By Heather Somerville
SAN FRANCISCO (Reuters) – Startup company Hotel Tonight, betting that superior mobile technology will give it an edge, is expanding its hotel-booking offerings and going toe-to-toe with the big online travel companies.
Hotel Tonight early next month will allow users to reserve a hotel up to 100 days in advance — a striking expansion of its original business of offering same-day hotel reservations at a big discount.
“This marks the start of how we are going to compete in the market from now on,” said Sam Shank, Hotel Tonight’s chief executive officer and co-founder.
The change puts Hotel Tonight more squarely in competition with online travel behemoths Expedia Inc and Priceline Group Inc, which together account for about half of all travel bookings made on mobile devices, according to travel research firm Phocuswright. Hotels themselves comprise about 16 percent.
San Francisco-based Hotel Tonight, which has raised $115 million in venture capital, spent much of last year cutting losses through layoffs and eliminating costly promotions. It went from burning $2 million to $3 million each month to earning a profit, Shank said. But the company is under pressure to grow.
Yet some analysts are skeptical that Hotel Tonight can become a true competitor to the online travel giants. While Hotel Tonight can still offer cheap rates for some last-minute bookings, it often will not have a price advantage over rivals.
“I do not buy the idea that even a smart and savvy startup like a Hotel Tonight can compete head-to-head with the likes of Booking.com and Expedia and grab a lot of market share,” said Douglas Quinby, an analyst with Phocuswright.
More than 25,000 hotels in about 1,700 cities globally are currently listed on Hotel Tonight. By comparison, Priceline’s Booking.com has 1.2 million hotels.
Shank says his seven-year-old startup is seizing on the transition to mobile.
About 20 percent of all online travel bookings now occur on mobile devices, according to Phocuswright. Mobile bookings are projected to reach $36 billion this year, triple the $12 billion spent in 2013.
Shank says Hotel Tonight can win over customers from other companies with better mobile services. Its app lets users book a room in 10 seconds and each search turns up just 15 hotel suggestions that are tailored to the user’s specific needs and tastes.
“We are like Lyft and Uber, born from the mobile-first era, and we can innovate much more quickly,” Shank said.
Rivals, however, are not standing still. In April Expedia Chief Executive Dara Khosrowshahi — who this week took over as CEO of Uber Technologies Inc [UBER.UL] — said that more than one-third of Expedia’s bookings occurred on mobile devices and more than half of the company’s traffic came from mobile.
“Hotel Tonight is going to be seen as the same as the other companies,” said Christopher Anderson, director of the Center for Hospitality Research at Cornell University.
(Reporting by Heather Somerville; Editing by Jonathan Weber and Leslie Adler)