Interview with a travel-tech startup: MAGNiTT catches up with Hotel Data Cloud
It could be argued that out of all the businesses suffering the consequences of COVID-19, companies in the Travel and Tourism industry have been hit the hardest. To that effect, MAGNiTT recently caught up with Gregor Amon and Kevin Czok, the Co-Founders of Hotel Data Cloud, following the travel-tech startup's recent fundriase, to discuss their company, the industry as a whole and their future plans:
Q1) To start, tell us briefly about Hotel Data Cloud (HDC) in layman's terms. How does it work?
GA: Hotels regularly suffer from incorrect or outdated information on third-party booking channels, and studies show that in turn, 9 out of 10 travelers blame the hotel for this; ultimately not only hurting the hotels reputation but also affecting their bottom line.
HDC is the leader in providing a centralized global database for descriptive hotel content that confirms hotels’ information and pictures are updated across all travel websites, travel agent databases, and points of sale. With studies indicating that the average traveler hits 45 touchpoints over a 36 day period before making a final hotel booking decision, HDC enables travelers to make quick, educated and informed choices, without the need to gather hotel information from many different, incoherent sources.
We have over 11,300 hotel clients all over the world, enabling them to get back in control of their descriptive content. As the next phase in our evolution, we are introducing our new AI-based recommendation engine, which is sure to be a game-changer.
Q2) How exactly does an AI/ML engine benefit hotels, especially now with COVID-19?
GA: The new AI and ML engine will enable hotels to showcase tailor-made offers, amenities, and other important factors, according to each travelers’ specific requirements and personal preferences.
By building customer profiles based on analytics, psychographics, and other meta-data, hotel websites will be able to show different offers and images according to the client’s personal preference. Additionally, we will also be able to send client emails at times when they are more likely to be opened, with more relevant offers. We are using a level of personalization that other industries have proven to be highly effective, leading not only to an increase in profit but also much happier guests. It is estimated that with this technology, the CTR (click-through rate) across on-line bookings will increase by over thirty-five percent.
Q3) What is your big-picture vision for the future of HDC?
GA: HDC is going to be the de facto global standard for hotel content. As one industry expert phrased it, we can be the “single source of truth” when it comes to hotel features and amenities.
KC: Our technology is very adaptable, and we can easily create spinoffs and expand into new verticals. Similar to Slack or SAP, HDC could even serve as a platform for an entire ecosystem of products and services that are based on our core technology and content.
Q4) It is quite extraordinary that you managed to raise this round as the travel and tourism industry reels from the impacts of COVID-19. Was this round in the works from much earlier?
KC: It requires patience and persistence to raise funding successfully, and we started to approach investors long before there was any sign of COVID-19. The travel industry felt the drastic economic effects almost immediately, and of course, we were concerned that our investors might back away from the deal. But they understood that our solution helps hotels and travel businesses operate more efficiently, which is now more important than ever before.
Q5) How did COVID-19 affect your fundraising efforts for HDC? (e.g. were investor risk appetites different, did deal terms change?)
KC: Understandably, our investors wanted to understand how this impacts our startup, and we were able to reassure them. We can take significant steps forward without increasing our cash burn. There is more talent available, and our expenses are lower than initially expected. There is now even greater opportunity and demand for tech solutions like ours. And we anticipate that the market will eventually recover and provide attractive exit opportunities. Our investors remained convinced and considered the deal fairly valued at its original terms.
We’re in conversation with a few investors for a second closing, and while the process has slowed down, there is still considerable appetite for cash-efficient innovative tech startups.
Q6) It’s safe to assume that after this round, you're going to have some exciting growth plans. Can you share some of HDC's short-term plans for expansion with us? (e.g. geographic, product, talent)
GA: We are already serving hotels in 153 countries and are a global product from the start. The next stage in our evolution is to focus on key markets where we see the potential for exponential growth. In particular, the UAE, where we are working with Dubai Tourism (DTCM) and Dnata through participation in their incubator Intelak.
Our AI/ML product is evolving quickly, based on our clients’ feedback, and we are excited to roll that out in a couple of weeks.
Q7) In your opinion, what are some of the most exciting things happening in the travel and tourism tech space (globally) right now?
KC: The industry is finally waking up to the reality of how desperately it needs to innovate. Inspired by other sectors, consumers are becoming more demanding. They turn to more innovative channels for travel discovery and penalize businesses that feature a tedious booking journey and poor user experience. Travelers can no longer be addressed homogenously with generic messages. They expect personalized offers that consider their individual requirements. Forward-thinking travel companies know that they can’t continue doing business as usual if they want to recover their losses from COVID-19 and outrun their competition once travel volumes resume.
Q8) You haven't disclosed the investors in this round. What were you looking for from your investors, beyond capital?
KC: Our investors preferred not to see their names disclosed, but they are far more than silent partners. They support us actively by sharing advice from their versatile professional experience in different industries. They understand that startups operate differently from traditional SMEs, and we can count on their support throughout the various stages of growth. We are happy that our new shareholders are locally and internationally well connected and can someday also help us source exit opportunities.
With COVID-19 uncertainty and ambiguity leading to social distancing, many travel and tourism startups (along with many others in exposed industries) are seeing hits in revenue and dips in valuations. How long do you think we will be seeing this for?
GA: No doubt, the travel industry will see long-term effects and require significant adjustments as a consequence of the current situation. Hotels will need to think ahead, be innovative, and focus on how to engage better with clients. It’s encouraging to see the rise in interest in HDC’s products because it signals to us that the industry is looking at post -COVID-19 recovery and planning ahead.
Q9) Finally, what advice would you give to yourself five years ago?
Don’t be discouraged by all the “No’s” that you will hear. As an entrepreneur, you will hear that a lot – but keep forging ahead. You only need one “Yes” to change the game.
E-commerce deals in MENA-based startups have tripled from 2016 to 2019. Find out more details behind this trend and many more in our 2019 MENA E-commerce Venture Investment Report HERE