ZUZU Hospitality CEO Vikram Malhi
ZUZU Hospitality is a revenue platform provider for independent hotels. It provides hotels — that lack resources and have limited time — with the technology and expertise of larger hotel chains without the associated costs and restrictions.
Headquartered in Singapore, ZUZU Hospitality has operations in Indonesia, Thailand, Malaysia, the Philippines, Vietnam, and India.
In this interview, its CEO Vikram Malhi shares with e27 how the company survived multiple crises in the recent past, the current global economic slowdown is affecting its business, the new opportunities that have emerged due to the economic downturn, and more.
The firm recently announced a US$9 million (SG$12 million) Series B funding round led by SoftBank Ventures Asia, with participation from Atinum Partners, Wooshin Venture Investment, Visor Ventures, and JG Digital Equity Ventures.
Edited excerpts:
How has been the past 2-3 years for ZUZU Hospitality from a business growth perspective? How did it tide over COVID and the economic slowdown?
We followed this saying closely, “We didn’t just weather the storm; we danced in the rain”.
So, over the last three years, we used the time to improve our product significantly. There was a particular focus on improving and automating our revenue management tools to drive revenue improvements for our hotels and cost efficiency for our business.
The new line of products to help our hotel partners increase their distribution. This includes a direct website and booking engine with a localised payment platform for each country.
During this time, we built an entire payment platform for our hotel partners to manage their payments and collections with all OTA partners and guests. This has dramatically improved cost efficiency for hotels and eliminated breakage suffered by independent hotels in managing payments.
Also Read: ZUZU Hospitality raises US$9M in a Series B funding round led by SoftBank Ventures Asia
We also continued to add hotel partners throughout the last three years and have grown our hotel count by 50 per cent (the last reported number by WiT was 1,800 in Feb 2020 to over 2,500 partners across seven different countries.
As a result, our revenues are 2.5x of pre-COVID-19 numbers because we are able to drive better and higher OTA business for our hotel partners. This has also resulted in the fact that we are practically at break-even.
How does the current global economic slowdown affect its business, and what steps has it taken to mitigate any negative impacts? Has ZUZU Hospitality noticed any changes in customer behaviour or demand, and how has it responded?
After significant challenges during the pandemic, the travel industry is now booming globally. In APAC, travel and hospitality are well on their way to recovery. According to data from Amadeus’s Demand360, in the first quarter of 2023 (January-March), the hotel occupancy growth trajectory of 61.7 per cent, surpassing 2019 levels by 3 per cent.
Specifically in Southeast Asia, the travel rebound has been steadily ramping up post-opening of the borders in July 2022 and as the flight capacity builds back. Because we see so much market opportunity, we are now in aggressive growth mode instead of slowing down, especially with our latest series B round of funding.
How has your financial strategy changed in light of the current market conditions, and what measures have you taken to ensure long-term sustainability?
We’ve always been a capital-efficient business, but the pandemic forced us to be even more careful with our spending. We cut down our growth spending significantly between 2020 and 2022, which allowed us to survive and thrive through the slowdown. This has ensured we had sufficient runway during this period and is entering a strong growth phase already in a solid financial position.
With the Series B funding, we can see the potential for the industry and know that we need to strike while the iron is hot. So we have allocated the funds primarily towards product innovation, including introducing AI elements to our platform. We will also enhance our partner experience and look to expand our sales and marketing within the region.
Can you describe your recent fundraising efforts and how the current economic climate impacted those efforts?
Fundraising was challenging for most companies but especially tough for travel businesses during the pandemic. As we move past that period, there is a strong interest in capital-efficient companies with solid fundamentals.
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This is good for us because we have been focused on building a viable business that generates revenue. This allowed us to do as well as possible during the pandemic and then be able to be in the position to capitalise when borders started opening up.
Can you discuss any cost-cutting measures ZUZU Hospitality has implemented and how those measures have impacted your business operations? Did you lay off employees to stay afloat in the market?
Naturally, we had to cut down on growth expenses, which meant reducing marketing and sales budgets. We still had to invest in the company. Still, we look at automation of revenue management to supplement our existing team as a way to manage and even grow during the pandemic.
Have you adjusted your growth projections or other key performance indicators in light of the current economic climate?
We are seeing the industry rebound as travel continues to be strong globally. Southeast Asia is recovering nicely, with an expectation that it will fully recover by the end of the year. We are optimistic, and our projections for the company year and more reflect that optimism.
Can you speak of any market opportunities that have emerged due to the economic downturn and how your company is capitalising on those opportunities?
India is the newest and most exciting market for us. We find it easier to sign hotels in India as hotel partners had tried the branded approach, especially when they were getting significant incentives and realised they disliked it.
However, from that experience, they have learned the importance of hospitality technology and, more importantly, distribution and revenue management. They realised the most significant improvement in their business came from professional revenue management, not necessarily the brand. Now that they have left the brand, they are looking for solutions to help them create that value.
COVID-19 helped push digital adoption by consumers, whether it is food delivery or health. Similarly, digital adoption in travel is expected to leapfrog in the next couple of years. Independent hotels heavily relying on offline business now understand the importance of online channels. That allows us to partner with them and help them manage their online distribution channels and revenue.
How do you balance the need for short-term financial stability with the long-term goals of your business?
With the new capital raised, we are focused on growth to ensure we can reach our long-term financial goals. However, we remain a very capital-efficient business, allowing us to maximise the capital without unnecessary burn.
Can you discuss your plans for diversifying your revenue streams or expanding into new markets in light of the current economic climate?
India is a relatively new market for us and has great potential as travel has fully rebounded since 2019 and is expected to reach historic heights.
This growth has been there for many years, with outbound tourism from India increasing 143 per cent from 11 million travellers to 27 million. More recent projections show a full recovery for the Indian outbound market in 2024, with outbound travellers reaching 28.5 million in 2025.
How have you maintained a strong company culture and motivated your team during these challenging times?
Keeping your spirits high when the world shuts down was challenging. As such, I’ve focused on communicating a lot with my team and made sure that everyone felt appreciated and engaged. After all, the team is most productive only when we all have a common goal to achieve and when we feel supported while achieving the goal.
Do we see an end to the raise-cash-burn-cash growth model and the emergence of the “make profits, sustain & grow” model?
Yes, it is obvious that the days of the ZIRP (zero-interest rate policy) raise-cash-burn-cash model are gone. Now it is strong business models that are being coveted by VCs, and the good news for startups is that there is a lot of capital on the sidelines, ready to be deployed in these sensible businesses.
We were always focused on building a sustainable business model that could scale quickly without the need for constant fundraising. This has helped us create a company that could sustain itself even during COVID-19.
What challenges does a late-stage startup face compared to an early-growth-stage startup? What learnings can early or growth-stage companies make from late-stage companies?
Most late-stage startups are extremely focused on unit economics and capital efficiency, while early-stage startups need to focus on growth rightly, but in the new world, this growth needs to be sensible growth and not growth at all costs.
Like every industry, startups are generally starting to adapt to the new world of investing and growth.
How many rounds of funding have you raised of far?
ZUZU Hospitality has raised four rounds so far, including seed, Series A, Series B1 and Series B2. Our Seed and Series A were led by Wavemaker in 2017 and 2018. Golden Gate Ventures, Alpha JWC and TNB Aura also participated.
Also Read: ‘Want VC funding? Your startup needs to be valued at least US$700M in 10 years’: Jeffrey Paine
Series B1 was a convertible note round during Covid. Wavemaker, TNB Aura, JG Digital Equity Ventures, SEEDS, Visor, and Velocity Ventures were the key participants and Series B2; our current round was led by Softbank Ventures with participation from Atinum, JG Digital Equity Ventures, Wooshin.
How is the mindset and cultural shift happening internally since we are in a high-interest rate environment and funding will take more work than before?
What other companies and even whole industries are going through now in this high-interest rate investment, we have already gone through that for two years during the pandemic. It was an extremely tough period, but it helped us prepare, so we are already in great fighting shape.
With the new capital, we at ZUZU Hospitality now need to focus on growing our business and investing in product improvements because we already know how to handle the current challenges in the market.
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