As Southeast Asia’s largest online travel company, Indonesia-based Traveloka is a familiar name in this region. A relatively obscure affiliate of the unicorn, which has been quietly making strides in the country’s budget hotel space, is now seeking the spotlight as it takes on regional rivals and now even Traveloka itself.
Founded in 2015 by two former Traveloka engineers, Jakarta-based Airy Rooms was created to bridge a gap in Indonesia’s fragmented budget hotel industry, a sector adjacent to, but not at the centre of, Traveloka’s online travel agency (OTA) business.
According to numerous industry sources, Airy Rooms was a venture built in-house by Traveloka, before it was spun off to run its own course.
When asked, Airy said it could not share information on the matter. The company describes itself as a “strategic affiliate partner” of Traveloka, with an “independence to build its own organization, direction and products.”
The startup describes itself as an “accommodation network orchestrator” that partners with budget hotel owners or landlords to transform their property and improve their business.
Transforming a hotel typically includes guaranteeing, among other things, free WiFi, a flat-screen TV and air conditioning. Airy also provides training and technology to hotel owners. The close relationship and trust it builds with owners is what sets Airy apart from its peers, says co-founder and CEO Danny Handoko.
“We are different from other players that focus more on vanity metrics such as the number of properties and number of rooms. We look at the profitability of each property,” he said.
Since it started out in 2015, Airy has been pitted against Singapore-based RedDoorz, which entered the Indonesia market in the same year. With total funding of $140 million raised to date, RedDoorz has been aggressive in its pursuit for growth in Indonesia, where it claims to operate around 1,200 budget hotels.
Competition in the space became more intense last year when SoftBank-backed Indian hospitality major OYO announced its launch in Indonesia and a $100-million investment plan.
Despite the presence of heavily-funded competitors, Airy remains unfazed as it looks to maintain its sizeable slice of the budget hotel pie, which according to the Central Statistics Agency (BPS) includes 11,981 establishments with 259,326 rooms in the non-star accommodations or the jasmine hotel category alone.
At the moment, Airy claims to be the market leader in terms of the number of properties, with over 2,000 hotels and 30,000 rooms across 100 cities nationwide. This feat, Handoko said, can give people a sense of the amount of capital Airy has raised and invested over the years – something it refuses to disclose along with the identity of its backers.
“They need so much money to establish a presence in Indonesia, while we are currently sustainably building this business and are the current market leader. So that gives you a reflection (of the capital we have raised),” he said.
While financial firepower is important, Handoko said that the capital needs to be spent responsibly to achieve long-term success, as opposed to just using it to sporadically acquire new properties.
Furthermore, Airy will always have a local edge over any incoming competitors, he added.
“Indonesian hospitality players are highly local, different to Bangkok or India. It has different kinds of hotel owners and different types of customers. In fact, even Java and Sulawesi are very different. Java and Papua are different. Each region has its own local wisdom and understanding, even more so when it comes to hotels and accommodation,” he said.
Flying into Traveloka territory
Having established itself as a hotel and accommodation player, Airy introduced a flight-booking feature on its platform in 2017, a move that takes Airy into Traveloka territory and sees the two companies compete against each other for customers.
The move raised eyebrows among the few aware of the affiliation between the two companies, and perhaps provided an early indication of Traveloka’s market domination strategy. A year later, as part of a seemingly similar ploy, Traveloka reportedly acquired Indonesian rival PegiPegi, which has since continued to operate independently under its own brand.
From Airy’s point of view, Handoko said, the decision to branch out into flights was simply a matter of improved and more comprehensive customer services. With 10 domestic airline options, Airy has been catering to up to 12,000 routes over 164 airports across 152 cities in Indonesia.
“I think the flight business is quite a commodity. There are lots of other players selling flights, so I think the best way to look at it is from the customer point of view,” Handoko said.
Vertical over geographical expansion
While flights are a popular additional feature for Airy, it is by no means the only one. One of its recently launched offerings is Airy Business, a travel management service for companies to book flights and accommodation for their employees.
There is also Airy Syariah, offering sharia-compliant accommodation guarantees to Indonesia’s Muslim sharia market, which according to Handoko is not only large but also very loyal.
Going forward, Handoko said Airy will continue to launch new products to tap more opportunities in the market and expand its customer base without straying too far from its current focus.
“We will focus on our core, which is hospitality first. As long as it solves the pain points of customers, and has a sustainable business model, and traction, of course, we will be open to those opportunities. However, our core is hospitality,” he said.
With Indonesia being the fourth largest country in the world, there is still a lot of room for Airy to grow in the market. While the company says it has been approached by potential partners from abroad urging it to expand geographically, Handoko says Airy is currently still committed to Indonesia, but new markets may be on the cards in future.
“Once we tap into other opportunities here and make Airy a local hero, then we can replicate outside. That’s the strategy,” he said.