How an Israeli startup wants to help hotels improve their online booking game during the crisis

Splitty, a Tel Aviv-based startup, told hotels it knows how to increase their online booking game while increasing guest satisfaction. Over the past year and a half, Splitty has woven together different types of reservations to create the cheapest deals for consumers. But the company has virtually no marketing savvy and has remained a niche brand.

To help close its marketing gap, Splitty recently acquired the assets of Cancelon, a Boston-based company. Cancelon processed half a billion dollars in hotel reservations last year using its digital marketing techniques. But losses from the pandemic bankrupted it in March.

The size of the companies, both small, is less impressive than what the merger of guerrilla marketing tactics in online travel reveals.

Most price comparison search companies, such as Google, Kayak, Trivago, and TripAdvisor, typically put their thumbs up in their advertising auctions to favor an online travel company with the best hotel rate. They do this even if the business lacks a big budget and can’t afford to spend more than giants like Booking Holdings or Group.

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For example, Google prioritizes in its so-called hotel meta-search results the distributor or supplier offering the lowest rate, experts say.

The Splitty team in Tel Aviv. Source: Splitty

Google often sets a minimum bid it accepts for the top placements in its ranking. Think of this minimum acceptable offer as a floor. Google would lower the floor for an agency with the cheapest room rate.

Advertising auctions at Google and elsewhere are actually more complicated and mysterious than this picture. They weigh other factors, such as the value of the auction against the amount of each individual bid, the time of day, the location of a buyer, the rates in question, and other factors.

But experts have said that as a general rule, when a sales channel like Cancelon has a low hotel rate, Google or a similar meta-search brand could give it, say, the third position in its search results. mobile for just, say, $ 1.40 per click. Yet on the same list, he might expect a corporate advertising colossus to bid $ 2 to appear in the top slot.

Cancelon became good at guessing when metasearch ad auctions had a higher than usual odds of getting the best average return on a company’s digital marketing budget. He perfected a kind of advertising auction arbitrage.

Having learned this common sense, Splitty hopes to apply these techniques to help juice sales under her brand. It won’t be until October to settle in, said Eran Shust, CEO and co-founder of Splitty.

The under-booking crisis

Splitty differentiated itself from typical online travel services by offering “mixed rate” hotel deals. When a traveler searches for a multi-day reservation at the same property, Splitty brings together a mix of fare types from one or more sources, which the consumer can book with a single voucher. It claims to be able to offer deals for roughly half a million properties around the world.

“Without entering the IP [intellectual property] Problems, there are many technical capabilities that you can build through distribution tools such as channel managers or through a direct connection to hotel group systems, ”said Shust. “These connections can almost always be made without the need for human involvement.”

Splitty claims that consumers or hoteliers only look to its Customer service for exceptional circumstances, confusion or other confusion in two out of a hundred reservations on average.

Earlier this year, Splitty opened its first U.S. office, located in Greenwich, Connecticut, after the company received support from Connecticut Innovations, the state’s strategic venture capital arm.

Splitty has unveiled a $ 10 million fundraiser to date led by Fosun RZ Capital, an investment arm of the Chinese firm that owns Club Med and other tourism companies. Other investors include Techstars Ventures, Cockpit Innovation (the investment arm of El Al Airlines) and 2b Angels.

In many markets and property types, the hotel industry is facing a vacancy crisis due to stay-at-home restrictions, border restrictions and confusing signals from the authorities.

With hotels facing what you might call an “underbooking” crisis, or the reverse of overtourism, many could welcome any tool that can help put heads in affordable beds. (For background, see “New York’s hotel woes registered long before the coronavirus.”)

But not everyone is convinced of the sustainability of the concept of shared rates.

“From a revenue manager’s perspective, although hotels today are certainly looking for occupancy by any means possible, I think a company like Splitty could certainly be dangerous for long-term profits.” said Kelly McGuire, senior hospitality manager for ZS. “Customers’ trust and perception of value should also be considered with this app or any third party app looking for deals. “

“From a customer perspective, despite the best rate guarantees available, customers are already skeptical about getting the best price by booking direct,” said McGuire. “Perhaps here is another channel that exposes inconsistent pricing to the consumer, many of which probably weren’t meant to be available in the open market – or weren’t meant to be booked in the way this app might book them. All of this risks eroding confidence in the prices on the direct hotel channel.

Splitty’s Shust has heard similar reviews before. He says hotels will love the way his company puts together combinations that increase what he claims is incremental demand that their technology cannot yet create. Shust cites examples of a multi-day booking where breakfast is included only on the first day, and a multi-day booking during a high demand period where a guest goes from a premium class room one night to a discounted room for the rest of the day. the weather.

Splitty plans to add Cancelon’s signature to its product line of letting consumers “resell” their non-refundable reservations, but not until next year, if all possible.

Critics argue that these companies are stuck in a miserable middleman position and only receive a cut in commissions due to their reliance on other sources of supply and demand. These niche services risk a long-term struggle.

One example is Tingo, owned by Tripadvisor, a brand that had allowed customers to track rates and re-let them if they gave up. Tripadvisor shut down Tingo last year. Cancellation Rival Tenant has raised $ 17 million to date, but has yet to become a household name. On the other hand, startups like Airbnb, Hotel Tonight, and Hopper show that pathways to global scale can be found.

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