Power Supply

by Marc Almagro
Photography by Chino Sardea
29 Oct 2019

Zuzu Hospitality Solutions aims to equip independent hotels with tech resources and support services for increased profitability in this period of massive online penetration.

Launched in Singapore in 2016, Zuzu Hospitality Solutions manages its client hotel’s pricing and online distribution. It works with independent hotels across the spectrum, typically two- or three-star hotels with 40 to 50 rooms, and owned by an entrepreneur who is very much focused on operations and guest experience. “We deliver professional behind-the-scenes yield management services that a chain hotel would provide but do not require them to give up their independence or hotel brand,” Mr. Vikram Malhi, Zuzu co-founder and -CEO with Mr. Dan Lynn, explains.

“We are the chain for independent hotels,” Mr. Lynn, adds. “Small players do not have the financial clout or scale of a big brand, and have to rely on expensive travel agencies to make their presence felt. They work harder to achieve key business objectives and run the risk of not taking care of the core of their business: hospitality.”

The duo started out in Indonesia in 2016 and has expanded into six markets since: Singapore, Malaysia, Indonesia, Thailand, Australia, and Taiwan, managing more than 1,000 hotel partners. It saw a fivefold growth in size in 2018, and expect similar growth rates this year.

“Currently, technology players offer one or two components of the full technology stack needed by a hotel. Our holistic all-in-one hotel operating system delivers key technology components needed to optimally manage operations, online distribution and revenue for a typical independent hotel.”


Interest and Opportunity

Both Mr. Malhi and Mr. Lynn worked previously with online travel agency Expedia where they saw independent hotels struggle to compete with the big hotel chains on technology platforms. “The internet created so much transparency on the range of options available with real-time prices that hotels needed to be much more on top of updating prices and availabilities through these channels more so than ever,” Mr. Lynn explains.

“The big hotel chains were spending millions building dedicated revenue management teams as well as complex IT infrastructures. This development risked squeezing out the independents who did not have the same resources to compete. If you were an independent hotel hiring an in-house revenue management team and buying different software products, it would just cost way too much.”

The situation provided the duo with a combination of interest and opportunity. At Expedia, they scaled the business up 20 times in gross bookings, and market coverage from two to 13 countries across Asia.

“We realized that the majority of the bookings on online travel agency (OTA) platforms go to branded chain hotels even though they make up a small portion of the overall number of hotels. The chains have invested in technology and resources to optimize on OTA platforms while independent hotels lag in those areas as they cannot afford to invest in technology and expertise.

“We realized there’s a need for someone to help the independent hotels be better at managing their online distribution and revenue.” That someone is Zuzu Hospitality Solutions. 

Currently, some technology players offer one or two components of the full technology stack needed by a hotel. Zuzu's holistic all-in-one hotel operating system delivers all the key technology components needed to optimally manage operations, online distribution and revenue for a typical independent hotel, Mr. Lynn claims.


Path Plan

Zuzu is owned by its founders, team, and VC investors, which have brought in about US$10M in capital to date. They take a revenue share for delivering their service to partner hotels. The company is currently contribution margin profitable, that is, more than covering their variable costs with the revenues they generate. At the same time, it continues to invest in building technology.  

Partners hotels are asking Zuzu for help in other service areas such as integrated payment gateways that will simplify their operational processes. As the company delivers these, additional profit centers will develop and grow.

Mr. Malhi reveals that they plan to ramp up business in a few more big markets in Southeast Asia, adding that there are close to 60,000 hotels in Southeast Asia, about 93 per cent of which are independent, which makes it a large underserved market. “Our biggest focus for the next six to 12 months is scaling our sales team to introduce our offering to more hotels. Concurrently, we are investing into building more automation into our technology layer, to make things ever simpler for our hotels and ourselves.”

“The biggest challenge independent hotels face today is to take advantage of the growth of online penetration of travel, because they are not good at leveraging online sources due to lack of technology and resources,” Mr. Lynn points out. “This is where we can help independent hotels optimize their online distribution and revenue management.”

“Ultimately, our vision is to empower the world’s independent hotels to thrive. There is so much we can do behind-the-scenes to lift these hoteliers to higher levels, and there are more than 600,000 independent hotels globally, in literally every country in the world,” Mr. Malhi adds. “Ultimately we’d like to help a large portion of these hotels to be the best they can be.”