Swiss startup Treovi today launched its hotel booking service in public beta, and the company offers a key difference that makes it very different from the rest of the online travel crowd. Treovi offers commission-free booking for both hotels and travelers, meaning that hoteliers get 100 percent of their room rates and tourists don’t have to worry about paying a website or agent in addition to a hotel.
Generally speaking, hotels still foot the bill for booking commissions, and Treovi co-founder Michal Wrobel notes that that’s been the case since long before the Hotels.coms and Expedias of the world brought the process online. Wrobel draws a parallel between what happened with classifieds when they encountered the world wide web, and what he hopes to accomlish with Treovi.
“Most e-business right now online is based on freemium,” he said. “Like classified ads, for example, you advertise online for free, and if you want to get more exposure or make it sell free, you choose some paid options on top. It was quite different at the end of the nineties, because the first big classified listings that were online were actually sites where you had to pay to get your ad featured.”
Classifieds sites in those days were mostly paper-based versions brought online, with the same model in place where sellers would pay to list. Craigslist.org was one of the first to circumvent that model on a large scale, and Wrobel thinks the timing is right for the same kind of upheaval to happen in the hotel booking industry. Once it does, he says, it’ll free up a lot of capital on the side of hoteliers, making them that much more likely to re-invest funds elsewhere. Wrobel estimates that for a medium-sized hotel in a busy European city, for example, dropping travel booking commission fees could save a location up to $500,000 per year.
That bottom line benefit is where Treovi is hoping to make its cut of revenue, in two ways. First, Wrobel says the company will offer premium features to highlight or otherwise promote individual hotel listings on a freemium basis. He says that since his organization is designed around operating with a very lean backend staff requirement (supporting up to 200,000 hotels with 70 staff, vs. 500 or more staff for larger booking companies, he said), even if only a fraction of hotel clients adopt those paid features, Treovi will be able to make a considerable profit.
Second, Wrobel says that Treovi is building out a number of product offerings that will enable hotels to provide offers to potential guests that will make them much more attractive options than disruptive upstarts like Airbnb. Though he wouldn’t go into detail about what these might be, he did suggest that once hotels are making 100 percent of their booking rate on rooms, it’ll free them up to be much more aggressive in terms of pricing via emerging competitors in the home exchange market.
Treovi launches to guests today with 1,500 hotels signed up, but that’s an amount the company has accrued over just a month. Wrobel admitted that while a tiny percentage of hoteliers have greeted their model with skepticism, the response has been resoundingly positive. To achieve success, the startup will have to scale considerably and quickly to make the economics work, but this freemium approach to previously fee-based services seems to be catching on, with LevelUp blazing the same trail in the mobile payments market. Proving the company’s revenue model can thrive, and showing that travel companies can move away from a commission-based model, will be the company’s biggest challenge.