems, online hotel booking platforms are becoming an important layer of the hospitality industry as they help to generate demand for hotels while helping customers with discovery. The convenience of their platforms (web and apps) also make them super useful for booking hotels as they cut off a lot of stress for the consumers.
There is a lot of money to be made…..
The hospitality report released by Jumia Travel highlights the sweet spots that some of these hotel booking platform tap into. They generate revenue from (1) hotels with high demand in specific cities, (2) hotels with high order value and (3)taking advantage of user’ booking behaviours.
The CEO of Hotels.ng recently tweeted about their revenue growth. Thjs confirms to me that it is a “flourishing sector” despite the economic recession in Nigeria.
In December 2016, we did more revenue than entire 2013. Dec+Nov 2016 we did more revenue than entire 2014. We’re just getting started.
— Mark Essien (@markessien) December 31, 2016
The hard lessons about growing market share
You might assume that building an interesting solution will instantly bring customers begging to pay you.
The hard lesson is that a better product does not translate to instant market share. Even the best products have to be sold and I have my own experience of how hard it could be marketing a product when it is a clear disruptive solution.
The truth is that you need to arm yourself with a smart way to acquire customers and grow your business. In fact, in order to be successful, hotel booking platforms are concerned with the same challenges that every startup faces – acquiring customers, retaining them and maximizing revenue.
10 Business growth lessons from 5 Nigerian Hospitality startups
Here are some of the business growth lessons you can take away from how the top 5 online hotel booking startups are growing their businesses.
1. Invest in content marketing. (Best example: Hotels.ng)
Content marketing is the new SEO as it plays an important role in customer acquisition. Content can come in various forms like text, video, graphics etc. A smart content strategy helps to drive awareness about your brand and also help your sales funnel.
Hotels.ng’s major content engine include their official blog, the CEO’s personal blog and a Travel Magazine.
Most of their content are super useful to you even if you are not their customers, that is because their most engaging contents are posts about travel experience and other useful tips. (like this post on how they use Slack)
2. Organise events for your target market (Best examples: SlimTrader and Wakanow)
Every industry needs a thought leader and hosting an event easily makes you one. The event can either be business focused like Slimtrader or just about leisure like Wakanow; whichever one you choose, you will have an incredible opportunity to stick your brand out. Simply make sure that you get adequate media coverage for your event.
3. Have a reward programme (Best example: SlimTrader)
Rewards is easily one of the best hacks to grow your business. When you reward actions, you get the “word of mouth” recommendation and can retain customers better. This is because the most effective reward programme gets users to repeat desirable actions and increase customer value.
With its MoreRewardz programme, SlimTrader rewarded hotel guests for every penny they spend in recurring stays at the hotels registered on the company’s platform. The common-sense here is that by directly targeting consumers with its reward programme, Slimtrader built an ecosystem where customers want to book Hotels that have the reward programme, thereby “forcing” more hotels to join the MoreRewards programme.
To do this in your business, you can check this awesome loyalty platform.
4. Win On Social Media (Best example: Jumia Travels)
Social media is one of the best places to win consumers’ attention to your business.
Hospitality and travel is full of imagery to capture experiences, hence social media is a great place to share with your customers using platforms like Instagram, Facebook and Twitter. The best way to use social media is NOT to sell, but to build a raving audience about your product. When social media is done right, it can also be a good sales channels to promote your offers.
5. Collaborate and Build Partner networks. (Best examples: SlimTrader, WakaNow and HotelNowNow)
An easy way to grow is to build your product on the back of another established platform, just like PayPal did with eBay in its early days.
The established player in this case is Interswitch which Slimtrader and HotelsNowNow partner with for transaction monitoring and hotels discovery respectively. Another example in the industry is Wakanow’s global expansion drive that leverages Zenith bank’s network.
In seeking collaboration, the goal is always to find a point of convergence between you and your partner. This could be exploring the same target market or demography in a complementary way that adds value to both of you. There are two noteworthy examples: one is the partnership where OneFinance (a company that democratizes access to finance) offer loans to hotels through SlimTrader, and second is between Wakanow and Union Bank to build its affiliate networks.
6. Carve a niche for yourself (Best example: HotelsNowNow)
While Hotels.ng and Jumia Travel are positioning their large hotel inventories, HotelNowNow, being the late comer to the party is subtly positioning itself as the best site to find discount hotels deals.
7. Effective PR strategy. (Best example: Hotels.ng)
PR is one of the most effective ways to build your brand, spread your story and also build quality back links. Effective PR helps you to sell, without sounding “salesy”.
For ages, PR experts know that you can turn any event, milestones or activity to a newsworthy message for your startup. They also know the best channels to communicate your message through per time. Hotels.ng exemplified this very well by taking advantage of events and several other strategies to drive growth by PR.
8. Side projects. (Best example: Hotels.ng)
Side project is the new marketing hack.
At Hotels.ng, one of their side projects is Spots.NG; a website that aggregates interesting places to visit in Nigeria. While it is designed to provide information about places of interest, it also showcases hotels around the location thereby making it easy to use their Hotel booking platform.
9. Invest in complementary product verticals (Best examples: Wakanow and Hotels.ng)
The hospitality and travels industry are siamese twins; they are totally complimentary.
It is like selling toothbrush and toothpaste to the same market. For example, Wakanow’s primary business model is international travels and hotel stays, hence its acquisition of a bus booking platform helped to establish its footprint in inter-state transportation and hospitality.
This strategic acquisition makes it value offering more attractive to customers as they can offer bundle packages and deals. (flight, travels and hotels). In a similar move, Hotels.ng’s investment in OgaVenue is a complementary business move to “own” the entertainment niche.
10. Paid Advertising and Distribution (Best example: Jumia Travels, Wakanow and SlimTrader)
Jumia Travel is the king of paid advertising. The Rocket Internet company has a truckload of cash to speed up customer acquisition and drive revenue on short term.
To excel at paid advertising, it is important to understand your customers’ journey to online purchase and use the right paid traffic to attract them to your sales funnels. For Hotels startup, Google Ads is the best paid traffic source to convert “ready-to-buy” users who are shopping for hotels.
(hint: as you can see from “booking habit”, 31% of hotel bookings is made on same day)
In addition to paid advertising, other startups are using coupon sites like DealDey and Picody, as well as affiliate programes offers additional distribution channels for their paid marketing offers.
Lesson for You.
Just like the $3 billion hotel sector, I believe there are several key industries that can be disrupted by tech startups in Nigeria. Currently, a lot is going on in the Fintech space and many other opportunities exist for VR, artificial intelligence and robotics.
It looks like startups are “eating up” traditional businesses and it is such a wonderful time to be in, especially in 2017. So, go and grab yourself a piece of the action.
I wish you Godspeed.