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Accustomed to the “connected lifestyle,” users in Southeast Asia have high expectations from all digital products, including travel. While this might be a tall order, it also presents a plethora of opportunities for travel companies that are poised for recovery post the pandemic.
Shirley Lesmana, chief marketing officer at Traveloka and Amit Saberwal, the CEO of RedDoorz, discussed these opportunities and the technology shifts driving Asia’s return, as they spoke with Skift’s Senior Hospitality Editor Sean O’Neill at the Skift Global Forum in New York.
Watch the full video of the conversation below and you can also read the transcript to understand where Asia is headed and how the app-first strategy has been effective in driving loyalty.
Sean O’Neill: Whoa. So Southeast Asia represents a tremendous opportunity for the travel sector, and we’re going to hear today from two superstar companies from the region, Traveloka and RedDoorz, about what the opportunities are in Indonesia, Singapore, Vietnam, and the Philippines. So Shirley, I’d like to start with you. Thank you for coming to Skift Global Forum.
Shirley Lesmana: Yeah. It’s such an honor to be here, meeting hundreds of people in the industry.
O’Neill: We’re very glad you made the flight from Jakarta to be here. So maybe to start with you, what is the big picture opportunity in Southeast Asia? Assume we’re going to come out of the pandemic over the next decade.
Lesmana: Yeah. It’s such an honor to be here, meeting hundreds of people in the industry.Yeah. So Southeast Asia is a very exciting region with growing middle and affluent class people there. We have more than 200 millions of middle class populations there. And what is quite unique about Southeast Asia, it is a mobile-first market. The internet… sorry, the digital market or smartphone penetration is above 100 percent. So it’s quite interesting that one people can have more than one smartphone or phone on their, let’s say, wallet. It is quite interesting as well that Southeast Asia is among the market with the highest social media consumption. So you may imagine this is a market that is essentially mobile-first. At first there is, I would say a tall expectation towards digital products.
Pandemic has not just accelerated the penetration, but as well heightened the expectation toward digital product. They want something that is seamless because even before pandemic, they are really accustomed to connected lifestyle. So that’s the similar expectation that is given to travel product. They demand everything to be available in one single platform. So yeah, that’s the opportunity in Southeast Asia. We’ve seen that with the borders being open earlier these years. This year, the recovery is good, especially on the domestic side. Probably I can tell a little bit more on our conversation. Yeah.
O’Neill: Okay. Yeah. We’ll put a pin in that and come back to it. So Amit, thank you for coming to Skift Global Forum. I’m really grateful to have you here.
Amit Saberwal: It’s my pleasure.
O’Neill: Maybe what is your view about… I know you’re passionate about trying to educate the market on the potential for Southeast Asia. So what would you call out?
Saberwal: Yeah. No, I think Southeast Asia is perhaps the most incredible and exciting region in the world today. 600 million young people, highly ambitious. Indonesia, the largest economy, getting money both from India, from China, and from the US. So there’s a lot of money coming into the region. And as Shirley said, I think for Instagram, Indonesia is the number one market. And for Facebook consumption on a daily basis, I think the statistics is that Philippines is the number one market. So very exciting region. Lots to look forward to. In fact, it is entering what is known as the golden age that really means is that from now to 10 more years is going to be exactly where China is there today.
O’Neill: Cool. So what I’m hearing is compared to other emerging regions of the world, mobile-first, mobile-eager, aspirational middle class is bigger proportionally than many other places, and faster-growing. So let’s talk about your brands in particular, and we’ll start with Traveloka. Before the pandemic, Traveloka was a travel price comparison search engines for Indonesia. And then during it, you expanded, and now you’re a travel and lifestyle app with about 20 different products and services serving multiple markets.
O’Neill: So why did you make that shift?
Lesmana: Yeah. Essentially this is something that we have discussed in the past two days because typical people will travel probably twice, three times a year. Then the question is with this application, how can we keep them coming back? How can we increase their stickiness? So then we expand our ambition. First is to enable that mobility. And next, we want to enable people to realize their lifestyle aspirations. Travel is still the big part of it, but we realize that how can we create that happiness. How can we create that stickiness toward the brands? So we expanded our offer. So first within the travel to ensure…
O’Neill: Can I interrupt for a second? Maybe if we call the video that shows the app running in the background while you talk. So sorry. Go ahead.
Lesmana: Sure. So the first is for us to ensure that we are able to accommodate key products in travel both that are complementary, for example, travel insurance or buy now pay later because payment is one of the key infrastructure that we need to solve in Southeast Asia. Then after we complete that ecosystem in travel, then the next one is how can we engage with our consumers? Because we have 100 million downloads. How can we engage them in our application? Then we launch this experience product. It’s not just attraction. But for example, if you want to book your weekend activity playing with your kids in the playground, or let’s say after your, let’s say long day at work, you want to have some massage or spa, then you can book it with us. And that has been powerful for both acquisition and as well retention to ensure that although that probably people will travel just three or four times a year, people will still be sticky to our platform.
Plus, in travel, we see how can we increase the frequency. So one of the answer is staycation, and actually, that was one of the, let’s say use case that was prevalent during the pandemic and has high staying power up until now.
O’Neill: Nice. So the one big advantage that I hear out of that is traditionally, online travel agencies… this is something I’ve talked about with Amit before because he came from MakeMyTrip as an executive… that it’s very hard to have retention. So once you’ve got people multiple touch points after work, they’re ordering something, then you’re increasing the brand recognition, they become more loyal to Traveloka, which reduces things. You mentioned about payments. And so we’ll come back to the payments point. So Amit, during the crisis, you also expanded your operations. So before the pandemic, it was the classic branded budget hotel with the RedDoorz. You can show Superman. You got the t-shirt here. And then you have branched out. You got build a lifestyle brand and another brand. Tell us about that.
Saberwal: Yeah. No. So let me just explain to the audience what we do. We have 3,515 to 25 rooms under our franchise. It’s RedDoorz and some allied brands. And the way we look at our business is that we are hospitality 3.O. We use our tech to manage other people’s assets. Asset-light, but lots of hotels. Small format. Think 7-11.
O’Neill: So small format is up to 30 rooms.
Saberwal: 15 to 30 rooms. I mean, some are larger. But then I think the majority is about 25 to 28 rooms. And then what we figured out, that our end consumers were actually the property owners. And so if they were our primary consumers, rather, maybe we should give them different options because in a micromarket, how many RedDoorz do you want to put before the owners start getting antsy? And so we started introducing brands which were close enough to be in the budget segment, but were also a little more lifestyle, little more expensive, give consumers more options. So that is something which we did because we figured out very early that the only thing we could control was to try to get new hotels on board. We couldn’t do anything about the occupancies or the borders, but we could add to the property count. And we doubled the property count during the pandemic.
O’Neill: Wow. Doubled the property of count during the pandemic. Across the whole group.
Saberwal: Across the group. Yes.
O’Neill: And so one advantage that we were talking about backstage, as you said that for RedDoorz, because it’s a small footprint, 15 or 30, you can get into all sorts of different neighborhoods. And then it becomes a fulfilling cycle. So every time you add another property, people just start thinking about, “I’ll go book a RedDoorz.” If we could call, there’s a slide. It’s a red slide for RedDoorz about you have an incredible… It’s 75 percent. Now I know I had said hospitality 3.0. Maybe we can go to the next one. You have a direct booking of up to more than 70 percent for booking direct?
Saberwal: That’s 75 percent direct and no performance marketing.
O’Neill: No performance marketing.
Saberwal: No performance marketing. And the mother of all A/B experiments happened when the pandemic hit. And I think we spent and wasted a lot of cash before that.
O’Neill: Yeah. This is something Brian Chesky, Airbnb, had made a similar point.
Saberwal: It could be. In our situation, we figured out our consumers would keep coming back to us because we are the accommodation brand. I mean, we are like the Marriott, but for the small hotel, or the Singapore Airlines. So we create this end supply. Consumers are loyal to the supply. They figure out a way to come there. And so yes, 75 percent direct, incredibly high repeat grade, and many use cases from graduations, funerals, leisure, business, and there’s a property close to our consumers to make sure that that gets delivered.
O’Neill: Okay. Yeah. And this points out some of the statistics that you were just mentioning. And maybe we can go back to the one that we just had. Sorry. For hospitality 3.0. So what is Hospitality 3.0, Amit?
Saberwal: This is, in our opinion, I think, I used to be a hotelier before I joined MakeMyTrip. So MakeMyTrip is a online travel company from India. So hotelier, and initially, people would manage their own hotels. And then come along the hotel management companies. And then other people’s asset, hotel management company, then the hotel management company put the GM, and then GM builds the team, and then they operate. So our opinion is 2.0 and 2.5 is and Booking and Expedia and Agoda and Traveloka come along. And they solve a part of the problem on the distribution. So 3, 5, 10 rooms get sold on a daily basis from these platforms, but the small hotel owner has a bigger problem. And then we say, okay, 3.0 is where our tech and their assets, and completely asset-light, no GM in the property. It works very well for a specific kind of property. Most of the hotels don’t have any food and beverage, no swimming pool. It’s just basic accommodation, $15, $20 a night. And so that lends itself well to scale, and that’s what we consider ourselves to be.
O’Neill: Okay. Thank you, Amit. So Shirley, one thing that really surprises me about Traveloka rise is the conventional wisdom. Is that the Trip.coms of the world, Booking Holdings, Expedia Groups, they cast a very long shadow and eat up a lot of oxygen, and it’s hard for new brands to come along. And yet, Traveloka has just really blossomed, and you’re a chief marketing officer. So how did you manage to do this?
Lesmana: Yeah. I think the key is understanding the diversity of Southeast Asia landscape. So when we’re talking about Southeast Asia, on one end, we have Singapore, developed economy. And then in between, we have Indonesia, Malaysia, and then we also have Vietnam, a very vibrant market. Each of them have different local context nuances. And I think the key is about being able to customize the needs of each of the local here, the balance between, let’s say having world-class solutions with some, let’s say local context personalization. So we actually have I think seven languages on our platform. So it is available, of course, in English. We have it in Indonesian. We have it in Melayu. We have it in Vietnamese and Thai language. And that makes up essentially 80 percent because in Southeast Asia, the English literacy is, let’s say varies from one country to another. And secondly, it’s understanding the complexity of each of the market. And I think I would like to bring in about payment.
O’Neill: Yes. Let’s talk about the payment. It’s very different than from here.
Lesmana: Yeah, because payment is the last mile. That’s probably the most painful touch point from the consumer’s perspective. If they can just don’t pay that, that’s better. But when we’re talking about Southeast Asia, we have sizable under-banked population. So the-
O’Neill: Very little credit cards, under-banked.
Lesmana: Correct. In some countries, it is probably single digit or high in 10 percent to 20 percen, for example. Then the question is how can we cater to those consumers? They have this increasing buying power. They are eager to travel more. And basically they’re very eager to adopt those digital platform. So how can we make this last mile much more seamless and less painful? So the first one is we have 30-plus payment solutions on our platform. So just to give you some context, the most popular payment solution in Asia is bank transfer. In Thailand, we enable the payment through convenience store. And even in Philippines, we also enable the payment through pawn shop. So that’s the first step.
O’Neill: So just to spell that out, you might book on Traveloka a trip, I’m going to go on Singapore in a ferry somewhere, and then you go to local 7-11 and pay for it.
Lesmana: Correct. So that’s the first one. It is about enabling to the touch point of their preference. But then, still, it is not as seamless. You need to rush to 7-11, let’s say to complete your payment. We have payment timeout, 15 minute, one hour. That’s still painful. Or let’s say if you have mobile banking application, you still need to leave the application. So how can we make this payment solution even more seamless to increase the conversion rate? So then the next solution, there are two actually solutions that we bring in. The first is buy now, pay later.
So in Southeast Asia, in some markets, we have payday every 25th or the 1st, let’s say of the month. We will see some seasonal pattern in it. So some people that are cash-strapped, they have some, let’s say difficulty to manage the cash flow. So that’s where the buy pay later come in. And that has been very effective. One is not just to enable them to transact during those low cash flow time, but as well the stickiness to our platform. And secondly is direct debit because credit card penetration is quite low. So how can we enable them to transact right away, even if they just have a debit card? So we partner with some of the large banks in Southeast Asia. So it’s with debt enablement on direct debit. Basically that was very effective to increase the conversion rate.
O’Neill: And proof of how successful this is, so in Thailand, you entered the market, and only a couple of years later, you’ve become the number one most downloaded app on the app store, you say. Is that right, for travel?
Lesmana: Yeah. Correct. So we are now the most popular travel booking platform in Southeast Asia at total, and market leadership in Indonesia, Thailand, and Vietnam.
O’Neill: Okay. All right. Some of the other players that have been on stage need to step up their game if they want to compete. So Amit, one thing about changing your business model by expanding it is now you had been very asset-light, and now you’re taking on more of the management. So how do you balance doing both at the same time?
Saberwal: Actually, we decided to just be asset-light. I think part of the pandemic realization is self-realization, who we were as a company. We are doing so many different things. We figured out asset-light, short stay, that’s our core strength. That’s what we’ll continue to do. But I must add that during the pandemic, we also started monetizing the app. And today, for every dollar which we make from our core business add-ons, we make 50 cents.
O’Neill: So for your revenue model, the upselling and cross-selling is a critical component?
Saberwal: For us, yes, because it was a question of survival because we had to make money, and that was the best way to make money without squeezing our property owners. And then we started selling a bunch of stuff including paid loyalty. And now that’s about the 35 pecent of our take rate comes from add-ons.
O’Neill: Okay. So 30 percent of your take rates on a typical booking, 30 percent of the money that you get as flowing to your bottom line is coming from an add-on of… What would be another sample product you might offer?
Saberwal: So insurance, a short stay platform fee, early check in, lay checkout, a see a short stay. We were a branded player, so one would imagine that if we put a brand out there, consumers would expect the brand to deliver. But we put a product, we said, “Hey, folks. If we don’t deliver on our brand promise, we will give you a full money back, but for that you’ll have to pay us a few cents.” And that had an incredible take up. So we had to experiment with these corner cases, and collectively we have 11 add-on products. Each one of them adds a little bit, but together they make 35 percent of our take rate.
O’Neill: And you’ve been insulated from the Chinese tourism not being in Southeast Asia and rest of the world right now partly because you have a huge domestic audience and very narrow booking window. You say half or same-day bookings?
Saberwal: 50 percent of the bookings happen on the same day.
O’Neill: That’s incredible. And so that presents some interesting inventory management issues. Let’s go to some audience questions. So one is how is RedDoorz different from Oyo, which is the branded booking in India? Is it the same business model? And maybe we’ll refer to the classic RedDoorz brand for this.
Saberwal: Yeah. Well, it’s a great question. Getting asked about it all the time. I think we are all trying to solve the same problem. It’s that we have different approaches to solve the same problem. I think I can talk about myself. We are building a company which is built to last, has incredible consumer and owner trust, incredible culture, and is one of the last people or last company standing in the space in our region. So it’s different. A car is a car. A Toyota is a car and a Mercedes is a car. They both do a similar job.
O’Neill: Okay. So Shirley, are there any updates in Traveloka’s partnership with Expedia and how important that is to your business?
Lesmana: Yeah. We have, I say partnership with Expedia and as well some other players as well. We want to ensure that we can deliver to our consumer base because let’s say some other players, they have strength in probably different area where let’s say we might can get additional help on. Yeah.
O’Neill: And what are some creative ways you do marketing in order to attract consumers? You have a team, I think you mentioned, specializing in TikTok and…
Lesmana: Yeah. So actually, we centered our marketing strategy around our platform because we see that the app-first strategy has been very effective in driving the loyalty, and we are also able to cater the highly valuable ones even more. Then we complement that with the paid and organic. So as a reference, of course, I’m spending in Google, Facebook, et cetera. It’s there. But we also have I think, pretty strong organic channels in a sense that we have seven millions of followers on our social media accounts. That has not just been one-way direction, but in a way, it feels like a community in a sense that it enables us to engage with our consumers at scale with pretty efficient marketing spending. So I think in general, because we are a digital platform, we have that advantage of using the first-party data to engage them to ensure that we can give them the personalized recommendation. And that is also being used, let say, to do some testing, for example, between the first-party data with our marketing spending, with message personalization, the offer management. So at the end of the day, we can improve this customer lifetime value.
O’Neill: Okay. Great. We have a question here, Amit. Do you think there’s an opportunity for the hospitality 3.0 to expand to the US and Europe? Or is it better tailored for Southeast Asia?
Saberwal: Yeah. I think it’s an emerging market solution, and there has to be a lot of scattered supply. If you don’t have a scattered supply and you don’t have owners who are not fully motivated to run it themselves, then it’s not the perfect ingredient for success. So my belief is it’s an emerging market solution, our kind of solution. It could work in some other format in the more developed markets, but for now, I don’t think we are going to get there.
O’Neill: So I could imagine trip.com, Booking Holdings. Booking Holdings already has developed a Kayak hotel. They could get into the branded budget thing. They might even buy an Oyo or buy RedDoorz. Do you see that as a competition for… Do you see online travel, your old friends at MakeMyTrip getting into competing on the actual hotel branding?
Saberwal: I don’t want to put Shirley on the spot, but it didn’t work out too well when they tried to do it. I mean, Traveloka tried. MakeMyTrip tried. Goibibo tried. It’s a question of core versus non-core business. Our core business is to solve the hospitality owner’s problem. And then it’s very different from a distribution kind of setup. And actually, we would encourage more distribution. It’s actually good for us.
O’Neill: Okay. Thank you. Shirley, we have a question. What’s the biggest misconception about Southeast Asia’s emerging middle class?
Lesmana: Okay. They are socially active. So I can share some more. They are very socially active. It’s all about, let’s say, giving them inspiration. It’s about luring them with, let’s say some images. So it is very important to win those emerging middle class affluent. It’s about, let’s say create a brand that would not just one, resonate with them. We talk to them in the same language, in a sense. And for Traveloka, we have a, let’s say our consumer baseline is on the younger demographic side. So it is very important to always stay up-to-date because for them, from digital product, there is a heightened expectation. It’s not just about booking. But even they want something much more in the earlier face of the journey on the inspiration to ensure that those travel booking platform is their go-to, single source of truth, for example.
I can give you some examples. In the pandemic, we’ve been able to successfully, let’s say promoting new destinations, hidden gem, which is I think good for consumers. Now, they have options. And at the same time, giving them the curated inspirations, which at the same time, that is also good for the local economics because it exposes, let’s say because Southeast Asia, let’s say the top destinations, you might be able to name, like Bali, Phuket. But now, with some efforts that we are doing, we are able to, let’s say raise the booking rate for those hidden gems. For example, like Vietnam, we see some of the destinations are on the rise. Or Indonesia, we’ve seen… Those are really beautiful destinations. So there is something that works well for both consumers side and supply side as well.
And secondly, there is a heightened expectation about being the single source of information for the consumers. So imagine that for Asia, yeah, the recovery rate is a bit, let’s say…
Lesmana: Yeah. So then one of the, let’s say pain point is about navigating through those different travel regulations. That is very dynamic. And with that heightened expectation, they demand a digital platform to be able to give them, let’s say there’s very concise information. So we’ve seen that when we launched that travel safe page, we call it, travel safe page, so essentially you just enter, “Hey. I’m from Singapore, I plan to travel to Korea. So what are the documents required for me to travel?” It works really well. So I-
O’Neill: That’s great. So they’ve come to rely on Traveloka as a truthful planning and it’s at a higher level of the funnel, which is a… So we’re going to have to end it there for time, unfortunately. But thank you so much, Shirley, for telling Traveloka’s story. And thank you, Amit, for joining us for RedDoorz.
Saberwal: Thank you.
Lesmana: Thank you.
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