23 Feb

Bringing online travel to West Africa, a place where the big brands fear to tread

When Hotels.com.ng, West Africa’s first hotel listings site, launched in Nigeria at the start of 2012, it entered a business environment without many of the things peers in the US and Europe take for granted.

These included small matters such as local technology infrastructure, online payment systems and reliable internet connections in hotels.

But co-founder Mark Essien believes building from scratch now will reap rewards as affluence and connectivity increase across the region.

A few weeks into the project, he agreed to answer some questions on the business by email.

Can you give us an overview of the team?

Right now we’re keeping the team small to make sure we are able to stick around till the market is well developed. I direct everything.

I’ve got four freelance programmers who develop the site on project basis, one Romanian who does the back-end, two Indians working on the front-end and a Nigerian who is doing the payment systems.

I’ve got a girl handling phone calls and Twitter, and my sister is coordinating the content research. Then there’s Chijioke Nwoaduh in Abuja who is setting up the office and starting to build a ground team.

How do you source hotel content?

At the moment, we are still collecting the hotel content from local listings and directories, both online and print. When we exhaust pre-compiled sources, we’ll start the ground-work.

We are planning to have one coordinator in every state.

How much of your technology infrastructure is in Nigeria?

None of our tech is in Nigeria. Our servers are in Germany and the programmers are around the world. We only have one programmer in Nigeria.

By the middle of the year, when our Abuja office is set up, I will consider bringing in some part of the infrastructure to Nigeria, but certainly not the servers.

Nigeria is not ready for that.

Do you see your market as Nigeria, West Africa, Africa or global?

Right now I’m completely focused on Nigeria. It has the seventh largest population in the world, larger than Germany, Japan or Russia, which are countries with many large and thriving internet-based businesses.

Nigeria already has the tenth largest population of internet users in the world. If we are able to create a product that works well within Nigeria, then it will be easy to expand to similar West African countries, with Ghana first on the list.

What is the projected revenue model?

We won’t offer advertising at all. Our service is useful mostly for Nigerians in Nigeria, and that is a very bad advertising market.

Our core focus is to be a service that brings customers to hotels, with our revenue coming from a cut out of that process.

It’s a common model, but the Nigerian market is not quite ready for it – many people are not yet online, in particular the older, richer people who are more likely to stay in hotels.

Many hotels can’t do electronic bookings and don’t have consistent internet connections. So we want to keep everything lean and tight until the Nigerian market is viable.

Where has your funding come from?

We’ve done one fund raising of N5 million (around £87,000). The money came from a Nigerian angel investor that I’ve known for some time.

After the launch, I had a number of offers from some of the major internet-based businesses within Nigeria, but right now we do not want to raise more money till we are ready to more aggressively expand.

What are the key features on the product road map?

Our major focus right now is the mobile version. Roughly 90% of the likes on our Facebook page are from mobile devices.

Almost all Nigeria-focused sites I have spoken to say that their number one browser is Opera Mini by a large margin.

So we’re developing two more versions for iPhone/Android phones and Nokia and Blackberry devices. After that we’ll look at payment and booking infrastructure that will allow hotels to manage rooms and collect payments over our website.

In parallel we will develop an Android tablet app that a hotel can use on the front desk to collect payments.

Do you have any agreements with Expedia-owned Hotels.com? If not, do you foresee any trademark issues?

There will be no trademark issues because “hotels” is a generic term that even they were unable to trademark. Even if they were able to trademark it, they would need to come down to Nigeria and battle it out in Nigerian courts, and I’m not sure they would enjoy that very much.

[Ref – Hotels.com loses court case]

Geographically speaking, you’re a first mover in this space. What told you the time is right?

When the industry experts start going into something, then it’s the right time (when the random businessmen start going in, it’s too late).

I became interested in the Nigerian market when South Africans started opening web properties there. For example Mocality, PrivateProperty, Dealfish.

Those guys are dealing with a somewhat similar market in South Africa, so they must see some potential in Nigeria.

Then I saw the fast growth of VConnect.com and Jobberman and realised that the time was right to set up something focused on Nigeria, so that we could be prepared when people are online and can spend money.

To what degree is your growth and development dependent on other parts of the online travel space maturing? For instance, I’d guess that inconsistent (or non-existent) reservation systems at hotel level make it difficult to develop live booking? Are there clear needs/opportunities you think foreign and regional investors are missing?

Yes, live booking is a big problem because many hotels are just houses with some rooms and a couple of people at the front desk.

However, this is also an opportunity, because if we can get our systems into the hotels, we can lock down the market.

Following VC4Africa, I see a steady stream of local web startups that are filling gaps left by big brands’ reluctance to invest in Africa – in Ghana alone I’m watching Getfeatured.biz(Craigslist/eBay), Truespot.com (Spotify) and Marketplaceghana.com (eBay). Is that a trend you recognise? Would you associate Hotels.com.ng with it?

Big brands have a very hard time doing business in West Africa. I would indeed say that we are capitalizing on this. I doubt that TripAdvisor or Kayak is going to be in West Africa within the next ten years.

They are not ready to have people on the ground walking door to door looking for hotels. They are not ready to deal with power fluctuations.

The Chinese market is equally tough, but in China the government is artificially creating roadblocks preventing foreign companies from competing.

In West Africa, the roadblocks are natural. By the time the West African environments are established enough for the big brands to come in, I think the space will be completely dominated by local businesses.