Startup pitch: Nekst offers personalized hotel search
Munich-based startup Nekst aims to make hotel shopping much faster.
With the support of Martin Blöchinger – a former senior executive of flight meta search swoodoo (acquired by Kayak) – it has developed what it calls “the first ultra personalized hotel search site”. The company uses data analytics to tailor an individual hotel selection to each user’s taste.
It launched publicly in late October. It raised Euro 130K through a startup grant issued by the German Federal Ministry for Economic Affairs and Energy.
A Q&A with co-founder Darius Abde-Yazdani:
Tell us how you founded the company, why and what made you decide to jump in and create the business.
The idea for nekst first surfaced in mid-2014. Florian Probst and me are both avid travelers and we were frustrated with current hotel booking platforms.
We found that basically all of them focus on finding the best price instead of helping us to find hotels that were right for us.
Whenever we had to book a hotel, we found ourselves with hundreds of options to choose from. The only way to get through this was by browsing through long lists and looking at every single hotel to check whether it met our preferences.
Florian, worked at BCG at that time, mostly advising companies in the travel industry. Here he saw how personalized travel planning was making first inroads into the industry.
With Sebastian, our third co-founder and a gifted data scientist, we quickly concluded that we wanted to harness the power of big data to build a hotel booking platform that could make an end of the hour-long hotel search by finding hotels that perfectly matched a user’s taste.
At the end of October 2015 this idea became reality when we publicly launched nekst.
Size of the team, names of founders, management roles and key personnel?
Our team currently consists of the three founders. Florian Probst holds a Ph.D. in Business Informatics and did his research on algorithmic social media influencer analysis. He’s mainly responsible for user experience and our proprietary hotel-matching algorithm.
Sebastian, who has a Bioinformatics background and tons of experience in big data analysis, is our CTO and responsible for product development.
I myself spent over four years in the private equity industry prior to founding nekst. I’m mainly responsible for marketing and investor relations.
To date, we have raised 130,000 Euro through a start-up grant issued by the German Federal Ministry for Economic Affairs. In addition, we are currently in talks with investors about raising a first seed-round.
Estimation of market size?
I think we all know how big the global online hotel booking market is, so I’m not going to dwell on that.
Our service caters extremely well to the needs of affluent travelers looking for up-scale hotel experiences. This is where we currently see the strongest traction.
For Europe, we estimate this market segment to be around Euro 5 billion.
We currently don’t see anyone doing exactly what we do, that is tailoring hotel results to a traveler’s taste based on past hotel choices.
Within the personalized hotel search arena, however, there are a few players who do their matching based on a certain set of questions a user has to answer – for instance, Hotel Insider or hotelmatch or Nara.
Because the amount of data you can get from a user in such a way is very limited, we clearly think that our approach can return far better results for our users.
Revenue model and strategy for profitability?
Our revenue model is based on affiliate provisions where we’re currently partnering with booking.com. In addition, we offer white label solutions to special-interests websites, where we have revenue-share agreements in place.
We are getting a lot of requests from individual hotels who’d like to partner with us directly.
This is a very interesting option for us, as it would enable us to extend our service offer even further; plus, the higher commission wouldn’t harm our profitability either.
What problem does the business solve?
Anyone who has spent a significant amount of time on hotel search before will agree that it’s not fun.
With nekst, we can get you an individual hotel selection that is perfectly tailored to your taste within seconds. Hotel search has never before been that easy and fast.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
We initially experimented with a friend-based concept where recommendations would be fed from a user’s social graph. We learned very quickly that this was hard to get off the ground and pivoted to an algorithmic approach.
Why should people or companies use the business?
In a nutshell: it takes the pain out of hotel search.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
Besides content marketing and building our social media community, one of our main acquisition channels are the white label solutions that I mentioned earlier.
Here, we basically “outsource” user acquisition to other, more established sites and in return do a revenue share.
Where do you see the company in three years’ time and what specific challenges do you anticipate having to overcome?
In three years’ time, I see nekst as a dominant player in the personalized hotel search space. I think that we’ll be able, by that time, to grow from our initial niche focus on up-scale hotels on to broader customer segments.
Also, I think getting our value proposition across to these market segments will be certainly challenging for us.
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
Like I mentioned earlier, current players in the industry don’t seem to make user experience their number-one priority. It’s mostly all about comparing prices and urging a user to book as quickly as possible – often promoting hotels that provide the highest commissions.
Barely anyone focuses on improving the search experience by eliminating the noise, that is, hotels that don’t fit a user’s style and needs, and let him focus on a personalized pre-selection of those that do.
What other technology company (in or outside of travel) would you consider yourselves most closely aligned to in terms of culture and style… and why?
I think the music industry is already doing a good job in personalizing user experiences.
If you look at companies such as Pandora or Deezer, they are doing what we are doing with hotels, that is: cutting the noise and selecting songs that are tailored to a user’s taste based on his past choices.
Which company would be the best fit to buy your startup?
I think it’s too early for us to answer that question.
But if I look across the spectrum, I think that we could add a lot of value to closed sites such as Secret Escapes, for instance, who build on user profiles and have data on booking behavior but don’t add a personalized touch to it so far.
With our experience in how to tailor individual user experiences, nekst could be a great match!
Describe your startup in three words?
Unique like you.
The economics driving hotel suppliers to consider a model like this was well covered in our story on Berlin-based Escapio’s switch from metasearch to a curated, boutique model.
Several of the same market dynamics apply to what Nekst is trying to do.
For travelers, the opportunity for personalization is obvious. But it’s a hard problem.
The closer one tries to be like Amazon or Netflix in personalization, such as by recommending one hotel based on past consumer actions, the harder it is to solve the problem, as TripAdvisor’s global head of product Adam Medros has noted.
But even a simple reduction of choices to a more manageable range could help consumers, as Barry Schwartz explains in his book, The Paradox of Choice.
We wish Nekst well. Oh, to be young, and in Munich, and building a startup. We hope they have a some fun along the way.