SleepOut in vogue as it plots further African expansion

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This week has proven, if it needed proving at all, that African hotel booking sites are in vogue. Nigeria’s Hotels.ng raised a US$1.2 million funding round from Omidyar Network and EchoVC. Yet the site is just one player in a growing market that also includes Jovago and SleepOut.com.

While Hotels.ng has secured funding in order to establish a pan-African presence, however, SleepOut is already there. Launched in December 2011 in Kenya, the startup now has a presence across the continent, offering over 10,000 unique places to sleep in 27 African countries and 68 countries worldwide.

Chief executive officer (CEO) Johann Jenson told Disrupt Africa the company has its roots in the Indian Ocean island of Lamu, which he and his girlfriend would visit regularly from their Nairobi base in 2011.

“I guess I fell for the barefoot bohemian chic lifestyle and eccentric charm of the place. We photographed many of the luxury homes on the island as a hobby initially,” he said.

“When we saw that there was quite a bit of interest in renting these incredible villas we built a local online tourism hub for the island. The foreign villa owners who were rarely on the island were quite pleased with the guests that were coming to them via the website and the local Swahili owners were also keen to welcome guests into their homes.”

SleepOut caught the attention of a small group of investors from Amsterdam, who funded the startup to the tune of US$200,000 and allowed Jenson to expand the offering across Kenya. By 2013 it was taking bookings throughout the country.

Now truly pan-African, SleepOut is expanding further.

“After Nairobi, we opened a new base in Mauritius in 2014 to better service our guests and hosts in Southern Africa and the Indian Ocean islands. Having spent the last few years learning a lot and improving our offering we are now keen to begin looking at bigger markets such as South Africa in a significant way,” Jenson said.

He said SleepOut had moved to disrupt the idea that booking accommodation in Africa is best left to the experts.

“Tour operators mainly based in Europe and North America drive bookings for safari lodges and high end resorts, while trusted international hospitality chains take the lion’s share of inbound business travel,” he said.

“Domestic travel in Africa is also on the rise yet the vast majority of these bookings are still being done through traditional offline channels. This system continues to work only because travellers don’t mind paying the heavy premium – sometimes with markups of up to 50 per cent – that comes with these trusted traditional booking channels. There is still this general distrust when it comes to booking African destinations.”

Jenson said beyond the “danger factor” associated with many African destinations, this is very similar to the way things worked in Europe and North America before e-commerce took off and online travel marketplaces emerged.

SleepOut’s peer-to-peer link between accommodation hosts – which includes both small hospitality business owners and homeowners looking to earn extra cash by renting out their empty beds – aims to change the way people book their accommodation in Africa.

“The result is that we are able to put together a wide variety of unique accommodation inventory to provide better choice, value and efficiency. The trust piece is the one we’re still working on particularly with domestic travellers in Africa but we’re still seeing excellent growth from these users who are embracing the peer-to-peer booking model from Mombasa to Harare,” Jenson said.

He said the startup’s greatest competition comes from global brands in the United States (US) and Europe, but that SleepOut focuses on areas “where they simply cannot compete with us”. The product is tailored for use by the 95 per cent of Africans without credit cards, or by international visitors looking for a “more unique, better value and potentially local experience”.

In every destination SleepOut has established local partnerships, with partners providing support for guests and hosts, which Jenson said improves the quality of the startup’s accommodation inventory and the accuracy of information on the platform.

“Having this local support also provides our guests with additional peace of mind when booking with SleepOut. Contrary to our competition, there are no booking fees charged to guests, you can share contact details between hosts and guests on our message board, you can watch video profiles of hosts and guests, and all sorts of discounts including resident pricing can be applied,” he said.

The company makes its revenues from its hosts, who pay a service fee for using the marketplace to promote their properties. Though Jenson said he cannot disclose revenue, he does say that in the final quarter of last year SleepOut processed six times more accommodation bookings than it did during the same period in 2013.

Besides the typical African startup issues around reliable internet, power and financing, he said SleepOut’s biggest challenge has been related to educating users to use its platform and building trust with potential travellers.

“Being that e-commerce penetration remains very low at only two per cent, Africa’s up and coming marketplaces have a huge opportunity but also responsibility to the growing consumer class,” he said.

“In the same way that PayPal enabled online payments in the US in the late 1990s, Africa is finding innovative solutions to enabling safe and trustworthy online payments.”

Jenson said SleepOut had a lot of success early on by getting accommodation hosts online.

“In most cases it was the first time their accommodation was bookable online. Because the content was never seen before we benefitted from a lot of search engine traffic,” he said.

“Since then our focus has been on improving the quality of the content by sending out photographers and proof-reading our user-generated content. With the recent launch of the SleepOut referral and rewards club, we can already see that our next growth spurt is coming from the best marketing of all: word of mouth.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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