Zen Rooms raises $4.1M to expand its budget hotel network in Southeast Asia
Zen Rooms, a budget hotel network targeted predominantly at Southeast Asia, has closed a $4.1 million Series A round to expand its presence in the region.
The company, which was first founded by Rocket Internet in 2015, said the capital was provided by Korea’s Redbadge Pacific and SBI Investment Korea, with participation from existing investor Asia Pacific Internet Group, the joint venture from Rocket Internet and Ooredoo. The money takes Zen Rooms to $8 million from investors to date including a previously undisclosed seed round.
Zen Rooms is one of a number of companies to emerge over the past two years aiming to make hotel bookings in emerging markets more organized, cost effective and of better quality. To do so, they create a network of partner hotels that guarantee a certain quality of room and comfort, whilst providing a platform for booking rooms that might otherwise be hard/impossible to find online.
India’s OYO Rooms, which has raised over $180 million, pioneered the concept, but Zen Rooms is among a number of copycats to have taken the model to Southeast Asia. Others that have raised venture capital include RedDoorz, Nida Rooms and Tinggal. Zen Rooms primarily focuses on Indonesia, the Philippines, Thailand and Singapore, but it also includes hotels in Brazil, Sri Lanka and Hong Kong among its coverage.
Zen Rooms co-founder and global MD Nathan Boublil told TechCrunch that the company is seeing progress in Southeast Asia, which has a cumulative population of over 600 million. Online where online travel spending in the region is forecast to increase from $22 million in 2015 to $90 million in 2025, according to a report co-authored by Google last year. For now, online represents around 15 percent of all travel bookings in the region, as opposed to 40 percent-plus in markets like Europe and the U.S..
While Boublil didn’t reveal specific revenue or booking details for Zen Rooms, he said that the company’s coverage of 1,000 hotel partners across Southeast Asia is turning it into a rival to traditional hotel chains.
“We really have started to annoy the incumbents, budget hotels that have been there for many years but are a little bit lazy,” he said in an interview. “We can disrupt the chains, grow faster than them and get to a point where the quality of our offerings and affordability is on par with [what you’d find in] the West.”
Zen Rooms typically partners with a hotel on a revenue share model. Beyond adding its branding and providing the means to market its rooms, it offers standards like free Wi-Fi, working air conditioning, clean towels and bedding and a concierge smartphone app. Some of those elements are obvious, but anyone who has ever gone off the beaten track in emerging markets can testify that cleanliness standards don’t always apply. The company also 30 “full properties” which it essentially takes full inventory ownership of.
Nida Rooms is arguably the closest competitor in terms of size. It has raised over $10 million, including a recent $5.6 million Series A, but it had run into financial problems last year. Boublil speculated that Nida Rooms’ outreach, which he said surpasses 4,000 hotels, may have seen the rival overextend itself.
“Nida has four-times more properties which is completely stupid,” he said. “Their number of bookings have been extremely low because [the network] been diluted. Hotels can’t work with them in depth [and] then there’s the cost which is higher — that’s why they got into some financial trouble.”
Keeping Zen Rooms to 1,000 properties makes its network more manageable and allows more direct relationships, Boublil argued.
Nonetheless, Zen Rooms — which has around 100 staff — is looking to expand beyond its current markets, with countries such as Vietnam, Laos and Myanmar among its potential new outposts. The plan is to raise a Series B around the end of this year. In terms of exits, Boublil hinted that there is some interest from traditional rivals.
“Big hotel groups are watching us,” he said. “We’re growing fast in a region where they’d like to grow fast but their methods aren’t suited to doing so.”