How to identify and exploit blue ocean markets in hospitality?

Yuval Shtokhamer, Co-founder & CEO ● Jul 2nd, 2024

The full transcript

Oleg

Hi everybody! Welcome to Devico Breakfast Bar! Here we speak with different people involved in the business landscape, share their expertise, delve into the latest tech trends, and explore the ins and outs of IT outsourcing. I'm Oleg Sadikov, and today I'm excited to have Yuval Shtokhamer, the CEO and co-founder of MiniHotel, all-in-one SaaS specially designed for small, medium-sized hotels, B2Bs, guest houses, hostels, and vacation rentals. Don't forget to subscribe and hit the notification bell. So you don't miss new episodes. Hi Yuval! Could you please start by telling us a bit about yourself and your professional background?

Yuval

Hi, Oleg! Thanks for having me, first of all. I am the CEO of MiniHotel. Basically, I've been working in software and SaaS specifically for the last 20 years. I'm 41 now. Two kids. Before being the CEO of MiniHotel, I co-founded MiniHotel with my dad. It was in 2007. Before that, I was working in IT as an IT admin. In Mini Hotel, specifically, I was the CIO. I was the COO. Currently, I'm the CEO of MiniHotel.

Oleg

Okay, great. Can you share this story behind the inception of MiniHotel? What inspired you as a family to start this venture, and what were some of the early challenges you faced as a bootstrapped company?

Yuval

Well, my dad and myself were dating quite back with hospitality tech. Basically, we were working, both of us were working in the same SaaS before MiniHotel, where we were employees, not shareholders, just working in another company. And this company was actually working with the 4 and 5 stars hotels in the hospitality industry. And we were having some issues with the smaller ones. And we saw that there was a big market — even the blue ocean, you can call it. Back then, it was a blue ocean. Right now, it's less blue, it's more red right now. But back then, in 2007, there was a blue ocean of hospitality businesses that didn't have solutions suitable basically for let's call it less than 102 hotels, hostels, motels, B&Bs. All of these were left behind back then. Today they have a lot of options, but back then they really needed one, and they didn't have that. And back then, we were struggling with the board of the other company trying to make some solutions suitable for the small accommodations, and we got not a good response from the CEO and the directors of that company. And at some stage, we decided to make our own venture. And then, we decided to found MiniHotel and to try to cater for the small accommodations because there are many of those worldwide, not just in our native country. But we saw the potential worldwide. We thought it's a good business to run, and it's also for a good cause. And we knew that a lot of clients out there are waiting for a solution, which is suitable for that.

Oleg

Did you target globally from scratch, or were you oriented to the Israeli market initially?

Yuval

Initially, it was easier for us to start locally. And in Israel, there were a lot of these small accommodations waiting for solutions. We started here with B&Bs. The first clients we handed out free. Basically, free to try, with no limitation. The word got out, and to our surprise, we started to cater for the B&Bs initially. But to our surprise, a lot of hostels, shared rooms, dormitories, motels, and small zero to two-star hotels, and little boutique hotels started calling up. They said, 'You know what? We saw your software, and we heard about you, and we think that it's suitable for us too. Why just B&Bs? We want to try as well.' And we tried, little by little. We penetrated all the small accommodations of all types. It took a few years before we went global, but back then, we could already see the potential.

Oleg

You're managing offices in different countries, and I guess it has a lot of operational challenges. What do you think is the most effective communication and collaboration for your international team? What is that? How to achieve this?

Yuval

Yeah, it's really related to the other question because right now we are almost thirty – three zero – employees. Back then, we started with just two of us, me and my dad. We were doing everything, and little by little we added more and more employees. And first, it was in Israel, but later, as you say, now three offices worldwide. We were working hybrid from day one. The async culture that we have now, we started this a lot before COVID. First, we didn't have Slack back then, you know.

Oleg

What did you use? Skype?

Yuval

We used scrappy tools like Skype. Back then, it was like really wow, you know, but right now, when I look back, it's really scrappy how we worked. But it was an async tool. This culture was there. And when we saw more tools that are better, that new tools like Slack, we started using these tools. We are working remotely and hybrid. And these tools, like Slack, for example, Google Docs, for example, all the suites, all the workspace of Google – we use it a lot to share a lot of knowledge in the company. This is a must for tech, for SaaS, I think, for everyone already in 2024. But even a few years back, without these tools, you cannot really run a global business.

Oleg

Yeah, definitely. I remember when I came to IT, and back in 2007, Skype was the best, like the top of communication technology. Of course, nowadays, you can compare with Slack, but back in the days, you didn't have any alternatives, honestly saying.

Yuval

Yeah, we used it not only for the teams internally; we also used it for VoIP, for other stuff. So we really took it to the edge, took Skype for a ride. And we used really 100% of the Skype features, but at some stage, it became a little bit outdated, and we started using various tools.

We also use Zoom today, for example. And Zoom, we use it also for VoIP. A lot of people know Zoom just for the free tool that you use to make online meetings, but we use it also for VoIP, and it's really helpful for us.

Oleg

What emerging trends do you foresee shaping the future of the hospitality sector? And how many hotel positions capitalize on these trends?

Yuval

Firstly, we need to understand what is the sector that we're talking about. Right now, travel in general, it's like a trillions of dollars a year business. And inside, you have a lot of subsectors. You have the travel tech that we are part of. If you take hospitality specifically, you have all the VRs and STRs, which are short-term rentals, like the Airbnbs of the world. And you have all the hotels of the world. And there are known tools, for example, by Oracle, you have Opera PMS. It's kind of a competitor of ours, but it's not entirely overlapping with us because it's only five stars. But all these tools are not adapted for smaller tips. Even today, not in 2007, even these days, not all of these tools are adapted for the smaller tips. If you look at the world, we counted there are more than 5 million hospitality businesses out there. They seek technology. There are more tech-savvy people in general in the world. The world is getting bigger, and the world is going to travel more to travel. You have countries like India, and China, and a lot of countries where the middle class is growing, and a lot of people are becoming tech-savvy. And this includes also the hoteliers, vacation rental owners. And they look for new features. It can be AI, and it can be subletting new ways to sublet their rooms, for example. It's a constant move. We need to move forward all the time, like a snowstorm. And if you don't move, you can freeze. So, it's the same for technology in general, and especially these days. We always hear the clients, the feedback, and we are trying to add more features because the competition is high also. Today, unlike 20 years ago, there are few hundreds of similar solutions like us. Today, it's not a blue ocean anymore; it's a red ocean. But as I said, there are millions of hospitality businesses, and a lot of them still don't have technology even these days. We need to move forward all the time and also working globally. We have clients in 70 countries. There are different demands for any country. You know, there are some countries that technology is more important than the others. And there are some technologies that are more important in some countries than the others. For example, some hoteliers like to automate their housekeeping. In Europe and in Israel, not so much. You need to win it. And the travel tech SaaS companies need to be aware of different types of clients and different kinds of things that they need and to be aware that people are getting more tech-savvy, and they expect more. You have second-generation and third-generation hotel owners, for example. The grandson is not working the business like the grandfather. Even if it's a 100-years boutique hotel in Europe, it's not working the same as it worked 100 years ago. We need to go forward like the clients do.

Oleg

You said that the world is growing, which I definitely agree with you. And people try to travel more and more, but I would add until the next black swan.

Yuval

Oh, yeah. I mean talking about COVID, currently in 2024...

Oleg

We do not know if it will be COVID or something else.

Yuval

We don't know, but I can tell you something. Firstly, for us, COVID was really a lifesaver because I think that without COVID, we were not be going forward like we are today. I mean, some things were well improved due to COVID. We had 50% less revenue during the COVID, let's say the first year, probably more or less. But for us, it was an opportunity because we had time. We were very busy everyday. A lot of stuff got stuck. For us, this stoppage was a good thing, a good timing to just sit down. And we had more time for product work, and to survey the clients, and hear more feedback, and build, and build, and build because we had less work with the clients of the everyday work. So, sometimes black swans are an opportunity and not a bad thing necessarily. So, we had time to build more. For example, we had a lot of plans to migrate to cloud, and we started little by little, but we never did it the whole move. And we made like 10% instead of doing the whole work. So, during COVID, we had time to reshape and pivot both in technology and also with the offering business-wise, and we opened another office in Europe. Who knows? The next black swan doesn't necessarily mean that it's bad necessarily. And secondly, referring to this same point, I think that the world is going forward, and we see more middle class growing in more countries. It's not stopping. People wanna travel. People will always travel because like they work their everyday job, going from nine to five or whatever, and they wait for one or five times – it depends on the person – they wait for this time of the year when they go to travel because people love to travel. People love to shop, right? They like to do shopping, and they like to travel, and they like to have fun. This is what the world is about, what life is about.

Oleg

Regardless of plane ticket prices.

Yuval

Yeah. But they can travel internally also, you know. So, my saying is that nothing can stop travel, and people love to travel, and it's unstoppable because it's a basic need. Travel, unlike 100 years ago, it's not a luxury. Travel is a basic need of the person, like air, and like freedom, and like health. Travel is something that is basic in human life today. The middle class grows, and more people understand it. Travel is a good place to invest, first of all. If people look for investments and stock to buy, I would recommend them to buy travel stocks. Travel companies and companies, for example, like Airbnb, Expedia, and booking.com, these companies are moving forward. More companies are coming in, and the travel sector is unstoppable because it's a basic thing in life.

Oleg

What key lessons have you learned about entrepreneurship while building MiniHotel from the ground up?

Yuval

I learned if I go back, I don't know, a few years back, I think I should have been more courageous. I'm not saying gambling, but I'm saying to put more chips on the table. Sometimes, when you're cautious, you're not moving forward. Entrepreneurship, it's not for everyone. I think I have the freedom, especially as a bootstrapper, which has zero-dollar funding, a really clean cap table. I feel the freedom of being an entrepreneur, but it's not for everyone. You need to be a risk-taker. I think in business in general, and especially when you're founding a bootstrap, sometimes going little by little is not enough. I think we could have maybe three times bigger if we would do the things we have done during COVID, for example. We could have done a lot of these moves, I think, a few years back, instead of doing that during COVID. Self-investing in a company is one time to mention as an example. Sometimes you need to take a little risk. I mean, not saying like gambling on your home, or making a second mortgage, or anything. I'm just saying, put more chips on the table, taking some risk in order to go. It's not to any business. Probably also a VC-backed one. They less have this trouble of funding and chips as a bootstrap. We really have what the clients pay. We live by the returns of what the clients pay us. Still, even if you're a bootstrap, even if you run a burrito stand, as a business owner, you need to know to take risks and be courageous. And sometimes, if you're not, then you're pushing back your progress. So, this is one tip that I can get because once we decided to be more courageous and to take a little more risks, it made our business grow more. It's one tip that I can get to the listeners.

Oleg

Thanks for the advice. Are there any professionals or leaders in your network who inspire you in your journey?

Yuval

Well, specifically, I'm following a lot on LinkedIn. In every place that I have the chance, I follow Brian Chesky, who is the CEO of Airbnb. Right now, with MiniHotel, it's hard to imagine the future, but I can really imagine myself doing something, maybe in the future, not only B2B.What Airbnb has done in their sector is really amazing. It's a good CEO to follow, Brian Chesky.

Oleg

Being based in Israel, do you notice any unique challenges in the tech industry in your particular region, compared to other parts of the world?

Yuval

On the contrary, I mean, if you don't take these times, like now, there is a war in my country, but we know it's a temporary situation. On regular times, Israel has the advantage of the global business being made regularly, daily. We are a global company. The move that we made a few years back made us not dependent on one country or one region, because we have clients in 70 countries. Then, if there is a problem in one country, we still have revenue coming in from other countries. And this rule was deliberate because when we had 80% of the clients from Israel, even though at good times we knew bad times could come. And this is why we decided to spread as much as we can. If you have, for example, a volcano erupting in Iceland – and we have clients in Iceland – okay, we lose revenue there, but we have revenue in other places. If we have a problem in Israel and less revenue, okay, but we have it elsewhere. So, I think when you're a global business, you're also spreading the eggs in a lot of baskets. It's good for any business, of course, but for us, I think it was essential. Especially when you're a SaaS, and you have a few languages in our team spoken, there is no reason. It's not stock that we put commodity in a warehouse, you know, and we're selling it. It's a good tip to hear, although it's obvious. When you're a SaaS, you have an unlimited commodity to sell, unlimited stock as a SaaS. So, you can sell anywhere. And sometimes you have regulation issues, legal issues, but they are all, especially today with a lot of tools out there, with APIs, they are mostly solvable. For example, we have the invoice in several countries – a few dozens of countries made and done. So, people can make an invoice if they're working with us in Argentina, or in Belgium, or in Holland, or in Israel, and in a few dozen countries. And we have, for example, a check-in done with the governments. When you check in to some countries, they need to report it to the government. So, we have an API for that for a few dozen countries as well. There is nothing that can stop you if you find the right partners, if you want it, basically. I think that any SaaS should aspire to work and spread to as many countries.

Oleg

Okay. You're a tech company. How do you attract and retain top talent in such a competitive tech landscape, especially in Israel, not only in Israel, globally?

Yuval

Well, we had the luck. First of all, you need some luck. It's not only a gift. But we had the luck to have open offices in the right countries, I think. We have an office in Argentina. We have an office in Serbia. And basically, we have six employees in Israel, 24 employees out there. And most of them are in Argentina, some – in Serbia. We had luck finding these markets. Of course, there are other markets, but in these markets, we have access to top talent, compared to Israel, the US. Of course, the expenses are lower for us. Of course, the local talents get a fair share, a fair price for their country. Especially when you're a bootstrap, you need to be creative. And if we would hire 30 employees in our own country, this would be unfeasible for us. We are honest about it. There is nothing to hide about tech. We are not VC-backed. Surprisingly, after having a few developers in Israel, now having, for example, in Argentina. Specific developers that we have in Argentina are better than the ones we have in Israel. So, it's also a matter of luck. I mean, when you're using tools like Fiverr or Upwork, in those stores, it takes some experience to hire. After making some hiring with third parties, we decided a few years back that we are going to directly hire. Our companies are locally cooperated. So, we have basically three companies. In each country, we have one company, and we have local people. It's not that we are trying to guess what the law is in each country, and we are not trying to speak with local authorities in English. We have local people with local languages. We have local contracting. We have local accounting. So, it's really streamlined, as you say, and really regulatory-ready in each country. And we have people also in HR locally to interview people. We also interview, and we demand, for example, for English to be at a good level or very good level. Having some management level in these local companies that we have, of course, it's like being locally in three countries. We're not outsourcing, basically, right now. In the past, we did. You can say that we are locally hiring in three countries. We are not outsourcing, and we are not hiring remotely. We are locally hiring, but in three countries, and this is a big advantage for us. We can do interviews in Spanish, and in Serbian, and in Hebrew, and in English. And this is a big advantage. If you have this base ready, this is the minimum, I think. And from there, it's a bit of luck and experience, also. When you're hiring, it's a lot of experience and some luck.

Oleg

What was your experience with outsourcing?

Yuval

Specifically, I used Upwork in the past. I am old enough to know that it was called oDesk in the past. Mm-Hmm. It's a really good tool, but statistically, one in five hires is maybe a good one. And I think it's not their fault. I don't know the statistics worldwide, but it's not easy to go and hire people that you don't know according to CV or according to ratings. It's not easy. And you also need experience in depth in these tools and these environments. Probably there are people that know how to hire better on Upwork than I am. I did it a few times, and I had a couple of good hirings. Some others were not so good. And also the way it works, for me specifically, I always work right now hiring locally. I see more determination and more commitment from the employees that are hired in-house. Because for us, they feel part of the business. Of course, I hear a lot about tools and about companies that do splendid work with outsourcing. I'm not running out of outsourcing in the future. I hear a lot of good feedback about a bunch of companies, and I'm not running it out. For me specifically, from what I saw and what's working for me, it took several years to enable, right? It's not that easy to do. But we made a workflow that is suitable for us and that made commitment to the company, a culture to the company, and a certain DNA for the company. You saw us – it's working. But I think that when you're starting a company – because we are a 17-years old company – I think there is no way around it. You will need, I mean, especially if you're not VC-backed or you have little funding, I think you will need to use outsourcing at some stage, like we did and like other companies do. I think there is no way around it. You can go and streamline everything, have these workflows that we have when you're just starting your business. So, it's something that you need to consider. There are more and more companies, and they did get better and better in this field. Maybe if and when I have another company, I will try more of these tools and companies. And right now, where we stand – because we are a veteran company – mostly not outsourcing right now.

Oleg

oDesk, Upwork, to me, it's not outsourcing. To me, it's working with freelancers, and this is totally different because usually on Upwork, it's full of people who are freelancers, meaning they might have their day job, and they work after their job on those kinds of activities, spreading their attention. And you cannot work efficiently working on one job and then doing another job. To me, it's impossible. And another thing is that to them, it's also kind of freelance work. It means that they don't have this discipline, working full day, dedicating their attention fully to the project.

Yuval

The commitment. I also think this is...

Oleg

Yeah, they don't have commitment, and that's the biggest issue for me.

Yuval

To the brands, the goals, you know, into the culture of the company.

Oleg

Working with freelancers, that's the biggest issue to me. Outsourcing, it's when you outsource to companies providing either dedicated team engineers, or providing solutions based on their expertise, or even buying something like a product that integrates. which basically, you can also consider outsourcing. They did it for you, and you bought your paid license fees, and you are using it. Those kinds of things. But I speak with many entrepreneurs, and what I noticed working with freelancers, maybe it's okay for a small company when you're like really one, two people, maybe three people, but then when you need a developer who is dedicated, who commits to the result, that's not the best way.

Yuval

Yeah, it just sounds right. You can be a bigger company, but when you're like a 1000-person company, you would probably not need to outsource or use freelancers. Up to 100 people – maybe you can, for some operations, use freelancers and to use outsourcing. For example, maybe a company has a marketing division, and they want to try some kind of AB testing and penetrate to another region. Sometimes internally, you don't have all the answers. You can do some kind of AB testing and get some outsourced knowledge also. But these companies can maybe also tutor and teach your own team in some cases, make a project of one quarter or two quarter, and in ad hoc help you out with some markets. And maybe you can keep such companies for the long term if they are working efficiently, and they are committed, like you say, to regular workflows and hours. I mean, if you get ROI, if you get the return on investment, basically, it doesn't matter per se, if it's outsourcing or direct hiring. This is not what is important, the headline. What is important is the results and the return on investment. For me specifically, direct hiring was the one working and the others less working. But I don't rule out using any of the other ways in the future. And I think it depends also on the company's DNA, and the company's needs, and the runway, and a lot of factors, you know, because each company is different. You know, the company's track, the company's journey is different. I mean, in some ways, maybe you think this way right now, and then later on you want to try another way, and it's okay.

Oleg

As we conclude our discussion, drawing from your own experience, what advice would you give to aspiring entrepreneurs and individuals looking to disrupt the hospitality industry with innovative technology solutions?

Yuval

Firstly, if you look at travel tech, because travel is getting bigger, as we spoke before, there is room for everyone. There are some segments that are a little bit crowded, like our segment right now. There are a few hybrid solutions. There is some consolidation going on. But I think, as I said, between 5 and 7 million recommendations. I think there is still a lot of room for everyone. If you take, for example, Cloudbeds, maybe they have 40,000 clients or so, Muse also, Logify, or Opera. Where are those millions, you know? What PMS, which solutions are they using? There are millions of those that are not getting solutions. So, on one hand, there is a lot going on, a lot of potential, not just in the PMS segment where we are at, but in travel tech specifically. On the other hand, if you're starting a new company – and I'm seeing it a lot – there is a lot of exploration, a lot of learning going on before you start. This is really important. When we started in 2007, we knew the business, and we knew the need. It was a blue ocean. Right now, if I were to start, I think the learning stage should be a lot longer and deeper because otherwise one can make a lot of mistakes because not all of the segments are blue ocean – some are, and some are not. And if you don't know where you're coming in, there can be sharks in the water waiting for you. So, I think a lot of learning is necessary. And secondly, specifically for myself, if I would make a business, not necessarily I would go for B2B. There are some needs also in B2C.

Oleg

For example?

Yuval

For example, if you go to the OTAs, the online travel agencies, like booking.com, and Airbnb, and Expedia, trip.com, you don't see a lot of those opening up. How many of new booking.com or new Airbnb, how many of these do you see opening up? You don't see a lot of these new ones. People looking at one place, which is the B2B. It's very trendy right now, but don't neglect B2C also. You need more venture capital to do B2C, I know, but I'm just telling you what I think right now. I think that in this business specifically, there is some room for B2C because it was a little bit neglected in the last decade. And if you go to the B2B, explore and investigate really well before you get in. For example, I saw some new SaaS companies coming into full housekeeping automation. It's a crowded place. It's very niche. It's very hard to do. And it's very crowded. And that's one example. I have a PDF of all the travel tech businesses right now. There is no place to put them all in the same PDF. On one hand, you have millions of clients waiting for solutions. And on the other hand, you have a few hundreds of solutions fighting for them. And you need to be laser-focused if you are B2B. And just for B2C, again, I think people neglected it a little bit, and there is room for business over there, in my opinion. Knowing this industry, you know, for two decades, yes, I definitely.

Oleg

Yuval, thanks for joining my video podcast. Your insights are really helpful. I do believe that many from my auditory will find it useful. We had a great podcast. Thanks for joining.

Yuval

Thanks, Oleg. Thanks for having me.

Oleg

If you enjoyed our discussion and want to stay updated on future episodes, don't forget to subscribe and hit the notification bell. That way, you will not lose other insights and conversations from Devico Breakfast Bar. See you in a week!

Watch previous episodes

Contact us for a free IT consultation

Fill out the form below to receive a free consultation and find out how Devico can help your business grow.

Get in touch