Euromonitor International Interview Series: John F Davis III, Chief Executive Officer of Room Key

Euromonitor International is pleased to present an interview with John F Davis III, Chief Executive Officer of Room Key. Roomkey.com is a hotel metasearch engine created by Choice Hotels International Inc, Hilton Worldwide, Hyatt Hotels Corp, InterContinental Hotels Group Plc, Marriott International Inc and Wyndham Worldwide Corp and launched in 2012.  [Editor’s Note:  This interview was conducted on September 9th 2013 when Room Key was live for 14 months.]

What is Room Key?

Roomkey.com is a metasearch engine founded by six of the world’s largest hotel companies. They founded it for three reasons:

1. The hotel companies didn’t necessarily like the way that their product was being presented on other travel websites where the product is highlighted with the words “cheap rooms” and “low cost”. They have really nice hotels and having them advertised as being cheap is not what they had in mind.
2. The hotel companies aren’t enthralled with the distribution costs of other websites.
3. They also didn’t like that they lost contact with the actual guest because the guest is going through a third party. They are in the hospitality business. It’s in their DNA. They want to have a one-to-one relationship with the guest. Having someone between them does not allow them to do or provide the services to the level that they would like to.

For the consumer, the website offers a different experience. It’s a very simple website, much like Google. Google has one line and it’s easy to figure out what to do. Room Key is modelled off of that. Our website offers ease of use. It offers trust, because you are working directly with the hotels. The transaction is actually occurring with the hotel companies themselves, so the guest receives the confirmation from the company, not from Roomkey.com. The guest also doesn’t prepay when using Roomkey.com for regular bookings (unless it’s an advertised pre-sale price and then you would need a deposit). It’s very simple to make changes—just call the property. Furthermore, it’s the lowest published rate, guaranteed by the hotels.

How is the Website Currently Being Marketed?

We’ve been up and live for 14 months—we went live in June 2012. The plan all along was to use pop under interstitials targeting exit traffic from the founders’ websites. This was the runway to get the venture off the ground. It was a low-cost way of building name identification and brand awareness. If people keep seeing our name enough, hopefully a number of them will remember us and come back directly—and we are seeing this beginning to work. We are off the runway and in the air. We are just about break even after 14 months, which in this space is really unheard of.

This type of marketing does provide a unique advantage to us, and it constitutes the majority of traffic we see. We’re a start-up, and we’re taking advantage of that exit traffic. We didn’t have enough critical mass in inventory at the beginning, so we spent very little on marketing, but now that we have stronger inventory (we went live with 23,000 hotels and are now up to more than 100 recognised hotel brands in 159 countries with 75,000 hotels), we will start marketing directly to consumers to get direct traffic next year.

How is the Website Performing?

The monthly site impressions are up 60%. The direct traffic is growing. The interstitial appears to 17 million people a month. The direct traffic is 10 times higher than that of other start-ups in our space and continues to grow. The biggest metric for me as CEO is that we are just about break even, which is great for a start-up in 14 months. Our conversion rates are up 100%.

Can you Please Explain the ADvantage Program?

It’s a unique hotel-only advertising marketplace that allows hotels to choose when and to whom their hotel properties are presented. It was created early this year. In search engines or other websites, hoteliers are forced to compete with the OTAs and other well-funded players. Because it’s limited to only hotels, our ADvantage Program allows them [hoteliers] a relatively low-cost place to market their properties to highly qualified shoppers. 75% of our customers are business travellers. Having a site that is focused mostly on business travellers is very interesting to hotels for their advertising dollars. The lead programme is Sponsored Listings, in which hotels can participate by purchasing on a pay-per-click basis, and hoteliers do not pay a commission for rooms booked through Sponsored Listings. Lastly, we offer a suite of display advertising options designed for brand-level marketing.

What Does the Future Hold for Room Key?

First, we hope to start advertising early next year to build direct traffic. Second, we think we have an opportunity to incorporate pieces of proprietary hotel content, specifically how we may interface with their [the hotels’] frequent guest programmes. Third, hoteliers are getting more and more requests from online distributors for connections. The hotels can’t manage all of these requests. As a by-product of what we are doing, we are building a comprehensive caching engine that will hold rate and availability data for all of our hotel partners. We want to build a plug-in that will allow distribution companies to come directly to Room Key and have access directly to our hotel inventory. We think that’s a great opportunity for hotels and distributors.

There is certainly a long-term commitment to the venture by the founders.

What do you think about the Expedia/Travelocity deal and Booking.com powering OdigeO’s websites in Europe? Does consolidation in the OTA space help or hurt Roomkey.com?

I don’t think either move has an impact on Roomkey.com. I think it’s a natural progression of where the online travel industry is going after about 15 years. For me, I just keep going back to the hotel industry to make sure that they understand how important it is that they are selective in which distribution channel they put their product out to. Just because someone starts a website to sell hotels doesn’t necessarily mean that you have to provide your product to them. If you do, then you should have a say in what the price is and what you are willing to pay. Previously, that hasn’t been the case.

Do You Think Room Key Could Become Big Enough to Put Pressure on the Remaining OTAs to Negotiate More Reasonable Financials?

I don’t think it’s going to be the role of Room Key to put pressure on the online travel agencies. It’s the hoteliers making the decision themselves on where they want to put their inventory and what they are willing to pay for that—it will be up to the hotels individually. I don’t think it’s going to be Room Key. We certainly hope to be able to create a low-cost distribution channel—an alternative for them. Until we can continue to grow, though, you are not going to see a hotelier, whether a chain or independent, turn off any of these major distribution channels because they need those heads in the beds. Yes, there are high costs associated with it but it beats nobody in the bed. You are going to see hotels continue to use multiple distribution channels, and as we grow, hopefully, they become savvier about how much each distribution channel costs them.