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A look at how Mark Essien built Hotels.ng from zero to ~$10million

  • Benjamin Dada

    • First, you build an online business, offline –

    Following the launch of their international hotels’ booking site, hotel.africa and a corresponding flights service, fly.africa, it is clear that the Hotels.ng mission has expanded to organising information on Africa’s hotels as well as making it accessible and useful.

    This, we believe is similar to Google’s mission- “to organize the world’s information and make it universally accessible and useful”- just on a different scale and in a niche industry.

    Now, one thing about Google and other online platform businesses is that, usually, they have to build their businesses using manual offline methods. Sometimes, after a while, they achieve prominence and network effect kicks in such that the others (demand and supply side) who are not currently on their platform “reach out” to become a part, else they will be “shut out” (of the potential leads and benefits they could have gotten from being part of the network).

    For instance, how do you think Google achieved panoramic views from positions along many streets in the world? They had to physically, painstakingly go through as many streets as possible to take pictures and populate their online service. The same is true for Hotels.ng and how they’ve built their online hotels booking site from the existing 300 online hotels in Nigeria to 10,000 in Nigeria by 2017.

    Here is what the CEO, Mark Essien had to say about their work:

    This manual process is not only painstaking but also capital-intensive (at scale) because the online platform has to hire these field agents. Sometimes, they outsource to an agency to ensure the quality of the deliverables (in this case, photos). Other times, they manage the field agents internally through one of their departments.

    Hiring, raising capital, scaling Hotels.ng and reaching profitability

    Like every other startup, one of the key buzzwords is SCALE. And that’s usually a good reason to raise capital from investors looking to triple, quadruple or sometimes 10x their initial investment.

    One way we are sure Hotels.ng raised the money to expand is from investors’ dollars. As of their latest funding round – Series A, they had raised (only) $1.65M, with their second seed round supposedly dedicated to expanding across Africa, according to the cover by TechCrunch. After that round, we received news that they co-invested in a start-up, OgaVenue, an online platform for finding and booking events, with one of their long-time investors, Spark, a $2million fund by Jason Njoku, founder of iROKOtv.

    Hotels.ng is one startup that is operating a very lean culture and management and it has proven to be profitable, so far. However, whether it is an impediment to its growth and scalability is still up for debate.

    On May 27, 2015, CEO and founder, Mark Essien, took to Nigeria’s popular online forum, NairaLand to announce the latest funding round of $1.2Million as well as execute a Question and Answers (QnA) session. In one of his replies, he revealed that “so far, they have operated without a ‘senior’ management team…”[emphasis mine].

    No doubts, hiring top-level executives is one of the most proven ways to ensure startup success but it is very costly, in the long run. These senior executives- usually from well-established companies- are courted by other companies and startups alike that they become very hard to close: founders then resort to giving out a significant amount of their company to them, in what is called stock options as a complement to the already high salaries they’ll have to be paying. Also, there could be irreconciliable differences in the ideologies and cultures of the senior executives which makes closing them all the more difficult.

    These existing differences could see hired VPs build out a vertical group within the company as employees are now torn on who to follow.

    However, one thing he (Mark Essien) did say then was that the no-senior-management-team approach was about to change. And we should expect some news.

    Fast forward two years after, November 2017, Mr Yemi Johnson updated his LinkedIn profile to read “Chief Operating Officer at Hotels.ng”. This month makes it Mr Johnson’s second year at the startup – Hotels.ng, where he was a “User Acquisition and Retention Specialist” as at January 2016. He grew steadily through the ranks and by January 2017 (a year after) he was the “Head of Growth & Business”. Two years before Yemi joined Hotels.ng, he was pushing his new enterprise, Pinforest, a peer-to-peer marketplace for students to sell anything within their University.

    Prior to Yemi’s promotion, in August 2016, Mr Neo Ighodaro became the company’s CTO – Chief Technical Officer having been at the company barely 4 months. Before Neo joined Mark at Hotels.ng, he had run a Nigerian web design company, CreativityKills for 8 years.

    By now, Mark’s approach is clear, hire entrepreneurial individuals, show them a path to a fulfilling career, allowing them to grow and shape the culture within his company and not have over-bearing senior executives bossing them around and preventing their ascension to the top.

    This is one way Mark has given ground grudgingly while keeping the startup alive.

    Also, Hotels.ng hired a lot of contract workers: many of which make up the field agents’ role of taking pictures of hotels and writers, paying them on a performance-related basis; based on meeting set targets.

    I recall going to their office in Yaba to discuss a writing opportunity, there I learnt that each Writer had to do 35 articles in a month about things related to travel and hospitality [a slick SEO move, by the way, and a way to offer value to your not already paying customers].

    I cannot particularly remember what the pay was, but I declined because it seemed too low for me (more like, the amount of work was not commensurate with the compensation offered). But of course, in a country with 25.2% of young people (15 – 24 years) in the labour force being totally unemployed (NBS, Q4 2016, p.5), you were sure to get someone to do that kind of a job. They did get people and today, they boast of an impressive 5,232 articles on the places to visit section of their site.

    Furthermore, creating a talent pipeline, building goodwill and spending little on paid marketing helped keep them lean. By the end of H1 2016, they piloted an internship program targetted at developing Software Engineers that would go ahead to build products for Hotels.ng and other startups in Nigeria. The idea had come from the new CTO who perhaps was eager to prove himself. Mark bought into the idea and plans started soonest.

    One of Mark’s greatest marketing assets has been his Twitter profile where he has amassed 33.8K followers (and follows only ~500 accounts) followed by his personal website which serves has his blog-cum-PR about the company.

    Also, positioning himself as an enabler, investor and thought leader did certainly help ‘up’ his relevance on Twitter, where he can be seen to tweet “thought-provoking” things like “an internship for founders“. Hence, he really doesn’t need to pay for a sponsored post (a line item on marketing budget for a fiscal year) when he can do all that via his tweets and blog.

    Regarding the first instalment of the Software Engineering internship, Mark simply tweeted about an opportunity to intern with Hotels.ng and in the first 2 days, they had already received 100 applications (they ended up starting the program with 170 prospective interns). Due to spatial constraints, Mark and Neo agreed to make it a remote internship.

    This overwhelming response came to be because of 3 reasons; it came from an accomplished programmer and business owner, Mark, it was in an underserved sector – Software Engineering, hence, relatively high demand and more importantly, it was touted as a paid opportunity – people need sources of income. At least they need to live for tomorrow.

    Apparently, the first instalment was successful and they ended up with 4 products built by the remaining 15 interns, this signalled an attrition rate of 91%. For Mark, it wasn’t about the number that made it to the end but the quality of the people, he calls them “people with the get-it-done attitude” (which kind of hints at his personality and the kind of people he is looking to hire).

    Hotels.ng ended up hiring 3 of the 15 developers. Therefore, saving on some aspects of the recruitment cost, cherry-picking the best, and pushing the rest to his peers (founders of startups). That act built him goodwill from the interns who took part and got recommended by him as well as the public who were watching his every move via his tweets.

    Leveraging the success of the first round of the internship, they (hotels.ng) were able to sign a Memorandum of Understanding with the Akwa-Ibom Government (Mark’s hometown) to train people in their state starting September 1, 2017. Needless to say, it was successful again, with about 70 physically converging at the State’s E-library (wait, why is it called an e-library?).

    That year Hotels.ng ended up with an app and two internal tools.

    Although it is not easy managing people in their hundreds, remotely, it sure has its advantages to the company, Hotels.ng. Else, they would have dismissed the project.

    Don’t get it twisted, a business is not a charity and whatever claims they lay to altruism has its impact on at least the topline. Else, it is not worth it and they’ll end up giving it up.

    Hotels.ng Internship program (is/)was significant to the founder and his company in 3 ways; creating a talent pipeline for Hotels.ng, sealing Mark’s place as an active contributor to the tech talent ecosystem and improving Hotels.ng internal efficiency via apps built for cheap (when compared to skilled developers and analyst to build the platforms). All of which in the long-run is cost-saving mechanisms.

    Profitability

    In a Forbes 2015 article, it was reported that Hotels.ng was already profitable barely 2 years after it started operations. The article read:

    The company is already profitable, though Mark Essien refuses to disclose revenue figures

    However, we have reason to believe that that statement was misconstrued because according to authoritative information from the company, they only reached profitability in 2017 and even raised spending in 2015. Perhaps, the writer of the Forbes article meant, they were seeing steady revenue and could predict a profit in the nearest future. But we never really know.

    Bottomline is they are currently profitable.

    Staff Strength

    As Figure 2 suggests, Hotels.ng ran their operations for 2 years with only 6 members by 2017, they were boasting 65 team members. *whispers* They are not here to play.

    The Foreseeable Future for Hotels.ng

    Given Hotel’s track record of execution and frugality, they raised only $200,000 for their Series A round and are going to be coupling that with a plough-back on their profit to make their expansion to other parts of Africa happen.

    Already, last week, they announced the launch of two services; hotel.africa, their continental hotel booking and fly.africa, their international flight booking portal rivalling big-name international players like Booking.com (who have only recently usurped some of the more experienced tech talents especially UI/UX designers from Nigeria) – to touch a little on that, I’ll like to speculate that the purpose of their coming to recruit in Nigeria is not just because of the technical talent but perhaps, local knowledge these designers have on the internet business landscape in Nigeria. If this is true, one can expect them to increase marketing to target potential SSA (Sub-Saharan Africa) customers in the nearest future.

    Currently, hotel business in Nigeria is a lot more manual than automated. In fact, COO, Yemi puts it this way “Not many hotels in Nigeria are tech savvy…”. Hence, there is still some work to be done in integrating their services together.

    As Analyst, Osarumen Osamuyi puts it, they might have to deploy an Enterprise System aka ERP software for all the hotels it partners with enable seamless integrations and faster communication between the hotels and Hotels.ng. However, the challenge here would be the selling/licensing of the software to these hotels by Hotels.ng [another revenue stream to the already profitable business]. Will the Hotels buy-in? Is there a strong enough case?. As Osarumen rightly added, “it [hotels.ng] would first need to significantly increase the number of bookings it sends their way as a percentage of total bookings.” and this would improve the leverage they [hotels.ng] have with their partner hotels.

    Currently, the fly.africa website integrates with an airline aggregator, TravelStart. Going forward Hotels.ng will look to building a metasearch to help their users get the cheapest possible prices by comparing across the board [perhaps of other airline aggregators like Wakanow and the airlines’ websites themselves]. Details of these are yet to be known.

    Hotels.ng goal is to become the defacto system for travel and hospitality in Africa. Sub-objectives include growing their “hotel inventory on hotel.africa from 25,000 to 100,000 within the next 4 years”, according to a statement we retrieved from the company. Also, there are rumours of an IPO between now and next year, even as they enter their 5th year of operations. If this IPO happens it would create an exit for the investors and fetch them more money.

    In conclusion, Mark has built hotels.ng from a new startup to a profitable startup suspectedly making it’s earliest set of investors over 5x return by being a visionary, developing a talent pipeline, effective people management practices, cutting down on expenses such as marketing by being positioning himself as a thought-leader, being frugal with capital (not getting too excited about raising money) and most importantly, finding/attracting and hiring the right set of people that have helped the company scale.

    Read his May 2017 article on staying afloat with less money as a startup.

    Also, you can follow Benjamin on Twitter: @dadaben_

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