Article published in Techweez on 2017-12-06
Havar Bauck, the founder and executive Chairman of HotelOnline is a Norwegian but is quick to note that he was born in Norway, but his heart is with his lovely wife and two daughters in Kenya. These two countries aren’t exactly where he spends most of his time, he says airports and planes are the more familiar grounds as his day is quite mobile. Here’s an interview with the founder of HotelOnline.
From a prosperous career to entrepreneurship – how did it all happen?
My goal was always to become an entrepreneur, and I somehow always knew that entrepreneurship was where I would eventually end up. During my last year in college (in Norway), I was looking at several startup projects I could have joined, but none of them really seemed viable. Then I came across an opportunity for a trainee-ship in Kenya. I jumped at it, and the rest is history. In my subsequent professional career, I was always drawn to startups and young companies, so that’s where I ended up working. Because of the love I had developed for the African continent, that’s where I focused my career as well.
Of course, once you start working, and get used to earning a salary, jumping ship and starting your own business becomes an ever bigger challenge, as you get addicted to the comfort of getting a predictable amount of money in your bank account every month.
I am a pretty restless person, and I don’t like routine work. Once I master something, I get tired, and seek bigger challenges. Hence, the four years I stayed in my previous job, were a record. It was a quite exciting job nevertheless, at least in the beginning. As the regional sales director for a Greek company contracting with mobile operators to provide mobile value added services, I was constantly on the move across the continent. For almost two years, I was living in Nigeria, before relocating back to Kenya because of my family situation. At the time when I resigned, I was for all practical purposes living in Kinshasa, and was under a lot of pressure to permanently relocate there.
My eventual move into entrepreneurship started in 2013, when I was still living in Lagos. Together with my friend and business partner Endre, I had invested in a serviced apartments hotel next to JKIA. At the time, there were no budget hotels close to the airport, so we moved in to fill that obvious gap in the market. We eventually launched in February 2014. Within 2 months, we were fully booked. We became one of the most-booked properties in Nairobi on Booking.com in the year of 2014, meaning that the 5 budget apartments we had at the time, were attracting online bookings at the same level as the big international hotels.
This made us realize there was a gap in the market, which we could build a business filling. Knowing that this would be an international venture from the moment go, we chose to incorporate it in Dubai. We also realized that geographical diversity would be crucial, as single markets can be very vulnerable to external shocks. Hence, we started from day 1 building the Kenyan and Ugandan markets in parallel. We then rapidly started adding partner hotels in Rwanda and Eritrea, as well as a handful of hotels in other markets too.
Endre was full-time on the venture from the get-go, and I was eager to join in too. We didn’t have the financial muscle to sustain both of us going full-time, though. Hence, I continued in my job, while putting in the effort I could during weekends and evenings.
Obviously, moving from a well-paid, prestigious international job, to being a full-time entrepreneur with a far less predictable income, was a major leap of faith. By late 2015, I was so excited about the business that I could hardly wait, though.
The business was growing fast, we were building a reputation, and some rather impressive resources were queuing to join us. My partner and I always had an excellent dynamic between us, and we kept talking about how both of us being full time on the business, would energize the company further. I had started getting a guilty feeling about not being able to give my 100% at the time, so even though from a financial perspective, my move might have been premature by a few months, I already felt like it was overdue.
Leaving my old job and going full time on Savanna Sunrise, felt like a liberation. I had finally achieved my long-held goal of breaking out from employment. Despite some inevitable, but manageable financial implications in the beginning, I have never looked back.
Transition from Savanna Sunrise to Hotel Online
Endre and I launched Savanna Sunrise in September 2014. Our realization from Day 1 was that, given the volatility of the tourism market, we needed to diversify geographically. African markets are particularly vulnerable to external shocks, with potentially dramatic impacts on tourism. Tourism in Kenya had been badly affected by Westgate, and by other subsequent Al Shabaab attacks. Meanwhile, tourism in the entire African continent was being hit by irrational, and widely exaggerated fears of Ebola. Being a westerner, I know how the media from my own part of the world blow negative stories about Africa out of proportion, so that was simply a risk we had to factor in.
Hence, we initially started building our presences in Kenya and Uganda in parallel, signing up a total of 15 partner hotels by end of year 2014. We rapidly expanded to Rwanda, Ethiopia and Eritrea as well, as we were gaining ever more traction. By the end of 2015, we had 130 partner hotels, with monthly room sales of almost USD 80,000. We thought this was mind-blowing at the time.
In 2016, we sold rooms worth USD 1.7 million. Of course we continued expanding to more markets, and we were attracting some of the best talents in the industry. At this point, friends and professional contacts were contacting us with requests to buy shares, so we brought in some external shareholders.
In January 2017, we were contacted by the company who was our only real competitor: HotelOga in Nigeria. While pursuing a similar business idea, they were substantially different in some key aspects, though. While we had focused on providing a solution, and build a profitable business model around it, HotelOga were focused on the technology. Hence, we had a solution which the hotels loved, and we were making money. We didn’t have our own technology, though. HotelOga had a technology, but they weren’t making money. We entered merger talks. In the process, however, it turned out that the situation in HotelOga was far from perfect.
In the process, we also realized that HotelOga in Nigeria were actually just a purely commercial entity, whereas the technology was owned by a Polish company which didn’t even have the same shareholders. The bonds between the companies were close, but they were completely separate. Through the due diligence, we realized that the planned merger was not viable. HotelOga, however, collapsed a few days later, opening the doors for a smaller merger between Savanna Sunrise Ltd., and Hotel Online Sp. z.o.o (the Polish technology company). In the process, we agreed that the Polish company had a better name and visual identity, and that the merged company would continue under their name and brand. Hence, the transition from Savanna Sunrise to HotelOnline.
What is your core business?
We are a virtual marketing department for independent hotels in African markets. We take African hospitality to the digital era, enabling local hotels to compete for international guests. International travelers plan and book their trips online. Hence, the hotels they get to choose between, are those that have an online presence in the numerous Online Travel Agents (OTAs), such as Expedia, Hotels.com, Booking.com, etc.
Search for hotels in an African city in either of these sites, and you will mostly find the global hotel chains. The local hotels are either far down in the search results, or not present at all. The reason is simply that online marketing has become a science. It is skills and technology intensive. Global hotel chains have marketing departments with people who know this science. The smaller, local hotels, don’t.
This is where we come in: We provide to our partner hotels the same services that a central marketing department, offer to the hotels in a chain. We build, manage and optimize the profiles of our partner hotels across all the numerous online travel agencies (OTAs). We also build professional, managed web sites, with booking engines and live web chats. Our partner hotels also have the option to let our 24/7 customer service represent them towards their customers, and to let us handle all digital payment processing for them.
Last but not least, our hotels also have free and unlimited access to our cloud-based Reservations Management System, providing them a super simple, user friendly interface for managing their bookings and availability. This way, we take hotels from the era of books, to the era of online bookings.
Where is the money?
We take a small cut of the bookings we generate. There are no startup costs, and no fixed monthly fees. Hotels only pay for the additional bookings we generate for them. For the hotel who choose to channel their payment processing through us (almost all of them), we also charge a small additional service fee.
What drives you to enter this highly competitive place?
It’s not really that competitive. We don’t have any direct competitors in Africa. We are in a sweet-spot, between the OTAs, and the hotels who lack the skills and the technology to effectively use the OTAs. The grand majority of the hotels in African markets, that is. Hotels love us, because we give them more bookings and increased revenues. OTAs love us, because we help them bring on board hotels who would otherwise struggle to use online channels effectively.
In India, Singapore, Indonesia, Malaysia and the Philippines, there are players like Zuzu Hospitality Solutions, Nida Rooms, Zen Rooms and OYO Rooms. Neither of these companies are outright similar to us, but they all have business models close enough for a comparison to be relevant. The common denominator for these companies so far, has been their ability to raise mind-blowing amounts of money at very aggressive valuations. That may also be indicative of things to come in Africa.
I own a hotel and I want to use Hotel Online Services. How do I go about that?
Very simple. We sign an agreement, then one of our salespeople will contact you to get all the exact details of your hotel. We then send in a photographer (at our expense), to take some professional-quality footage.
Once all this is done, a Relationship Manager will be assigned to you as your advisor and permanent point of contact. S/he will advice you through the process, ensuring your hotel goes live in all relevant online channels, including a managed web site, if you have selected that option.
Why should a hotel or guesthouse use your services?
Because we get them more bookings.
What is your geographical reach?
We are Pan-African. We envisage expanding beyond Africa at some later point. Our primary goal however is to cover all African markets.
What are the benefits unique to Hotel Online from a consumer’s point of view.
A consumer doesn’t see us. He sees a hotel with a very appealing profile on his favorite OTA. He might also see a very impressive hotel web site, where he can place his booking directly.
Are there any loyalty programs for consumers?
We are launching a loyalty program in 2018. This has been planned for a long time, and we already have the details ready with our solution partner. We see Q1/Q2 2018 as the right moment to launch this, and we believe our strategy for this loyalty program is a recipe for an outright success.
What’s the annual churn rate like?
Hotels churning, you mean? It’s a very low number. Less than a dozen a year. Most of our churn is from hotels closing down, or going out of business for whatever reason.
I hear that there is fund raising or Round A funding for HotelOnline. What is the idea here?
We are at the end of our ongoing crowdfunding round, and we expect to close it well ahead of the deadline. With 80% of the target amount pledged, and the first subscriptions already paid up, we expect to be oversubscribed.
Who are you expecting to join this investment round? Individuals, Financial institutions or VCs?
This crowdfunding round was an intermediate one, though, while the next target is our Series A for USD 2 million in 2018.
The crowdfunding round targeted individuals and small family offices. The Series A round will target institutional investors. We are of course open to high-net-worth individuals in the Series A too, and in fact, we prefer that. The minimum investment, however, will be significant in this round, and ideally, we would want one investor for the entire amount.
When does this round of investment close?
Technically, it is on until December 31st. We will, however close the round once the target amount of USD 250,000 has been paid in. We are already at 80% pledged. We only count payments, though, so until the entire amount is in, it is still possible to come in. We expect a slight oversubscription. That is ok, though, as all those who pledge in writing (i.e return the signed subscription forms) before the round closes, will still get the shares they apply for.
Where do you see Hotel Online in the next 2-5 years?
We will grow to become the no 1 marketing and revenue partner for hotels in frontier markets and emerging markets. By 2020, we will be a Pan-African company, working with 20,000 hotels. By 2023, we target 50,000 hotel partners across Africa, South America, Caribbean, Middle East, Central Asia and South-east Asia.
When you look forward, Where Might Havar be in the next 5 years?
Ringing the bell at the New York Stock Exchange as we complete our IPO in 2022.
There are many corporate employees waiting out there to be entrepreneurs. What is your message to them?
Entrepreneurship is like being in love. You just know it when it feels right. Be bold, but don’t rush it. There is no point in jumping into entrepreneurship for the sake of becoming an entrepreneur. Your project has to make sense, and you have to be ready to work hard and sacrifice for a long time before you see the results. Treat your corporate career as training for entrepreneurship, and focus your mind and your career path accordingly.
I always encourage my staff to have a long-term plan for starting their own businesses, and to learn as much as possible while they are working for HotelOnline. In-fact, that is the spirit I look for when I hire people: I have no illusions about keeping people forever. I expect them to excel, and to give their 100% while they work for HotelOnline. If that experience inspires them to go and start something new and innovative later on, then I take that as a compliment.
Closing remarks?
Any business you build, must be founded on more than just making money. There has to be a deeper sense behind. As Henry T. Ford said it: A business that makes nothing but money is a poor business.
A business must obviously be profitable, and preferably very much so. There must be more to it than just the profits, though. There needs to be the motivation you can only get from being driven by passion, from believing in what you are doing, and from loving what you are doing! It takes an extraordinary motivation to always go that extra mile, and to keep on fighting through good times and bad. Is it worth it, though? Totally. A million times!