TechnologyDistributionBidding for Boutiques

Bidding for Boutiques

A new travel startup called Stayful aims to make the independent boutique hotel experience more accessible and affordable to U.S. travelers while helping hoteliers fill unsold inventory. The technology will allow consumers to name their own price with real-time bidding. The company, which received $2.4 million in funding led by Canaan Partners, launched its private beta yesterday in New York and San Francisco.

Former Expedia Corporate Travel and President Cheryl Rosner co-founded the company with Shariq Minhas, who led engineering at Jigsaw in addition to Expedia and Hotwire. Advisors include Joie de Vivre Founder Chip Conley and Room 77 CEO Drew Patterson, previously the founder and CEO of Jetsetter and part of Kayak’s founding team.

Rosner and Minhas created Stayful to help independent boutique hotel owners attract new customers despite limited marketing budgets and gain distribution at a lower cost. The U.S. hotel industry’s overall occupancy was 61.4 percent in 2012, whereas independent hotel occupancy was only at 57.5 percent, according to STR data. Stayful reports that the independent boutique hotel industry loses $13.9 billion in revenue each year due to unsold rooms. Rosner intends for the Stayful model to help close this gap around perishable inventory and, as a result, improve hoteliers’ occupancy and overall revenue per available room.

On the consumer end, Stayful speaks to a significant segment of travelers who want to discover unique independent boutique hotels at affordable prices. Target consumers are savvy, early adopters who take five-plus trips a year and enjoy customizing their travels. “We started to think of them as self-directed travelers,” said Rosner, who worked in the secondary ticketing and daily deals markets prior to launching Stayful. Unless there is a specific intent for the trip, like a business conference at a host hotel, their preference is to stay in boutique and independent hotels where they can have authentic, local experiences. However, many of the consumers surveyed said that they often had to visit several different travel websites to find these types of properties.

The target consumers also typically book their hotel rooms within 30 days of a trip, with a sweet spot of seven to 10 days out. “Boutique hoteliers are clear on what inventory, at that point, will go unsold and rooms that will go unoccupied,” Rosner said. “That inspired the model around enabling one-to-one negotiation for that room. So the consumer can make an offer for a hotel room and the hotel, depending upon demand, can accept, counter, or decline the offer.”

Rather than using an opaque bidding model, Stayful allows consumers to select and bid on a specific hotel that has perishable inventory up for grabs. The company developed a proprietary algorithm that determines the fair market value of a hotel, based on supply and demand dynamics at the time of a consumer search. The retail price of the hotel will be listed next to the recommended bid. Travelers are required to book within the next 30 days and the reservation is noncancellable and nonrefundable. Hotels can accept as many or as few reservations as they choose and will be paid immediately at the time of booking. (Stayful takes a 10 percent commission.)

For its beta launch, Stayful has curated and set up relationships with a small segment of hotels in New York City and San Francisco to enable real-time negotiations through its technology. Travelers can also search for other boutique hotels that are not already part of the Stayful network. Once travelers place a bid, that hotel will be invited to join. “We truly want hotels to be able to engage new customers who are interested in booking them,” Rosner said. The site will eventually expand throughout the United States.

Before crossing over to and Expedia, Rosner had worked in the hotel industry for 15 years at companies like Kimpton, Sheraton, and Four Seasons. “The hotel industry is my first love,” she said, “so I spend a lot of time thinking about what we can do to better serve the hotel community.”

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