In the world of VCs and big money, being a small startup with very little funding can be nerve-wracking. With barely US$70 000, Mark Essien got ready to take on an emerging market startup juggernaut with a competing hotel booking platform.
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Like most startup ideas, it was easy enough: build an online hotel reservation service for the Nigerian market and visitors to the country, with the hopes of expanding to the rest of West Africa. Very simple.
“I found that hospitality was one of the most underserved [markets],” says Essien. His idea was to build an easy to use platform that allowed travellers to book hotels in most locations around Nigeria, and pay when they arrive at the hotel. Again pretty simple.
His business model was easy: don’t charge the consumer and don’t make them register. Instead charge the hotels a commission for every reservation made on the platform. Dare I say it, pretty simple.
Predictably however, building Hotels.ng turned out to be more difficult than Essien had thought. He had managed to raise some money, but the funding ran out quickly as he tried to deploy a travel heavy business and build a responsive platform for all devices.
“Our initial [funding] was US$75k, of which US$25k went to buy a car (to close deals in Lagos). So we had US$50k to deploy people across Nigeria and pay a team of 12 people,” Essien writes in a blog post marking the company’s second year. “That’s N8 million. At the time, I though that it would be more than enough. But quickly I realised that things were far more expensive than you think they are.”
While the German-educated entrepreneur began to figure out his business and what he was trying to achieve, the development costs were rising. At the same time Essien learned that Rocket Internet had the same idea for Nigeria.
He received a call from a friend upon returning from a holiday in Germany alerting him to the fact that Rocket Internet was building a site just like his.
But this was Essien’s passion, an idea he had presented to Rocket before — and was denied.
“I had actually pitched those guys a while back to open a hotel booking website in Nigeria. I searched my email for the pitch-deck to see if it gave away anything. Reading that document made me realise how different assumptions about a business are from when you actually start the business. That would not help them.”
Two years later: emerging from the trenches
Currently Hotels.ng has more than 5000 hotels registered on its platform. It currently has 30 full-time employees, has seen US$2.3-million in transactions and has hit US$40 000 monthly revenue — that’s an annual revenue of US$480 000.
Hotels.ng’s success is both accidental and purposeful. Its founder stumbled on to an idea that came from experience; he had very little knowledge of what it meant to run a travel industry dependent business. The Nigerian tech ecosystem, though small, can be credited for his success. More specifically, Essien is thankful for the investors and industry experts who advised and worked with him.
But by far the most interesting thing about this accidental success comes from realising that your biggest competitor is watching to learn from you.
As Essien recounts it, the weeks that followed finding out Rocket’s move, kept him thinking and observing. The ecommerce builder had everything — money and resources. But it too lacked experience in Nigeria’s hotel space.
“I noticed something: [Rocket] kept studying us, trying to find out how we did it. They were trying to beat us,” he writes. “That’s when I realised that somehow or another, barely knowing it, we had become the largest hotel booking website in West Africa. So I didn’t have to beat Rocket Internet, they had to beat me.”
Things look bright currently, but there is competition for the startup. It’s biggest competitor in the local market still remains the Rocket-funded Jovago. There is also another similar service, WakaNow, funded by New York-based VC Tiger Global.
However, for Essien, it’s a case of challenge accepted. His platform isn’t just about booking a hotel for the night or a weekend — it’s about cataloguing as well.
“Prior to the existence of our site, it was almost impossible to know what hotels existed in a particular city,” he says. “We are making the 95% of hotels in Nigeria that were invisible to the internet, visible and bookable.”
According to the platform, none of its competitors have the volume of local hotels it has. “We also have the most weekly bookings for any travel company in West Africa,” says Essien. “It will bring African hospitality online and show that Africa is a place one can safely travel to.”
Expansion and future-thought: the road is still long
Though Essien’s vision has been admirably executed it still faces major competition from the likes of Booking.com if it hopes to crack the international market. Currently he reckons his company’s profit is minimal but projects a better year ahead, although more capital is needed to grow. Spark’s stake, though a minority at present, will have to increase if Essien expects more capital from the investor.
If Hotels.ng hopes to become the biggest hotel booking platform in Africa in the next five years it needs to combat hotels with robust booking services as well. Currently the fact that the platform is device agnostic helps the service with Nigeria’s mobile-centric audience.
There is talk of a possible Android app but that is not a high priority for the company right now. Though Essien believes it is necessary, just not now. “Rather focus our limited resources on the web for now,” he says.
The company’s future paints an interesting picture. It needs to start making serious revenue with significant profit if is to unburden the pressures of big money such as Rocket and Tiger Global in its competitors.
As part of the next stage of the platform’s growth, Essien says that Nigerians will soon be able to book international hotels. Essien is confident of a successful future. His epic three-part post to outline the company’s and his success is a great strategy in the search for new investors. Who wouldn’t be interested in all that traction?
He could really be doing anything with his degree in robotics and computer science, but the truth is quite simple for him.
“Let’s solve the small things before we start building Robocop in Africa.”