Chatbots – automated bots that allow you to interact with a service or brand through messaging apps or text messages – have yet to become successful as a group. But that hasn’t stopped investors from investing $ 8 million in a hotel reservation startup called SnapTravel, which allows users to find and reserve rooms via text messages and Facebook Messenger.
The $ 8 million Series A funding round was led by iNovia Capital, a backer of Luxury Retreats that just switched to Airbnb for around $ 200 million. The cycle also included the participation of investors from the seed cycle Light bank, Bee partners, and Hedge, with strategic investor and member of the board of directors of Expedia Peter Kern, among others.
INovia’s Chris Arsenault joins SnapTravel board with round closing.
The startup itself was founded in the spring of 2016 by tech entrepreneurs Hussein Fazal, whose former company AdParlor reached over $ 100 million in revenue and then sold to AdKnowledge in 2011; and Henry Shi, who previously created uMentioned and worked at Google, where he helped launch YouTube Music Insights.
Unlike a number of chatbots on the market today, SnapTravel is not a fully automated solution – arguably, to its advantage. The bot part of the service makes integration easier and can answer simpler user questions, but when the going gets tough, human agents can step in. For example, if you’ve booked a non-refundable hotel but your flight is canceled due to weather, an agent would answer your questions and try to help you, rather than having you face an unfriendly bot.
You can also ask the agents for help with issues the robots can’t handle, like whether the hotel accepts pets or whether you can get adjoining rooms, among other things.
“Customers want a travel agent experience, but they didn’t want to call; they didn’t want to go into a store, ”says Shi. “They just wanted to email us or send us a message,” he says, of when the company started testing ideas. This made them realize that the hotel reservation experience could work through chat.
SnapTravel’s human agents function effectively like modern travel agents. They will call the hotels for you, if necessary, and even phone to confirm your check-in and attempt to negotiate a free upgrade on your behalf.
Shi says hotels honor special requests from SnapTravel agents about 70-80% of the time, and they are able to upgrade guests to better rooms about 25% of the time.
While still an early stage startup, SnapTravel has made a bit of a name for itself because of its offerings and its ‘app-less’ business model.
The company filters thousands of hotels from sources, then uses machine learning algorithms to narrow them down to the best options, based on factors like price, location, quality, and overall value.
As customers continue to use SnapTravel to make their reservations, the service learns more about individual preferences – like whether you want free Wi-Fi or free breakfast, for example – and then takes into consideration for its future recommendations.
SnapTravel does necessarily have deals you can’t find elsewhere, but sometimes it looks like it. As his own website explains, he has access to the same inventory of unsold hotels as everyone else. The service’s hotel inventory comes both directly from the hotels themselves, as well as through partners like Expedia, Booking.com, Amadeus, Hotels.com and Saber (pending).
But while the agreements between hotels and some hotel reservation services prohibit them from publicly posting their very low rates, SnapTravel is able to bypass this restriction as it only displays prices through private discussions. one-on-one, not publicly on the web.
But SnapTravel isn’t always the place for the cheapest deal or the most options, some critics have found.
However, the lower cost isn’t SnapTravel’s only appeal, Shi points out.
“We’re 100% free to the customer… the way we make money is commission on hotels,” he says. “But we build a relationship with the customer because we chat with them through a very intimate channel, like SMS or Messenger. To us, it’s a conversation – and that conversation doesn’t end when you make a purchase. It ranges from research to purchase, to upgrade and even after payment, ”says Shi.
At Facebook’s f8 developer conference earlier this year, SnapTravel announced that it has already made over $ 1 million in revenue from Facebook Messenger. It has since moved beyond that and launched its service on the Viber SMS and chat app.
He ultimately wants to reach users around the world through other platforms, like WeChat and Line.
SnapTravel’s app-less business model
The company believes chatbots have potential, especially in the case of Facebook Messenger, in terms of reach. (Messenger topped 1.2 billion monthly users worldwide in April, for example.) SnapTravel doesn’t need anyone to download its app to operate.
The team appreciates that SnapTravel can advertise to users in the app through things like sponsored posts and retarget them directly to their email inbox when they fail to complete a transaction. In the latter case, SnapTravel said it saw a 30% increase in conversions when retargeting this way on Messenger.
“Being able to re-engage customers is essential for any business venture. Typically, with a [online travel agency] when you go to the website and bounce, they have to follow you around the internet using display ads, ”notes Shi. “It’s a very noisy and inefficient channel,” he adds.
“For us, being able to use sponsored posts on Facebook has been super effective. We are seeing a double-digit increase in these re-engagement efforts, ”said Shi.
With the additional funding, SnapTravel says it will invest more in its natural language processing (NLP) capabilities to reduce reliance on human agents as it evolves. In this envisioned future, this would mean that an automated bot would be able to understand a conversational input from a user, such as “I’m going to New York on Wednesday next week for one night and need a room at the usual location,” for example.
Without needing a human to translate this into a booking request, SnapTravel would then send the customer to the correct hotel booking form and make their payment through Messenger.
Currently, SnapTravel has a dozen product engineers based in Toronto, in addition to an operating company in the United States. With the new funds, the startup plans to expand to a team of 20 to 25.