Two young Frenchmen, working for Rocket Internet SE of Germany, are shaking the Philippine accommodation industry, offering budget hotel rooms in premium locations such as Manila, Cebu and Boracay for as low as P850 a night.
“Our mission is to be the best budget hotel brand in the Philippines and in general Southeast Asia. What is happening in Southeast Asia is that traditionally, budget hotels are either unprofessional or expensive, and so we are coming with a disruptive brand that is essentially rationalizing the market,” says Nathan Boublil, the 31-year-old co-founder and global managing director of Zen Rooms.
Zen Rooms, which has venture capital company Rocket Internet as a major investor, is a network of branded budget hotels that offers cheap prices and guarantees high-quality standards such as free Wi-Fi, clean comfortable bed, cool air-conditioning, hot shower and 24/7 customer care.
Boublil says Zen Rooms aims to disrupt the Philippine hotel industry. “I don’t know why it has not been disrupted before. It is full of inefficiencies and that is why the prices are so high. The value for money ratio is one of the worst in Southeast Asia,” he says.
“First and foremost, it is our company culture. Our investor, Rocket Internet, has the culture of speed, culture of disruption. We move fast and break things. The founder of Rocket Internet operates this way and we definitely operate this way. All our team is young and energetic and working very hard. That’s the difference from the traditional budget hotel market,” he says.
He says the word Zen refers to the state of being stress-free. “It is all about budget stay, but with the quality that is guaranteed. You have that reliability of standards in all of our locations. Zen means peace. It is quiet and stress-free. You know that when you book a room through Zen, you will get best value-for -money, so it is stress-free,” says Boublil.
“Today, Zen Rooms operates in 1,000 locations in Southeast Asia. We started the company in Jakarta 18 months ago. Now, we are one of the main budget hotel brands in Indonesia,” Boublil says in an interview in Makati City.
Zen Rooms appointed Benjamin Nicolas, a Filipino-French executive as country manager for the Philippines last year. Within six-months of launching, Zen Rooms grew the brand to cover 600 rooms in Manila, Angeles City, Cebu City, Boracay, Palawan and other key areas, making it one of the five largest budget hotel operators in the country, and challenging the leadership of other brands such as Go Hotels and Red Planet.
Boublil says the plan is to double the number of rooms within the next six months, making it the third largest budget hotel operator, and emerge as the largest brand by 2018.
“Now, we have more than 600 rooms in 100 locations. You can find Zen wherever you travel in the Philippines. A big push is going to happen,” he says. “We went live six months ago in the Philippines, first in Manila, then expanded to key cities and more are to come. We are opening in Palawan in two weeks.”
Aside from the Philippines and Indonesia, Zen Rooms is also present in Thailand, Singapore, Malaysia, Hong Kong, Sri Lanka and Brazil.
Boublil describes the budget hospitality market in the Philippines as quite inefficient. “The prices are high for standard of quality. We come in with competitive prices. Here in the Philippines, you have quality issues and on top of it, real price issues. Relative to the cost of living and the wages, hotels are expensive. It makes no sense to pay P2,000 for a budget hotel,” he says.
Zen Rooms does not own properties, but teams up with independent hotels, guesthouses and even apartments. “We don’t build new hotels. We partner with the existing ones and we force upgrades, if we think they are needed. In the end, every Zen Rooms has the same quality standards. We operate on the budget segment. Our prices start in the Philippines at P850 to P1,500. We also have some premium properties in Palawan and Boracay because of the demographic profile,” says Boublil.
Property owners will get a clear brand in return, he says. “We essentially bring the power of the franchise to them, which means a franchise with clear quality—the Zen Rooms. And then we bring them the power of marketing, we bring them the loyalty program and then the power of leverage,” he says. “All of that contributes to getting more sales.”
Boublil says as a budget hotel franchise, Zen Rooms is powered by an efficient online platform. “We operate rooms within a property or apartment. We agree with the hotel owner on the price that is our price. The room becomes exclusive to us, then we resell the rooms at the price that we want. It is up to us to manage our operations based on demand and supply,” he says.
“We have people in every city who are in charge of audit quality control of the rooms that happens every two to three weeks. We constantly do quality control. For some occasions, we have mobile receptionists. In the end, the customer experience always has to be the same and it is the best value-for-money proposition in the market,” he says.
Zen Rooms employs 20 people in the Philippines right now, but plans to add 25 this year to support its expansion. “Our occupancy level is very high. We are filling our rooms. We constantly need more supply. It will double in the next six months,” says Boublil. “We are planning to grow the team very fast over the next three months, including sales people, operations people whom we can train.”
Boublil, whose first job was a night receptionist at a London hotel while he was studying in the UK, says the idea of Zen Rooms came up, after he started seeing inefficiencies in the market. “The position itself was an inefficiency because if you have a night receptionist in the hotel, it means it is not optimized. There are a lot of things such as human resources in hotels that can be automated. And so basically, this sector has never been disrupted ever. A hotel looks exactly the same today as it was 50 years ago. You have people on the reception, you have cleaners, you have a lot of human resources to attend to and those human resources means the prices of accommodation are quite high,” he says.
“The realization of the general inefficiency of the hotel market is magnified here in Southeast Asia. Here, any traveler that has been around would have seen the lack of professionalism of independent hotels at times. You will find dirty sheets, no working Wi-Fi, or air-conditioning is broken. So clearly they have quality issues,” he says.
He says Zen Rooms was also designed to meet the needs of the new generation of travelers. “On the demand side, the travel dynamics are very clear and millennials travel younger in life. They want to travel more often. They tend to favor budget options because they don’t want to pay more for hotels than their flights. You combine the lack of disruption in the supply problems and the growth in demand over the next 20 years and you know you have a great business opportunity. That is how it started,” he says.
Nicolas is also optimistic about the Philippine tourism market, as young generation of people want to travel more. “Thanks to Zen Rooms, they can go to Cebu, Davao, Palawan. They can go to these places at cheap prices. They have cheap flights with AirAsia and Cebu Pacific and now they have cheap hotels to stay and enjoy these cities,” he says.
About 60 percent of Zen Rooms’ guests are domestic and 40 percent are international, with a big focus on the millennials. “Younger travelers travel more often than their parents. They want to travel young in life, and they don’t want to travel until they are 40. They don’t care about the color of the curtains, but they care about Wi-Fi connection. Wi-Fi is like water for millennials,” says Boublil.
Zen Rooms has an existing partnership with low-cost carrier AirAsia. “We share the same values, so we partnered with them last year. We have 102 locations. From a travel perspective, it makes more sense,” says Boublil, who wants to disrupt the accommodation industry the same way budget airlines shook the airline industry.
“It is of course our long-term vision. We started the company to first become the biggest budget hotel brand in Southeast Asia and second, one of the biggest if not the biggest budget hotel brand worldwide. That’s the ten-year plan,” he says.
Boublil predicts that in the first half of 2017, Zen Rooms will enter the top three budget hotel operators in the Philippines, as it doubles its room inventory. “To enter the top three, we need to have 1,200 to 1,300 rooms which will happen in the next six months. I see no reason why in 2018 we are not going to take the top spot in the Philippines. We will become the No. 1 budget hotel chain in this country which in itself is a billion-dollar opportunity,” he says.
“I know that Red Planet and Go Hotels are looking at us. They don’t like what we are doing. I am just happy that it is working so well in the Philippines. I am happy that we are going to be the top player in 2018, or even sooner,” says Boublil.