Have you heard of StubHub and EBay? These well-known sites provide a secondary marketplace for buyers and sellers of valuable products. What would happen if there were a secondary marketplace for hotel rooms bought in advance, that need to be sold because of unforeseen circumstances? Welcome to the idea behind Roomer Travel.
Richie Karaburun, Roomer Travel’s United States Managing Director, was recently on the Emerging Market Trends Panel at the Hotel Electronic Distribution Network Association (HEDNA) conference, and he discussed the business model behind the startup.
Here is how Roomer Travel works: travelers who have booked, and prepaid, for a non-refundable room can put their room up on the site, where they can re-sell it to another person.
On the surface, there is some fear from hoteliers and room suppliers that “hotel scalping” will become the norm, creating a potential disruption in the hotel supply chain. For example, what is stopping a person from buying a room at $100 six months in advance, and then selling in later when the Best Available Rate is higher than the price originally paid – thus making a profit? Shouldn’t this profit be going to the hotel whose inventory is being re-sold rather than the customer?
Karaburun pointed out, the average discount they have seen on their platform is 37%. He claims this is a far cry from scalping, and more of a way to help customers with not having to eat the cost of the pre-paid hotel room when plans change.
The main goal of the company is to connect sellers – traveler who can no longer use their hotel reservation, but do not want to pay the cancellation fee – with other travelers who are willing to buy the reservation for them. This creates value for the hotels – which do not need to re-market the room and sell it for less (the hotel still gets the full price for a reservation). Hotels also have the opportunity to capture the incremental revenues (WiFI, minibar, etc.) which would be lost if the room is not re-sold.
Four Immediate Challenges Facing Roomer Travel
1) The true size of the market remains uncertain. Although Karaburun estimated that there are 80,000 hotel daily no-shows in the United States in an NBC News interview, this may be a slightly exaggerated figure. The key here is that not all hotels are offering a resale market option, and some of these rooms may not be non-refundable.
2) Unlike airlines, hotels allow name changes on a reservation now. If a consumer finds himself or herself unable to use a prepaid reservation, he or she can reach out to others using social media to see if anyone is interested in using a room.
3) Hotels may resist using Roomer if they believe it will have a negative effect on their revenues.
4) Simple convincing hotels to participate in this new marketplace will be a tough sell. Roomer could find it difficult getting branded hotels to participate. An easier angle to work may be independent hotels, but this reaches a limited consumer base.