The third entrepreneurs into the Shark Tank this week were presenting their business Hotels By Day and were seeking $750k in exchange for 10% of the business. They have developed a system that allows people to book a hotel room for a few hours during the day, rather than having to book it for a full night.
As for their numbers, their average booking is 6 hours at $90. As of the filming of their episode, they had done around 6500 bookings and seen about $127k in gross revenue.
Now, there was one obvious question that we all knew had to come up. If this is a market worth going after, why wouldn’t the hotels themselves or all of the larger booking sites just start offering this? I was really rooting for these guys at first, in hopes that they would explain that they developed a proprietary booking system to rival the current system used by all the other hotels and sites. The problem is, that’s not what they did.
I am always open to the idea that the editing of an episode can make people look worse than they actually were, but I feel like if they had shared anything truly enlightening about their system, it would have been included in the final cut of the episode. Instead, what we see is the Sharks asking over and over what their system is and all these guys can really say is that it would be impossible for the hotels to do what they are doing. Their rationale for this is that the hotels and booking sites are using outdated software from thirty years ago.
Here’s my problem with this, and we can definitely tell that the Sharks had a problem with this explanation, as well. I hate when people try to talk about what other companies “won’t” or “can’t” do! For your business to be a winner, you need to be able to beat out the competition even if they do try to copy you! Trying to ensure investors that another company won’t try to do what you’re doing, when you have absolutely no control over what they do, is a terrible negotiation strategy.
The better direction to go in is to claim that the hotels will be coming to you to buy this technology instead of trying to develop it themselves. It seems like they might have touched on that slightly, because I believe I remember them saying that the these big companies won’t take the time and money to rework their system like this. If that’s the case, then sell the Sharks on the software behind the system, how much better it is than the current system, and why it would be worth tens of millions to license it out to all these hotels and booking sites!
These guys seemed to stumble over themselves quite a bit when the Sharks were more interested in the software than the concept of the “day room.” I feel like they probably walked in there thinking these investors, who are definitely part of their target demographic, would be far more interested in that concept. It definitely seemed like they were interested in the concept as customers, but if they were going to invest they needed more info on the nuts and bolts.
Anyway, the entrepreneurs walked out without any offers. I wish they had been able to be more effecting in explaining the software, because I do think this is an interesting concept with a pretty solid market to support it.