Hotelrunner builds bookings business as Turkey's tourism industry crumbles

Hotelrunner builds bookings business as Turkey's tourism industry crumbles
Hotelrunner IT remains upbeat that bookings to resorts such as Alanya will improve.
By Carmen Valache in Istanbul August 24, 2016

Turkey’s tourism industry has suffered from a perfect storm of external and internal pressures this year, with arrivals down by 12.5% y/y in the first half-year as a result of Russian sanctions against Turkey and security concerns, something likely to worsen after the failed coup in July. But every crisis is an opportunity, and a small Istanbul-based online startup called Hotelrunner has seized the chance to grow its business. 

The company sees itself as the ’Facebook of hotels’ because it allows hotels without an online presence (or profile) to get one free of charge through a single multifunctional dashboard. It has positioned itself as an intermediary between tourism agencies and hotels, and has developed an advantageous pricing system to woo hotels to subscribe to its services, and tourism agencies to strike partnerships with it. 

Hotelrunner took advantage of the fact that the Kremlin’s sanctions only applied to traditional tourism agencies in Russia to partner up with Ostrovok, a Russian online tourist operator, which thus enabled Russian tourists to still come to Turkey. Russia has since lifted sanctions, but Hotelrunner continues to use the momentum that it garnered in the first half-year to fuel its expansion. “We are hoping to reach a valuation of $1bn in the future and to attract a fourth of the 4.5mn hotels in the world to our platform,” Arden Agopyan, Hotelrunner co-founder and CEO, says about the company’s ambitious goals.

Agopyan is a staunch believer in the prospects of the formula he has come up with, and thinks that the company’s quick expansion to 21,000 subscribers (hotels) from 127 countries is proof of how scalable the platform is. “We work with over 125 tourism agencies, and we [take] onboard some 30 hotels per day for Ostrovok alone,” he says. A third of Turkey’s 20,000 hotels are among its subscribers already, spanning in size from large chains such as Ramada, Novotel and Sheraton to small boutique hotels.

“When we first started in 2012, we were one of a kind, but our model has since been copied by other companies, “ Agopyan explains, adding that he and the other co-founder Ali Beklen came up with the idea to establish Hotelrunner while working for IBM. “We used to travel a lot for work. And we realised during those trips that many hotels did not have an online presence. At the time, creating a website and managing online bookings required a huge upfront investment of some $50,000 in IT systems, which small hotels were unable to afford. So we created an automated dashboard that allows hotels to create a website, get connected to online tourism agencies and create social media platforms, all from the same account.” 

Market niche

The beauty of the platform is that all these services are free of charge initially, as Hotelrunner works on a commission basis only; when hotels get online bookings through their platform, Hotelrunner retains 1% of revenues in commission. Besides, the website is self-servicing and automated, allowing Hotelrunner’s small staff of 20 to interact with the tens of thousands of subscribers through online chat when they need IT support.

While the individual services it provides are not new, Hotelrunner’s main innovation is the idea to offer integrated IT solutions – website, account on and other online agencies, social media accounts and the possibility to contact partner tourism agencies – in a single, cloud-based platform.

Reaching potential clients in the cheapest way possible was also an innovation prompted by early budget constraints. “We have very low customer acquisition costs,” Agopyan boasts.

He acknowledges that small hotels without an online presence see the greatest benefits of joining Hotelrunner, and that this market niche has been the company’s focus.

The company is seeking to expand its physical presence beyond Turkey to service foreign subscribers and attract foreign investors. London and San Francisco are the next destinations for Hotelrunner’s foreign branches, the CEO says, although the company will continue to pursue clients from emerging markets such as India and Thailand.

As for domestic investment, Agopyan is upbeat about Turkish investors’ interest in tech startups such as Hotelrunner. “There are a handful of successful tech startups in Turkey at the moment, and investors normally know them by name and approach us if they are interested,” he says.

State of play

In contrast with most Turkish tourism operators, who are concerned about the state of the sector amidst the frequent terrorist attacks and in the wake of July’s coup attempt, Hotelrunner remains optimistic that the situation will improve.

“The state of emergency has caused many bookings to be cancelled, but life is slowly returning to normal,” a company representative wrote in an email to bne IntelliNews. “The security situation does not affect the daily lives of Turks or tourists, and should not prevent visitors from spending their holidays safely in the different destinations in Turkey, particularly in the popular beach resort of Antalya. The number of Russian tourists has been increasing.” 

Yet despite Hotelrunner’s optimism about the prospects of the sector, industry sources such as the World Travel & Tourism Council (WTTC) foresee a 3.2% contraction in the sector’s contribution to Turkey’s GDP in 2016; it currently accounts for 4.5% of Turkey’s GDP.

Sensitive to the plight of the employment-intensive sector, Ankara is mulling a plan to nurse tourism back to health, Turkish Tourism Minister Nabi Avci told participants at an industry event in Frankfurt in August. The official promised further government subsidies to tour operators, on top of fuel subsidies for airlines introduced in April. “We will work on seeing what else we can do, as we know how important this is for the industry,” he was quoted as saying, promising to unveil further details later in the year.

Anecdotal evidence suggests that Turkey’s tourism sector needs all the help it can get, as Istanbul’s historical centre of Sultanahmet was emptier in August than this reporter has ever seen it, including during slower months like January. Popular sights such as the Basilica Cisterns and Blue Mosque, which normally feature long lines of tourists waiting to visit them, were unusually empty, as were nearby restaurants and cafes.