ZUZU Hospitality hits sweet spot, and why there’s less need for hotels to have a brand today

Feb 18, 2020 | Media Coverage

Original source: Webintravel.com

Four years on, after having signed its first hotel in July 2016, ZUZU Hospitality believes it has found its sweet spot in helping independent hotels manage their demand and revenue management.

It now has 1,800 hotels, with the sweet spot being those with 20-50 rooms, across South-east Asia namely Indonesia, Thailand, Malaysia, Philippines and Vietnam. ZUZU estimates there are 660,000 independent hotels worldwide, 57,000 of which are in South-east Asia.

Co-founder and co-CEO, Dan Lynn, said focus has helped ZUZU scale its business to where it is today. “Our sole reason for being is, we tell hoteliers, you do what you are good at, dealing with the human swirl of operations and delivering unique, differentiated, delightful experiences, and let us worry about your demand and revenue management.”

Lynn said it was last year that the company hit its stride. “We now sit on a business model that makes sense and we know what we are doing is valuable. We have caught up with the tech that we need and that will help the unit economics. Now it’s scalable, and it’s not about hiring more people.” (The team now amounts to 250.)

He believes ZUZU’s focus on helping hoteliers with demand and revenue management without need for a brand sets it apart from other players in the independent hotel market such as RedDoorz, OYO Rooms or Zen Rooms. 

“We’ve never thought of them as competitors. We offer very different solutions to the same problem – that problem, being independents competing with big brands. But their solution is to build a new chain. RedDoorz is what Holiday Inn was in the past. OYO is a full stack solution.

“It doesn’t make sense to me. Hoteliers have unique insights into their niche and their markets, whether you are a stripped back two-star or a boutique five-star. Imposing brand standards on independent hoteliers is not productive. To properly standardize an experience is very expensive, and it is less necessary now.”

Lynn said that Holiday Inn came about because of the disruption that came from highways. “People started travelling long distances and stayed in hotels along the way. It created mass hotels and people needed to have assurance about brands – that this brand was good for families, this brand was good for business.

“The Internet has reduced the need for that. Now you can read a review of any hotel. I wouldn’t stay in a Holiday Inn without checking a review so the need to put a brand on top is less now.”

He said it makes more sense for independent hoteliers to “spend money on what you customers want, own your niche market, rather than conform to a niche”.

“If you own more than 20 hotels, create your own brand and get companies like ours to help you behind the scenes.”

He said major hotel brands recognise this shift in the market and hence the proliferation of brands within global companies such as Marriott, Hilton or Accor. “That’s a recognition that the power of any one brand has diminished and people want diversity. What Marriott or Accor is good at is having a network of demand, distribution and revenue management, but they then say, you have to take our brand.”

He believes global brands need to build out more competencies in demand, distribution and revenue management to really add value to owners, beyond having properties flagged.

ZUZU, he said, is a hybrid that offers the services of a BPO (Business Process Outsourcing) with the tech competence. While pure tech solutions companies “rely on you to have the internal expertise to get it right”, “our people do the revenue management and distribution and we provide the software”.

He recognises this people-driven approach is harder to scale but for him and his co-founder Vikram Malhi, both former executives of Expedia, it’s about building a meaningful business that adds value to all stakeholders.  

“Vikram and I were having coffee one day and talking about the promise that the Internet would empower the long tail. Yet in Expedia, we kept seeing the big chains doing really well, and even as Expedia and other OTAs kept trying to build tech for the little guys, we felt it was counter-intuitive and it wasn’t the promise of the Internet.

“OYO and RedDoorz were two years old by then and we felt we had to find another solution. We wanted to be hoteliers all our lives. I grew up in Cornwall, tourism is in my blood.”

Yet growth remains the lifeblood of any company and Lynn said ZUZU would be looking at other sources of growth. “The biggest growth comes from having more sales people to talk to hotels and referrals, but we are also looking at other product offerings. It is amazing how many small hotels cannot take payments, for example.”

The focus on more sustainable business models with the fallout of tech unicorns last year has also been helpful to ZUZU, he said. “It forces companies to be more sensible and there are more rational practices in the market.”

It is also “dipping its toes” with hosts with collections of properties, for example, villas in Bali or apartments in Jakarta. “Like a hotel general manager, dealing with everyday stuff is a grind and if we can take over the pricing and distribution piece, that would add value to their business.”