Founder and chief executive Sean Schaeffer first came up with the idea of packaging hotel rooms with leisure activities in the 1990s. Fast-forward to today and the solution is digital, with ZoomAway enabling travellers to bundle rooms with activities such as golf and skiing directly through partner hotel websites that use its White Label platform.
By bundling a room with leisure activities, guests save both money and time. Instead of searching the Internet or calling around to book tee times, travellers can make easier choices and reserve right on the White Label hotel partner’s website.
Additionally, once a guest has chosen a hotel room and activities, they pay for everything in one transaction. Hotels find that they receive additional traffic from guests who want to stay at partner properties due to access to activities and the ability to tailor a package that perfectly suits their needs.
A key element of ZoomAway’s technology is that it maintains the brand integrity of each hotel’s website, as White Label offerings are typically found on an “Activities” or “Packages” page. And because hotels and activity providers cover the marketing costs for each component of a bundled solution, ZoomAway keeps its expenses under strict control.
ZoomAway was borne out of frustration. When Schaeffer had his ‘eureka moment’ he was working in the sales department for a hotel in his native Reno, Nevada, handling group bookings.
Sourcing rooms at the right price for large parties wasn’t a problem; finding accommodation for 10 or 15 travellers was.
“Every place I worked at there wasn’t a mechanism to handle those smaller group bookings,” Schaeffer told Proactive Investors. “So, unless you were a group of 20, 30 or 40 people, there was nothing you could do but book on your own.”
Spotting an opportunity, Schaeffer convinced his then employer to let him handle all group bookings – large and small. He went out on his own to do this, selling add-ons such as golf excursions along with rooms. Calls would be re-routed to him, meaning customers would still think he was part of the hotel staff.
In other words, he was making money as an intermediary by white labelling his services. It is a low-cost model ZoomAway still embraces to this day – no marketing or advertising spend; no customer acquisition costs.
“The trick for me was that the hotels would do the marketing,” Schaeffer said. “The host would push the product and I would do all the booking for them. I’d take my pre-negotiated margin from the hotel rooms and the golf courses.”
Within two years of starting out in 1999 Schaeffer and his team were handling the group bookings for multiple hotels. Schaeffer eventually built his own software and reservation systems to handle the increased demand.
It wasn’t always plain sailing, though. One of ZoomAway’s main package deals was arranging hotel and ski bundles for guests in resorts and destinations such as Lake Tahoe. Beginning in 2011, the Lake Tahoe region fell into the grips of a significant drought resulting in minimal snowfall for four straight years. “That was a wake-up call,” said Schaeffer. “We knew we needed to expand and get out of any weather-related geographic dependency.”
In other words, it was a case of run for the sun. Today, ZoomAway’s software is embedded in the websites of more than 20 hotels and resorts in Las Vegas, and the company continues to move west to California. The key is to get rid of seasonality, which is why ZoomAway is expanding into other markets.
As well as having more reliably sunny climates, these new territories can be far more profitable.
The average room rate in the company’s former heartland of Reno is US$84 a night. In Las Vegas it’s nearer to US$130, while tourist magnets such as San Francisco command average nightly rates in excess of US$300.
Schaeffer targets gross margins for the White Label platform of between 17% and 24%. As an example, a hotel room in Reno might earn ZoomAway US$16.80 (assuming a 20% margin) while in San Francisco, using a 20% margin, ZoomAway would earn US$60 per night.
Well-known hotels and resorts – such as The Palms in Las Vegas – are on board, suggesting the model has some traction with the hospitality and entertainment industries.
Recently, ZoomAway launched its new Reservation Management System (RMS) product. This is a recurring revenue product for which a resort pays an annual fee as well as transaction fees for bookings.
Using a link specific to an event such as a wedding or corporate outing, the RMS enables guests to individually book their own lodging, food, transportation and activities by choosing from a pre-set menu and paying accordingly for their choices. This eliminates administration and costs, while ensuring a better guest experience at the same time. ZoomAway debuted the RMS in the fourth quarter of 2016 for a music festival in Tahoe.
To help fund the kind of growth that Schaeffer is targeting the company went public in October 2016, raising C$2.3mln in the process. “We hope to make a big splash in the coming year. We’ve spent a lot of money in 2016 getting the pipeline ready and getting the sales team hired,” Schaeffer said.
The plan is to triple the current domestic client roster to 150 by the end of the year.
If moving into new US territories was the first expansion stage, then taking the model global “is definitely the second phase,” Schaeffer said. Asked where he wants the firm to be in five years, Schaeffer replied: “If we can get to the point where we have over a thousand clients and we can continue to put cutting-edge technologies on the market along with a couple of companies that we have purchased, then that would look like success.”
Although the goal is to grow rather than sell the business, Schaeffer accepts ZoomAway may one day prove an attractive acquisition target. “If you look at Tripadvisor (NASDAQ:TRIP) as far as purchases go, who knows what their master plan is,” said Schaeffer. The same can be said for other online travel players, such as Priceline (NASDAQ: PCLN), Expedia (NASDAQ: EXPE), and Ctrip (NASDAQ: CTRP).
Combined, these four companies have made over US $8bn in acquisitions over the last two years, at various stages of development in a target’s lifecycle. One only needs to consider the multiples these companies trade at and their respective stock price performance to understand how the world has shifted its travel needs online.
And that means lots of opportunity for ZoomAway to expand by deploying its scalable technology into new markets.
ZoomAway at a glance Key information
· Publicly traded as CVE:ZMA, Frankfurt:4ZO;
· ZoomAway has two main products, its ‘White Label’ platform and its Reservation Management System (RMS);
· White Label allows customers to buy stay-and-play packages (accommodation plus ski passes or green fees, for example);
· ZoomAway’s software is embedded into its client websites and customised so visitors can’t tell that ZoomAway, rather than the hotel, is handling its package booking;
· ZoomAway operates a call centre to deal with booking queries and other issues on behalf of clients. This provides localization and creates a barrier to entry;
· The RMS allows larger groups (such as sports teams or convention participants) to conveniently book accommodation and activities packages;
· The RMS is a tool allowing organisers to book and track individual lodging, activities and meal requests — essentially, it takes the hassle out of booking hotel rooms and activities for large numbers of guests.
· The software is integrated on a rapidly growing number of hotel and resort websites (currently around 50 properties);
· Several hotel/casinos in Las Vegas are clients, as are popular golf names Poppy Hills and Course Co.
Story by ProactiveInvestors