The best advice that Sam Shank has for budding Internet entrepreneurs is this: don’t do start-ups. Of course that’s easy for him to say, now that the self-professed travel-obsessed online entrepreneur has hit the big time with HotelTonight, a last-minute hotel booking app that helps solve your same-day lodging needs by finding a room for the night, at a good price.
Earlier this year, the app he founded in December 2010 with US$250,000 was acquired by Airbnb for a sum rumoured to be in excess of US$400 million in cash and stock. With the online rooms-to-rent darling gearing up for an IPO in 2020, Mr Shank – now Airbnb’s Head of Hotels – can look forward to sleeping rather well at night. It’s a win-win for Airbnb as well because HotelTonight, which focuses on boutique properties, looks to be a good fit for the lodging company’s strategy of growing its portfolio through hotel listings.
It took more than a few stress-inducing moments and two previous start-ups before Mr Shank, 46, built his winning app, which has been downloaded by more than 15 million users to date. The native of Charlottesville, Virginia founded hotel review site TravelPost in 2004 and travel deals search engine Dealbase in 2008.
Before that, life was a scream. While still an English major at university in 1996, Mr Shank got a job working as an assistant to director Wes Craven on the horror movie Scream. Hollywood beckoned (it still does), but the entrepreneurial bug bit harder and the untapped potential of the internet brought him to San Francisco.
Prior to the buyout by Airbnb earlier this year, HotelTonight had about 300 employees and had raised about US$117 million from investors since it started, but the problem was a burn rate of US$2.5 million per month. People liked the product, but they weren’t using it. He persevered, convinced he was onto a good thing and fuelled by the notion that up to 30 percent of hotel rooms go unsold every night. By mid-2016, the company’s burn rate had been reduced to zero. HotelTonight has now expanded its offerings beyond the US and Europe but in the very beginning, it was an only-tonight, only-three hotels concept. The importance of being different was the dealmaker, he says.
It was clear that we were so complementary as businesses, that we’re both cut from the same cloth. I saw what (Airbnb founder and CEO) Brian Chesky was doing early on. I have a love for good design and products, and we got together socially once in a while. A year ago, we started talking and agreed that we could be stronger together. HotelTonight and Airbnb are separate brands and the hotel category in Airbnb Hotels is very different from when Airbnb first started. There are now a lot of great design-focused hotels out there. HotelTonight first started with the Ace Hotel in New York and our thinking was that these types of hotels have expressed a ton of interest in working with Airbnb.
Why should people go to Airbnb to find a hotel room?
Our role in the partnership is providing good hotels for Airbnb guests who are looking for a wider variety of options. HotelTonight keeps getting better, and the sweet spot for us would be design hotels.
We’re enabling hotels to say what makes them very different. People are looking for a shift from their normal day-to-day. Either a cool pool or spa, something completely unexpected, like a bunk bed or having a pillow fight. That’s why we travel – for the endorphin rush, the prospect of new sights and smells.
There’s a lot of overlap between your brand philosophies, but what are the differences?
The HotelTonight mission is to make the world a more spontaneous place, to help people break free from the routine. The Airbnb mission is to create a world where everyone can belong anywhere – it’s a much loftier, ambitious, meaningful kind of mission piece. Helping people to have fun is nice, but changing the world is a different magnitude altogether. The number one thing I noticed is how much opportunity there is within the travel and hotel categories. It’s a challenge to have two storefronts, to be able to have two different brands that resonate. One caters to your last-minute needs, while the other has an amazing audience from 191 countries to bring you great guests.
HotelTonight has come a long way in a short time, yet another success story from California. What is it about San Francisco and successful start-ups?
What feels great is to have the opportunity to reach our capability. We have flexibility and are fair and friendly to your needs. People will always have new ideas. In other places they’ll tell you why it won’t work while in San Francisco they say, ‘here’s an idea that can help make it work.’ People there have an optimism that a new idea can help change the world.
You’re a serial entrepreneur, yet you don’t recommend going into start-ups.
If I wrote a book, it would be ‘Start-ups are Hard’. HotelTonight was a fairly simple idea, but executing it was incredibly difficult. I was encouraged by my father who told me, ‘Son, there’s millions of people out there with the same idea as you but none or very few will act on it. Don’t let that scare you – just make sure you execute really well.’
Your app is endorsed by the actress and rapper Awkwafina, which gives you instant hip quotient. Is she a typical HotelTonight user?
It’s great to work with her because she was already a HotelTonight customer. Our normal demographic includes couples without kids in the 35-to-45 age group, self-employed business travellers and many people with creative jobs whose schedules change at the last minute and need the flexibility. We have a whole group of customers who are stand-up comedians, another group is made up of professional golf caddies. These are people who like to stay in design/lifestyle hotels.
Are you a spontaneous person?
I grew up in a household where everything was regulated and planned, down to the last detail. My dad is a retired architect, I spent a lot of my childhood on job sites, helping in construction. I loved the smell of blueprints and sawdust. There’s something about creating things that was instilled in me. When I looked at the app store and said why is there not a great travel app, I decided to build something from the ground up – to build something specifically for a mobile app and make it easy to book a great hotel at a great price. Once we said ‘go’ I booked a same-day hotel, arrived in a city – and paid full price. My parents thought I was crazy but it was such a rush – the excitement of waiting till the last minute is fantastic. Plan less, live more.
This article was originally published in The Business Times.