Kayak Co-Founder and CEO Steve Hafner believes, despite the pandemic, that a golden age for hotels, particularly for independents, he selfishly says, is here because the consumer demand is there. With that in mind, Kayak is creating a tech stack to help its partner hotels and potential partners elevate the guest experience and improve their profitability. To take it a step further, Stamford, Connecticut-based Kayak is leasing and developing its own set of hotels, currently with tech-savvy hotel partner Life House, to demonstrate proof of concept with the new operating system.
Along with Life House’s Rami Zeidan, Hafner has re-branded a Life House property in Miami Beach as the Kayak Miami Beach and in late-December opened Kayak Sol and Kayak Luna, both in Playa del Carmen, Mexico. Hafner told HOTELS in late December that while Kayak is not out to build a big hotel brand that will compete with the Marriotts and Hiltons of the world, there are a good 10 or more other hotel deals in the works and growth by lease in the Kayak-branded hotel space is likely to continue.
Life House is managing the initial Kayak properties on a non-exclusive basis, but Kayak is the one putting the capex into the properties. “Then we have our own team writing code, etc. It’s a significant investment,” Hafner said.
Since taking over in Miami, Hafner said performance in an already very strong market has been great. “We’re beating all of our financial metrics and our comp set,” he said. “And the software’s still very early days. So, the reason it’s performing well is because we’re providing the demand. We can fill the rooms at good ADRs. The software actually isn’t very good yet at extracting any of the operational synergies.”
The new properties in Mexico are also performing well with Hafner saying he filled 60% of the rooms just after opening.
In the meantime, Zeidan is sourcing more deals for Kayak, as are some real estate capital partners. “We’re also getting lots of inbounds – folks who get the idea of marrying a demand channel with a tech stack and the actual physical asset,” Hafner said.
Hafner explained that Kayak’s primary intention behind creating branded hotels is to learn the business model and the pain points, and then to showcase what it can do for other hotels with its emerging tech stack so that they’re encouraged to jump on the Kayak bandwagon.
Kayak also co-led a US$60 million Series C financing round for Life House, which is known for its technology-driven business model focused on revenue management, finance and hotel operations software. Life House has some 50 hotels under management in North America and recently added the 50-key Shire Woodstock in Vermont, its 20th hotel in New England.
Hafner said the two companies work well together, both driven by a desire to improve operating models for independent properties.
The Life House brand lives side-by-side with Kayak, according to Hafner, who expects every Life House hotel to be interoperable with the Kayak app. “That’s part of the partnership. Rami will focus on his proprietary tech stack and he will launch his branded hotels,” Hafner said. “I think the bulk of his business right now and where he’s going to go with it is nonbranded hotels. It’s actually providing the software to open hotels, and some of them he will manage, and some of them he won’t.”
It’s really about the software
With thousands of tech-challenged independents in the world seen as potential new Kayak partners, Hafner said its biggest focus right now is getting the software just right. And by the way, Hafner addded, Kayak might not even charge for the product because recruiting this vast network of independents into the Kayak system would be worth its weight in gold.
“We’re really getting into this to help our users,” Hafner said. “If the Kayak app is ubiquitous that’s better than selling the software itself.”
To further explain the upside, Hafner cited frequency of app use by Kayak users versus a brand that might not get its infrequent users to keep the app. “If we can get those people to interact with the independent hotels, I think everyone comes out ahead.”
He continued by stating that Kayak makes a very nice living just being a meta-search engine. “If we get more people to use Kayak and get more loyalty out of those users, then that that’s probably good enough for us,” he said. “And if we can elevate the guest experience and help deliver more profits to the hotel owner and to the operator themselves, that should find its way back to us in terms of advertising and potentially people paying us higher commissions. Lots of companies have shown that if you build a successful platform it is more profitable for everybody. There’s a very virtuous cycle there, and we’ll see where it goes.”
Kayak’s proprietary software will enable it to talk with any PMS, allowing most all independents to connect. It is still in beta and Hafner said he hopes to have it ready sometime late this year.
The Kayak team is working on two software buckets – the in-stay user experience via the app and the back-end operations side to improve efficiencies. They are making sure that the Kayak app can actually help reduce the friction of the check-in and check-out process, requests for room upgrades, chat with staff – the basics of the guest experience. On the back end, there is a revenue management module and automation systems to reduce the need for staff. “There’s a lot to be built yet, but we’re starting with the consumer-facing features first,” Hafner said.
No doubt, Kayak’s bread and butter is and will remain meta-search, and when asked about how the pandemic has impacted business Hafner said financial performance hasn’t been where he wanted it to be.
“But, the silver lining is the accelerated adoption by consumers and industry participants of new technology. On the OpenTable side of our business, nobody’s walking into restaurants anymore – they are all booking online,” he said. “When you get to the restaurant, you’re scanning QR codes and you’re comfortable paying from your phone and ordering from your phone… The same is true on the hotel side – nobody wants to wait in line at a check-in counter anymore. They want to check in from their app, ideally, or potentially at a kiosk… Nobody wants daily housekeeping anymore. They want on-demand housekeeping. So, I think there’s been a lot of changes that are good for the industry and especially good for technology companies.”