Hotels by Day
NO DEAL
EPISODE SUMMARY
🕓 Air Date: February 17, 2017
Asking For:
$750,000 for 10%
Investor:
No Deal
Deal:
No Deal
PRODUCT SUMMARY
Hotels by Day offers day room bookings through their app and website, redefining the hotel stay for travelers with flexible schedules.
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Background Story
Hotels by Day, a disruptive force in the travel industry, was presented on Shark Tank by its CEO, Yannis Moati, and CTO, Brian Dass. Yannis Moati brings leadership and vision to the company as its CEO. The pitch did not delve deeply into Moati’s personal background, but his role as the chief executive suggests a wealth of experience in business and possibly the hospitality sector. Brian Dass, the Chief Technology Officer, is the technical mind behind the innovative solution presented by Hotels by Day. The pitch highlighted Dass’s pivotal role in creating a technological workaround to address the challenge faced by major hotel chains in offering day-room bookings.
The founders stressed their reliance on a channel-management system, which Dass developed and provisionally patented, claiming it to be a proprietary solution. The idea for Hotels by Day emerged from a keen observation of a gap in the travel market. The founders recognized that many individuals, whether for business or leisure, often found themselves in a city for a day with a significant gap between their arrival and their next scheduled activity.
This insight led to the creation of Hotels by Day, a platform that enables users to book day rooms, allowing them to check in early, relax, and use hotel amenities during the daytime. The pitch emphasized the potential benefits for both customers and hotels, providing a unique solution to a common traveler dilemma and generating additional revenue for hotels during traditionally underutilized hours. Despite facing skepticism from the Sharks about the market and technology, the founders presented Hotels by Day as a pioneering solution to a prevalent travel challenge.
The Product
Hotels by Day offers a unique and flexible solution to the conventional hotel stay, targeting individuals with daytime travel needs. The platform, accessible through both a dedicated app and website, allows users to book day rooms at hotels, transforming the traditional overnight model. Travelers can utilize the service to check in early, providing them with a comfortable space to relax, work, or freshen up during the daytime hours.
The booking process is straightforward, with users selecting their preferred hotel and booking a room for a specific duration, typically around six hours. The pricing model, averaging $90 per booking, positions Hotels by Day as a cost-effective alternative for those seeking short-term accommodations without committing to an overnight stay.
Key features of the service include the ability to access hotel amenities during the daytime hours, such as room service and leisure facilities. The platform caters to a niche market of individuals who may be in a city for a short duration, bridging the gap between early arrival and scheduled meetings or activities.
Accessible via a user-friendly interface, the app and website provide a seamless booking experience. The technology behind Hotels by Day involves connecting to a channel-management system, allowing the platform to overcome the limitations of traditional central reservation systems.
How It Went
The company’s position before Shark Tank
As of the pitch on Shark Tank, Hotels by Day had demonstrated a modest but promising performance. The company had achieved 6,500 bookings, generating $127,000 in gross booking revenue in the year 2015. Despite the relatively low revenue share (14%), the founders viewed this as a starting point for growth. The platform had successfully secured partnerships with major hotel chains, signing up 300 individual properties, which indicated a level of market acceptance and established relationships within the hospitality industry.
The founders highlighted their partnerships with big hotel chains as a key aspect of their business model, emphasizing that they had individually signed up every major brand out there, totaling 300 properties. This suggested a diverse and extensive network of accommodations available to users through the Hotels by Day platform. The founders mention that the model was accelerating with a 20% month-to-month growth rate, indicating positive momentum.
The technology-driven workaround, with a provisionally patented connection to a channel-management system, was positioned as a key element of the company’s structure, addressing the challenge of integrating day-room bookings into the existing hotel reservation systems. In summary, Hotels by Day appeared to be in a growth phase, with positive traction in terms of bookings, revenue, and partnerships with major hotel chains. However, the founders faced skepticism from the Sharks about the scalability and defensibility of their business model, ultimately resulting in no deal during the Shark Tank episode.
The Negotiations:
The negotiations for Hotels by Day on Shark Tank were marked by skepticism from several Sharks, leading to a challenging and ultimately unsuccessful pitch. Yannis Moati, the CEO, and Brian Dass, the CTO, sought $750,000 in exchange for a 10% equity stake in their innovative day-room booking platform. Kevin O’Leary and Lori Greiner showed initial interest, with O’Leary expressing curiosity about the potential market size. However, doubts emerged as the Sharks probed into the defensibility of the technology and the company’s long-term viability. The provisional patent for the workaround technology, connecting to a channel-management system, became a focal point.
Despite the founders emphasizing its proprietary nature, some Sharks, notably Robert Herjavec, questioned the defensibility and uniqueness of the solution. The negotiation reached a crucial point when O’Leary and Greiner were willing to make a deal. They proposed $750,000 for a 50% equity stake, a significant shift from the original ask. However, the founders found the proposed terms unfavorable, leading to a rejection of the offer. Mark Cuban, Chris Sacca, and Robert Herjavec had already expressed concerns and opted out earlier in the negotiation. The Sharks, particularly Herjavec, doubted the scalability and competitiveness of Hotels by Day, likening them to “cockroaches” facing potential competition from larger players.
Despite Moati’s reassurance that major hotel chains wouldn’t easily enter the day-room booking space due to technological limitations, the skepticism prevailed. In the end, Moati and Dass decided not to accept O’Leary and Greiner’s offer, leading to no deal on the show. The negotiation highlighted the challenges the founders faced in convincing the Sharks about the uniqueness and viability of their platform, and the terms offered by O’Leary and Greiner did not align with the vision and valuation the founders had for Hotels by Day.
