RedDoorz evolves with US$11 million pre-Series B fundraise, pilot property model

We have been following RedDoorz as it scales up towards becoming the leading accommodation marketplace in Southeast Asia.

The budget hotel booking platform bagged US$11 million fresh off a pre-series B fundraising round led by members of its previously unannounced 2015 seed and 2016 Series A rounds: the Asia Investment Fund of the Sushquehanna International Group, International Finance Corporation of the World Bank Group, and Jungle Ventures.

RedDoorz plans to allocate this investment towards growth, particularly in Singapore where it is headquartered and the Philippines where it has established presence. It began operating in Indonesia back in 2015, where it now has more than 3,000 rooms and a team of nearly 200 strong spread across 16 cities. Indonesia was the focus of two different studies for being the fastest-growing market for internet use and online travel alike, with one predicting it would generate a third of all online travel growth for Southeast Asia.

In an exclusive phone interview, RedDoorz founder and CEO Amit Saberwal (below) shared with Travel Daily that RedDoorz continues to mine Southeast Asia’s potential through its “methodical, step-by-step” strategy of market penetration and expansion.

“We had a good 2017 because we were able to service over 700,000 stayed room nights, garnered 500 properties and spread to 16 Indonesian cities under our brand,” he said. “This has set us up for a great 2018, where we still keep our focus on Indonesia, while also deliberately expanding in the Philippines and Singapore where we have a combined total of 20 properties.”

Budget hotels cannot be nameless, faceless zombies with predictable offerings because they are already competing with other nameless, faceless properties

Saberwal also added that the pre-Series B fund will allow RedDoorz to explore a new long-term business strategy. While it is originally known for using the franchise and marketer model, it now ventures into full property leasing and daily operations management. This means it takes over running an entire property with full efficiency, providing guests with the best flexible rates while assuring its owner of a fixed rent. To date, RedDoorz is the only budget hotel aggregator in Southeast Asia with a fully-leased and operated model.

RedDoorz recently launched a 65-room restored colonial shophouse at Katong in Singapore as its pilot fully-leased and operated hotel property. “RedDoorz near Marine Parade” calls to mind the Peranakan history and heritage of Singapore, but is also accessible to both old and new local dining spots as well as shopping areas like Parkway Parade, I12 Katong, and even Orchard Road.

“The new hotel is medium-sized inventory, exactly the kind of property that we want to use as a template for the new business. It’s critical that we have the capital to back this new business model,” explained Saberwal. “Singapore, our headquarters, is well known to be a high-cost market. It allows little room for effort, so if we can get the model right here we can replicate it elsewhere in the region. So, for a template, we thought this was good, because it puts a lot of pressure on our company to make sure that everything is done properly and profitably. Once we set our profit margins up 40% to 50%, we’ll take it from there.”

“With the right team, right set of investors and the right market opportunity, we are certain that we will be able to grow exponentially in Southeast Asia and drive up our existing 65% customer repeat rate. We plan to have onboard 100 such fully leased properties and 1,000 franchise properties in this region in 2018,” Saberwal explained further.

Does this mean that RedDoorz will no longer pursue the franchise and marketer model that has made it well known in the budget hotels marketplace? Not likely, said Aberwal: “Few people get that the scale of the Southeast Asia opportunity is mind-boggling. We target to go up the value chain and offer the best predictable stay experience for our users across the region with this model, but it will run concurrently with our existing model because we want to offer all kinds of solutions for all sorts of budget hotel property owners.”

We would like to continue to rapidly scale our overall business, and when you decide to rapidly scale, every time you lease and operate a property you’ve got a longer sale cycle

So far this move has gotten the support of new investors who were on bord the pre-Series B fundraising round, like DeepSky Capital, FengHe Group, Hendale Capital, and InnoVen Capital, a venture lending firm owned by Temasek Holdings and United Overseas Bank.

“We at FengHe are very familiar with the space RedDoorz is in and have seen a similar model unfold in China. We are very confident in the foresight and growth that it has spotted, most notably the potential to disrupt the budget segment in Southeast Asia’s hospitality industry,” commented FengHe Group founding partner and chairman John Wu.

Hendale Capital partner Geoff Lee added, “At Hendale, we have a tradition of backing winners and number one players. We have full confidence in RedDoorz as our support will contribute to their continuous effort to pave a solid growth journey across Southeast Asia.”

RedDoorz runs a streamlined full operations unit ranging from customer service, operations and product sales to branding, finance and marketing. It provides small to mid-size hotel and guesthouse owners a digital platform with proprietary data analytics technology to forecast demand and drive more traveller footfall, plus a RedDoorz Training Programme that seeks develop the housekeeping, technology, customer service, communications and usage skills of employees of these properties.