Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A European vertical solutions (vSol) which are industry specific solutions aiming to become industry OS and combining dynamics from SaaS, marketplaces and fintechs. Overlooked is a weekly newsletter about venture capital and vSol. In this post, I’m digging into SiteMinder which is an Australian publicly listed vSol and the leading channel manager for the hotel industry. This post is part of a broader deep-dive in the hotel tech stack. You can find here the first part introducing the hotel tech stack.
SiteMinder is the leading channel manager for the hotel industry. It helps hotels and alternative accommodations distribute their inventory online on multiple channels: direct bookings on the hotel’s website, indirect bookings on Online Travel Agencies (OTAs) like Expedia and Booking or on Global Distribution Systems (GDS) like Sabre and Amadeus. Today, SiteMinder claims to be much more than a channel manager. It wants to be a broader “smart commerce platform” to empower the hotel industry to attract, engage and upsell customers.
I believe that it’s a noteworthy business to study for several reasons:
It’s a vSol with a Shopify-like narrative of arming the rebels against both incumbents and distributors. Shopify arms independent e-commerce brands against incumbent brands and distributors like Amazon. SiteMinder arms independent hotels and alternative accommodations against large hotel chains like Hilton or Marriott and against powerful distributors like Booking and Expedia.
It’s a unique example of a publicly listed vertical SaaS in the travel space which went through covid. It shows how the hotel industry and its tech providers are recovering from this black swan event. It also shows the new digital and consumer expectations from both hotels and travellers.
In this post, we will go through SiteMinder’s history before describing its product, market and go to market strategy. We will dig into its public financials before highlighting its key opportunities and key risks. We will conclude the paper with key insights for vSol’s builders and investors.
History
Mike Ford (cofounder and CEO) and Mike Rogers (cofounder and CTO) launched SiteMinder as a channel manager in Sydney, Australia in Jun. 2006. During his spare time, Mike Ford was running an hostel for backpackers in Sydney and grew increasingly frustrated when he had to manage its inventories and prices on multiple OTAs at the same time. Mike Ford was working in an healthcare company called ICS Global. He asked a technical colleague and friend called Mike Rogers to build a software solution to solve the issue which led to the inception of the company.
In 6 months, SiteMinder convinced 70 hotels to use the solution for free. At this point, it started to monetise and to expand abroad in New Zealand. In 2007, SiteMinder also raised $200k from Les Szekely, a respected angel investor in Australia and who then created a venture firm called EVP.
In 2008, SiteMinder launched its booking engine called TheBookingButton to empower hotels to take reservations directly on their website to fight the growing dependence of the hospitality market towards OTAs. It also signed its first hotel chain called Rydges. It was an achievement for a company that had always been mostly focused on independent hotels.
In 2009, SiteMinder signed a partnership with the leading PMS player in the market - Oracle Opera which was called Micros Fidelio at the time. In Dec. 2010, it expanded in Europe by opening an office in London.
In 2011, SiteMinder reached 4k properties as customers. It opened a new office in Cape Town in South Africa. It also added GDS connectors to its channel manager.
In May 2012, SiteMinder raised a $5m series A from Bailador Technology Investments. In Oct. 2012, it opened an office in Bangkok in Thailand. It also started to white label its channel manager to other tech providers in the hotel tech sector.
In 2013, SiteMinder reached 10k properties as customers.
In Jan. 2014, SiteMinder raised a $33m series B from TCV. It expanded into the US by opening an office in Dallas and in China by partnering with a local OTA called Ctrip.
In Jun. 2015, it acquired Globekey, a booking engine to manage direct reservations and which had a strong focus on Asia. SiteMinder also launched an hotel website builder called Canvas and ended the year with over 20k properties as customers.
In 2016, SiteMinder continued its international expansion opening an office in Galway in Ireland. It also launched a Business Intelligence (BI) solution and reached 23k properties.
In 2017, it reached 26k properties.
In 2018, SiteMinder signed a partnership with Airbnb. It also launched SiteMinder Exchange which is a unified API to connect solutions in the hotel stack and reached 30k properties.
In Jan. 2019, SiteMinder brought in a new CEO called Sankar Narayan who was previously COO at Xero which is a top Australian public company in the accounting space for SMBs. In 2019, it passed the threshold of AU$100m in ARR generating AU$106m in ARR and reached 34.1k properties.
In Jan. 2020, SiteMinder raised a AU$50m series C at a AU$1bn valuation. It launched an insight product on the hospitality market and it opened an office in Berlin, Germany. In Nov. 20, SiteMinder launched SiteMinder Partner Program. It collaborates with PMS (130 partners whose PMS is connected to SiteMinder) and service providers (400 partners sell consulting and integration services to hotels). Partners are remunerated via referral fees and can access to dedicated training on SiteMinder’s products.
In May, 2021, SiteMinder launched SiteMinder Multi-Property which is a product dedicated to hotel chains to manage their distribution.
In Sep. 2021, SiteMinder raised a AU$100m series D (mix primary and secondary) from Australian Super and BlackRock at a AU$1bn valuation.
In Nov. 2021, SiteMinder went public raising AU$627m at a AU$1.36bn market capitalisation from funds like BlackRock, Fidelity, Australian Super or GIC. It had 32.4k properties as clients at IPO.
In Aug. 2022, it acquired for AU$5m in equity GuestJoy which is a guest engagement platform for independent hoteliers leveraging automations to communicate with guests before, during and after their stay.
Product
SiteMinder markets itself as an open hotel commerce platform. In the hotel tech stack, it wants to be the only system used by hotels beyond their PMS which manage day-to-day on-site operations like check-in, check-out, guests allocation to room, financial back-office and housekeeping. SiteMinder started and is mostly known in the industry for its channel manager for independent hotels. Since then it has expanded into a broader platform including distribution on GDS and metasearch, booking engine, website builder, payment processing, guest engagement, business intelligence and a light PMS.
Distributing your Inventory on Third Party Websites: Channel Manager for OTAs, MetaSearch and GDS
SiteMinder’s channel manager is a set of two-way API integrations between an hotel PMS and indirect distribution channels that can be broken down into OTAs (Booking, Expedia, Airbnb), metasearch (e.g. Google Hotel, Trivago) and GDS (Sabre, Amadeus, Travelport). With a channel manager, an hotel has a single platform to manage its indirect distribution on multiple channels. Rates and availabilities are updated in real-time to avoid double-booking. SiteMinder also includes features to broadcast its inventory in multiple currencies and to sell rooms under different plans (e.g. promotions, less expensive if you stay longer). It has connections with 425+ different channels that could be OTAs, GDS, wholesalers and hotel website booking engines. Implementing a channel manager could increase bookings by up to 40%.
SiteMinder’s integrations with GDS is crucial for independent hotels to give them access to the corporate travel market which has historically mostly been served by large chains. It’s connected to 600k+ travel agents. SiteMinder’s integrations with metasearch channels enable hotels to access an indirect channel in which it will control the guest information (contrary to OTAs) which is key to be able to retarget them after their stay.
SiteMinder charges:
A monthly SaaS fee for the OTA channel manager
A transactional fee for distribution on GDS and metasearch.
Managing Direct Bookings on Your Website: Website Builder, Booking Engine, Payment Processing
SiteMinder also helps hotels attract direct bookings on their website in order to build a proprietary customer base (because guest information is not hidden by your resellers) and to generate higher margins on bookings (because you don’t give a cut to intermediaries).
It has a no-code website builder for independent hotels and alternative accommodations. It enables them to create and maintain a website with templates dedicated to them, insert multi-lingual capabilities and is optimised for SEO.
SiteMinder offers a booking engine that allows guests to book their stay directly on the hotel’s website. Its booking engine is seamlessly integrated with the website, the channel manager and the PMS so that inventories and rates are updated in real-time. It supports multi-currency payments and is available in multiple languages. It’s also easy to use and mobile first in order to maxime conversion rates.
It also offers payment processing to execute digital payments on its booking engine. SiteMinder takes a cut on every transaction which is a way to monetise the GMV generated by its customers base. It does not charge set-up costs or a monthly fixed fee. SiteMinder Pay takes into account the payment specificities in the hospitality market (payment schedules, refunds, card data collection for check-in, etc.).
Operating your Hotel: Business Intelligence & Insights, Guest Engagement, Light PMS, Multi-Property
Besides managing direct and indirect distribution which is its core business, SiteMinder has expanded to handle certain on-site operations. It leverages its position as industry connector to provide a business intelligence and insights product to generate data not only on your distribution performance but also on how you compare with the rest of the industry and your direct competitors.
It has a light PMS called Little Hotelier dedicated to small independent hotels, vacation rentals and B&Bs. It’s a mobile first product and it manages the basic tasks of a PMS (check-in, check-out, room allocation, etc.).
Following the GuestJoy’s acquisition in 2022, SiteMinder expanded in customer engagement to manage guest communications before, during and after the stay. It unlocks use-cases like welcome emails, digital check-in, upsell opportunities, personalised offers, digital directory (to present the hotel and its offering) or feedback collection (to collect reviews for Google or TripAdvisor).
It has also a product called Multi-Property targeting hotel chains. It’s a single interface to manage room inventory across multiple locations. It can synchronise with both PMS and indirect channels enabling the HQ to update rates without having to log in each system.
Customers & Go-To-Market
SiteMinder is selling products to all the hospitality market segments: vacation rentals, B&Bs, independent hotels, hotel groups. It breaks down its customer segments in 3 categories:
Independent and small properties (less than 20 rooms, vacation rental or B&B): SiteMinder tries to become their all-in-one solution to manage their business with LittleHotelier which includes a PMS, a booking engine, channel manager and payment processing. In terms of go-to-market, sales and onboarding are mostly self-service.
Independent hotels and small chains (more than 20 rooms, less than 14 properties): SiteMinder starts being their channel manager before expanding with other direct and indirect distribution products. In terms of go-to-market, SiteMinder wants to generate leads without a human touch (online marketing, indirect distribution via other hotel tech providers) and wants to have a short sales cycle. It has also a customer success team in charge of selling new modules to the customer base.
Medium to large hotel chains (more than 15 properties): SiteMinder starts by offering its channel manager combined with multi-property management products before expanding into other direct and indirect distribution products. SiteMinder relies on a enterprise sales motion with longer and more complex sales cycle as well as with account management to work on roll-outs and upsells.
In FY2021, the first two segments accounted for 75% of SiteMinder’s customer base and 71% of its subscription revenues. SiteMinder started with independent hotels and alternative accommodations (which is the largest customer segment with 85% of hotels being independent) before expanding upmarket. It also adopted a localised go-to-market approach with sales teams across the world (e.g. offices in London, Berlin and Galway to cover the European market) with salespeople speaking local languages and able to meet customers in person.
Business Model
SiteMinder’s business model combines SaaS-based revenues and transaction-based revenues. In FY-2022, SiteMinder generated 75% of its revenues from subscription and 25% from transactions. Its subscription products include channel manager, booking engine, website builder, business intelligence and PMS. Its transactional products include payments, distribution on GDS and distribution on Metasearch. Generating transaction-related revenues enables SiteMinder to capture a percentage of the hospitality GMV generated by its customers. In Jun. 21, c.25% of SiteMinder’s customers were using at least one transactional product.
Financials
In FY22, SiteMinder made A$130m in ARR growing at 24% YoY. It was notably impacted by covid with a 6% decline in ARR in 2020 and a low 5% YoY growth in 2021.
It works with 37k properties around the world growing at 10% YoY and adding 2.3k properties per year on average since inception. ARR growth is mainly driven by three factors: (i) the growth of the number of properties (from 32.4k properties in 2021 to 34.7k properties in 2022), (ii) the ARPA growth (13.2% YoY from A$257 in 2021 to A$291 per month in 2022) and (iii) the increasing reliance on transactional products (from 15.6% of sales in 2019 to 25.2% in 2022).
It hasn’t been easy for SiteMinder to fully recover from covid. In 2019, the company was EBITDA profitable. Today, it has a 19% negative EBITDA margin. It’s currently struggling with profitability, with a decreasing gross margin (from 76% in 2019 to 69% in 2022) and increasing sales and marketing expenses (from 35% of sales in 2019 to 40% in 2022).
The most challenging part in SiteMinder’s model is to go after SMBs as a core customer segment. On the one hand, it’s hard to sustain a go-to-market equation with good payback periods after a certain scale. SiteMinder pays back its new customers in 22 months which is too long for SMBs. I’d expect a payback below 12 months for an annual ARPU below $5k. On the other hand, it’s hard to sustain long term and sustainable growth without a NDR retention above 110-120%. SiteMinder has a NDR sitting at 88.7% because SMB customers have a high churn and SiteMinder is not able to sufficiently compensate it with upsell.
When you compare SiteMinder to listed peers, you see that (i) it is significantly smaller than its peers ($500m in EV when the median is around $6bn and less than $100m in LTM revenues when the median is around $800m) and (ii) SiteMinder trades below its peers with a 4.5x EV/NTM revenues multiples (compared with 5.7x for peers on average).
Key Opportunities
Going Upmarket
SiteMinder started by targeting the long-tail in the hospitality market signing small independent hotels, B&Bs and vacation rental. Overtime, its channel manager product has become mature enough to go after larger customers. Moreover, SiteMinder launched in May 2021 Multi-Property which is dedicated to hotel chains to manage their direct and indirect distribution across multiple properties. It works with chains such as Hyatt, Best Western or Choice. Doubling down in this mid-market/enterprise segment could be a great opportunity for SiteMinder to increase its unit economics (higher ARPA, lower gross churn rate, higher NDR potential).
Building a PMS to Compete as All-in-One Solution in the Independent Hotels, B&Bs & Vacation Rental Segment
SiteMinder has a lightweight PMS called Little Hotelier. In Mar. 2022, it did a significant upgrade of this product in order to make it easier to use, especially on mobile. It’s probably the product in SiteMinder’s product portfolio with the biggest upside. It targets SiteMinder’s core customer segment (independent hotels, B&Bs and vacation rental). SiteMinder can upsell it to its customer base which will have 3 consequences: (i) increasing ARPA, (ii) increasing its stickiness because the PMS is the core system for hotels and alternative accommodations, (iii) better compete with all-in-one solutions targeting SMBs.
Key Risks
Channel Manager is not a System of Records and is Becoming a Commodity
SiteMinder is mostly known for being a channel manager. With the maturation of the hotel tech stack, the barriers to entry to build a channel manager have shrunk. Many tech providers in adjacent categories in the hotel tech space are adding a channel manager to their product offering. As a result, the channel manager is becoming a commodity which puts a strong pressure on prices and which could increase customer churn. It’s even more problematic that the channel manager is not the system of records of an hotel - which is usually the PMS.
Competition in the SMB Segment with All-in-One Platforms
In the past decade, all-in-one solutions like Cloudbeds or Amenitiz have emerged to address the SMB segment in the hospitality market. These solutions bundle the channel manager with other key products such as a PMS, a RMS, payments and a website builder. SMBs love this all-in-one platform in which product blocks are seamlessly integrated and prices are less expensive than buying best of breed solutions.
Dependency on Large OTAs like Booking and Expedia
SiteMinder is acting as an intermediary between hotels and OTAs. As all intermediaries, you want your market to be as fragmented as possible. In the OTAs market, Booking and Expedia which are the two category leaders have a market share of around 20%. It give them a strong bargaining power against SiteMinder. Booking and Expedia have their own hotel distribution technology and don’t like to be bypassed by an intermediary. Moreover, they have no incentives to have clean and open APIs for channel managers.
Key Insights
SiteMinder penetrated the hotel tech market without being the system of records. It started as a channel manager which enables hoteliers to distribute and manage their inventory and prices on multiple channels (e.g. Booking, Expedia) from a single interface. The system of records for hotels is the property management system - which manages the front office and the rooms - and not the channel manager.
SiteMinder built a significant business with a relatively low ARPU. In Feb. 2023, its customers paid on average $225 per month ($2.7k annually). It’s hard to scale a sustainable go to market motion with this level of ARPU. SiteMinder managed to do it because it has a quick sales cycle, it makes its products available in self service and it has multiple products to up sell once a customer has entered its ecosystem.
SiteMinder is moving from a SaaS only business model to a business model combining SaaS and take rate on transactions. It follows a traditional playbook for vSaaS that Shopify and Toast have pioneered and that other tech players in the hotel tech market are also pursing like Mews. In 2022, it generated 25% of its revenues from transaction related products.
SiteMinder relied on M&A to expand its product offering beyond channel management. In Jun. 2015, it acquired Globekey which is a booking engine to manage direct reservations and which had a strong focus on Asia. In Aug. 2022, it acquired GuestJoy which is a guest engagement platform for independent hoteliers leveraging automations to communicate with guests before, during and after their stay.
Conclusion
SiteMinder is an Australian-based company in the hotel tech. It started in 2006 with a channel manager targeting mostly the long tail in the hospitality market with independent hotels, B&Bs and vacation rental. In a first development phase, it expanded to manage indirect over multiple channels beyond OTAs like metasearch or GDS. It also added direct distribution with a booking engine to help hotels reduce their dependency to OTAs. In a second ongoing development phase, SiteMinder tried to build a comprehensive open hotel commerce platform positioned as the only other solution that hotels need to manage their business beyond the PMS. In order to do so, it has integrated products around guest engagement, BI and payments. In November 2021, it went public on the Australian Stock Exchange raising A$627m at a A$1.36bn market capitalisation. Today, SiteMinder has over 36k properties as clients and makes c.$A130m in ARR. Its two main challenges are the upmarket expansion and the ability to successfully bring to the market an all-in-one solution including the PMS for the long tail of the hospitality market.
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋
Siteminder needs to buy Mews and Toast. They 3 together can complete what a long tail positioned hotel needs. The web builder is not worth it, the Little Hotelier is useless. Better we should ask Claude to integrate everything and create something New from stack.