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SiteMinder: Extending into Consumer Demand

AUTHORS:

Dave Yuan

Founder and Partner, Tidemark

Dave Yuan, Founder and General Partner of Tidemark, in conversation with Sankar Narayan and Dai Williams, CEO & MD and CGO of SiteMinder respectively.

SiteMinder Limited (ASX:SDR) is best known as the world’s leading open hotel commerce platform, ranked among technology pioneers for opening up every hotel’s access to online commerce. On top of being a publicly-traded, vertical SaaS platform servicing 33,000+ hotels in 150 countries globally, it’s a true pioneer and industry leader. From its roots in Australia, today SiteMinder has offices in Bangkok, Berlin, Dallas, Galway, London and Manila, and generates more than 100 million reservations worth over US$35 billion in revenue for hotels during a regular year. I had the fortune of investing in SiteMinder in 2013 and served at various times as board director, lead director and non-executive chairman.

SiteMinder exhibits many of the strategies that the VSKP advocates for. They integrated and surrounded a control point, extended their product towards consumers, and went from a single application to multi-product to being a platform. For their consumer extension, they ended up repurposing existing infrastructure to open new channels of demand—allowing a hotel to tap into customer segments that wouldn’t have been easily available to them without SiteMinder.

Sankar Narayan and Dai Williams brought their extensive work experience to this new company and have turned it into a global brand. Their success was hard earned, and strategically achieved. Really excited that they agreed to chat with me and discuss their extension into consumer demand.

This interview was lightly edited for brevity and clarity.

Dave: Sankar, Dai, excited to talk about our journey at SiteMinder. Let’s kick it off by sharing a bit about yourselves. 

Sankar: Hi Dave, my professional journey started in the US. After my undergraduate engineering studies in India and a graduate electrical engineering degree from the US, I spent a few years in Silicon Valley, before the rise of the big global software giants. I decided to pursue my MBA in Chicago, and then came to Sydney for what was meant to be a two-year stint before I returned to the Valley. That was 1995 and, needless to say, after a series of finance roles and then becoming the COO/CFO of Xero prior to joining SiteMinder three years back, I may have overspent my two years a little.

Dai: Hi there, Dave. On a similar note to Sankar, I came to Sydney for what was meant to be six months, and I’m still here nearly 15 years later. But that is where our paths diverge somewhat. Thirteen years ago, in my first job out of university, I joined a small, 10-person Sydney company called SiteMinder that was forging its way in the Australia and New Zealand hotel tech market. I made 50 cold calls a day and had a great time doing it. I have been with the company ever since, performing a number of roles from global sales and marketing leadership, regional leadership and building out new products and offerings, including Demand Plus and SiteMinder Pay.

Dave: Tell us how SiteMinder got started, the problem you were looking to solve, and the footprint today.

Sankar: SiteMinder was founded by Mike Ford and Mike Rogers over 15 years back to solve the problem of hotels connecting to multiple online channels, to keep it all aligned and remove friction and stress for hotels. While we have added a lot more functionality over the years, the core capability of connecting hotels to consumers in the online world still remains for us and today we are the world’s leading open hotel commerce platform. We have a very large footprint with 33,000+ customers from over 150 countries around the world, and we service hotels of all sizes. Our purpose is to open up every hotel’s access to the world of online commerce and, with more than one million hotels globally, I can say that even after 15 years we are just getting started.

Dai: An interesting note on this is that Mike Ford’s primary exposure to the problem was via a backpackers hostel he was involved in. The product, and subsequently the company, was built to democratize access to the online world for accommodation providers. Most tech vendors start with global hotel chains. We started with hostels and motels and this ethos of openness and democratization of accessibility still pulses through the company today. It’s the very essence of our brand.

Dave: SiteMinder’s core product is a channel manager, similar to that of Olo in restaurants, that sits on top of the PMS (property management system). The PMS is super strategic—it’s the “control point”—why didn’t you build the PMS? 

Sankar: The PMS market is super fragmented. Many PMSs are mom and pop vendors with sometimes older software. Additionally, hotels experience a lot of friction when they migrate to another PMS.

So, it was a much better model for us to partner and integrate with PMSs, and today, with more than 400 PMS partners, we integrate with more than any other provider. By partnering with PMSs, rather than trying to rip and replace them, we’ve had the chance to focus and build world-leading expertise in distribution and other ecommerce capability, while our partner PMSs work with hotels on the operating side. For hotels, this model has meant that they have greater choice to build the best tech stack for their individual property. So, it’s a win-win for all.

Dave: Oh, interesting. In some ways it was a lot easier to get hotel scale and density integrating vs replacing PMS. In our VSKP parlance, this is the canonical “integrate and surround” strategy. Was it tough to get the PMS to cooperate in the early days?

Dai: In a strange way, in the early days it was actually easier than it is today. There was a bright new world emerging for hotels that were accessing online travel, and PMSs realized very early on they were not equipped to deal with connecting to the never ending list of consumer and corporate channels that hotels wanted to connect with. Not to mention the subsequent maintenance of those connections. It was a no-brainer to give the hotel what they wanted. PMSs love working with us because we help solve a core problem for our mutual customer. Today it is much harder for a new entrant to the market. As a new entrant into the market today, you have to convince the PMS why they should connect to you as well as those they already connect with because the PMSs have helped solve the core problem with SiteMinder and a handful of others already. This is a significant moat around our business.

Dave: That’s an operationally intense business. Tell us why you thought you could build out productized integrations that small hotels could handle all across the globe.

Sankar: The challenge from a global perspective was that the technology platform couldn’t just have the benefits of global scale—we knew it also needed to be localized from a regional perspective. That challenge was significantly harder for hotels that were trying to migrate their PMS at the same time as managing their deep operating inventory around the world.


Dai: As Sankar mentioned, the secret sauce to scaling the company wasn’t just connecting to the large global players, but the myriad of small, localized and niche PMS providers. To make the go-to-market economics work, we needed to—in the majority of conversations—be able to plug into a hotel’s existing system and make that hotel’s life better without needing them to rip and replace their current PMS. We also made the actual connection part scalable and easy via a very easy-to-implement API that PMSs of any size can build to, and this has been essential on our road to have many hundreds of PMSs plugged into our platform.

Dave: Global is a really interesting point. SiteMinder went global super early in its history, launching in Southeast Asia, Europe and the US by $10M ARR. Why was that?

Dai: Being an Australian-headquartered business, we had to embrace expansion sooner than most because, frankly, our local hotel market was not very big compared to other parts of the world. With big ambitions for the business, we took our product, localized it (our platform is now in eight languages) and tweaked our go-to-market approach accordingly for each region. For example, in Europe, we run a largely inside sales model, but in Asia it is predominantly field sales, and we expanded early. The vertical tail wind is that travel is global by nature. So, helping hotels access both global and local demand matters, and we do this better than most.

Dave: Tell us about launching the UK office. What were some of the key challenges and lessons?

Dai: A couple of things really stand out from that experience. One was the importance of seeding the new office with some established SiteMinder employees, which was absolutely essential from a cultural perspective. New offices can quickly go off the boil without the company's culture being ingrained, especially the culture of resilience. The other was understanding how important localizing your message, product, and experience was. Even though Australia and the UK share many similarities, when it comes down to it, the Aussie style of business didn’t quite work with prospective hotels—and, quite frankly, with some of our early staff. So, we made an active effort to tweak and change the message, the product and the experience for both hotels and our people. We were still SiteMinder, but we were SiteMinder for the UK.

Dave: Once you had this global network of PMS integrations, what could you offer a hotelier? What could a hotelier do differently? 

Sankar: We offer hotels the largest ecosystem in the industry, consisting of PMSs, hotel applications and direct and indirect demand channel integrations, as well as hotel consultants. So, once a hotel is connected to SiteMinder, they not only gain access to our commerce platform but to 1500 of the best-ranked hotel software distribution channels and experts around the world.

The breadth and depth of our channel connections is particularly unique. While most connect only to the big global channels, we also allow a hotel to target specific groups of potential customers in any corner of the world. For example, if a hotel in San Francisco wanted to target outbound Chinese tourists, with a click of a button they could do that by adding Trip.com as a demand channel. If a hotel in Switzerland wanted to target travelers who love to ski, they could do that too.

By integrating to the PMS, which is a hotel’s system of record, we can give the power of commerce to every hotel. We can provision a direct booking solution, market and competitor insights, meta distribution, access to the Global Distribution System (GDS) and payment solutions. Additionally, hotels can access a full range of applications that are designed to assist hotels with conversions and enhancing the guest experience. These vary from CRMs, to revenue management systems to companies that enable keyless door entry.

Dave: What is direct booking?

Sankar: Direct is a booking that is made directly with a hotel and today that’s typically online, on the hotel’s website. When a consumer makes a hotel booking through a third-party, such as an OTA, the hotel does not always receive that guest’s information and therefore loses the ability to communicate directly with that guest and market to that guest in future. When a consumer makes a direct booking, the hotel receives all of that guest’s information, is able to build that relationship, and is able to enhance that guest’s experience that much more effectively. While hotels need OTAs for the mass visibility that they provide, direct bookings also generally provide much higher margins for hotels.

 

Dave: Why did you get into metasearch?

Dai: Meta forms another channel of demand for hotels, because it’s how many consumers make or at least start their hotel bookings today—through Google, trivago and Tripadvisor. We call our meta offering SiteMinder Demand Plus, and it’s what drives additional bookings for hotels including providing visibility on, and bookings from, metasearch channels. It is almost impossible for an independent hotel or small group to effectively compete in the meta world because the model is Cost-Per-Click, not Cost-Per-Stay, and the other companies in the auction (i.e. major OTAs) are exceptional at driving traffic from meta sites and generally view the cost of the guest vs their future LTV with their brand, whereas hotels tend to look at the cost vs the revenue for that booking. That is a challenging game for most hotels to win. 

We make meta really simple for the hotel by allowing them to opt into a success fee model on the consumed stay (i.e. no risk for them) whilst we drive more traffic and bookings than they could because of our bidding sophistication and scale across thousands of hotels. This is a win-win-win for hotels, guests, and SiteMinder.

Dave: That’s a big deal! SiteMinder has gone from a subscription SaaS relationship to, with SiteMinder Demand, finding guest for hotels—their #1 priority—and garnering a take rate. Huge!

How has the launch gone? 

Sankar: That’s right, it’s incredibly strategic and has proved popular with hotels driving incremental revenues.

And, the program is still quite early in its lifecycle. We have barely scratched the surface on the potential to improve the distribution and demand for our hotel customers. While we look to gain a deeper penetration for our meta channel distribution, we are also exploring solutions on how we might partner with other distribution partners to drive greater engagement with hotels and provide a more seamless way for hotels to gain access to distribute their inventory around the world. 

Dave: What do you think the learning is for VSVs in other markets? What has SiteMinder learned from other great Vertical SaaS companies?

Dai: I would personally say the biggest learnings that other companies can take from us on their journey is how to expand globally and still keep the essence of your company and culture whilst doing it. From a product and customer standpoint, we are very proud of the impact we have had on tens of thousands of businesses around the world, speaking many languages and operating with many different cultural expectations. We allow them not only to win in the online travel world, but to provide their guests the hospitality experience they want to offer. We would not have been able to achieve this if we hadn’t localized our product and business to suit them, not have them suit us.

From an internal perspective, one of my most cherished reflections has been the number of people who love being a part of the SiteMinder business. These people speak many different languages, live all over the world and come from many different cultures, but they are SiteMinder people through and through, and that is something that we are very proud of keeping as we have grown.

Dave: Well thank you, Dai and Sankar, for taking the time to chat with us today. This was definitely enlightening.

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We love the idea of bringing together a community to explore the boundaries of Vertical SaaS and are excited by what we can learn from each other. If you have thoughts or comments or want to get involved, reach out to us at knowledge@tidemarkcap.com. If you would like to keep updated as we publish these essays, sign up below. 

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SiteMinder: Consumer Demand
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The information presented in this post is for illustrative purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Companies discussed in these posts may include current Tidemark portfolio companies and/or prior investments made by Tidemark employees while at other investment firms. These companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. The information in this post is not presented with a view to providing investment advice with respect to any security, or making any claim as to the past, current or future performance thereof.

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