Generation Startup: Yamsafer eyes turning into a unicorn
Ramallah-based travel booking website banking on mobile revolution
Nestled in the city of Ramallah and built on a 75-strong team dubbed the “mafia of the internet”, the Palestinian co-founders of hotel-booking platform Yamsafer have set their hearts on creating a tech unicorn, a US$1 billion company that can take on international sites such as Booking.com and become a household name throughout the Mena region and beyond.
Just as ride-hailing app Careem has established a presence in nearly every major city in the Mena region, Yamsafer (named after the Arabic word for traveller) is attempting to launch a similar revolution for hospitality across the region.
With a few clicks on the Yamsafer app on their smartphone, users can book a hotel room or apartment in over 25 countries in the Mena region and other countries including Malaysia, Thailand, the Maldives and the UK and across the world.
The company seeks to differentiate itself from its rivals by competing on price, offering flexible payment options that include settling bills directly at the hotel rather than booking ahead with a credit card, and offering an inventory of hotels not found on other booking websites.
Yamsafer co-founders Faris Zaher, the company's chief executive, and chief technology officer Sameh Alfar didn't initially start their business to make life easier for Arab travellers. Mr Zaher had an itch to start his own business after graduating with a masters in real estate financing (“a waste of time” he says now) in 2009. He subsequently teamed up with Mr Alfar through Seri Abdelhadi, the company's third co-founder, who has since left the project.
“We started Yamsafer because we wanted somewhere to work,” says Mr Zaher.
“We didn’t find any place where we could ... be technically challenged by the work that we are doing. So we created that environment for ourselves. Within several months we realised the magnitude of the opportunity.”
That magnitude is evident in numbers. Global online travel sales last year reached US$564.87 billion and are projected to grow by a third to $755.94bn in 2019, according to market research firm Statista. The share of the Middle East and Africa market in 2016 was estimated at 3.9 per cent, or $22bn, and is set to rise to 4.7 per cent by 2019.
Winning a slice of this market would be more than enough to make Yamsafer create a tech unicorn the company's founders claim. Arab travellers, like their peers elsewhere, are increasingly moving to booking their travel and accommodation online, thanks in no small part to the high and rising penetration rate of smartphones across the region.
“More and more travel is booked on a mobile device rather than from a desktop PC,” says Kathrin Schreiber, analyst digital markets at Statista. “This also impacts online travel providers: Hotels and online travel agencies are investing in mobile technologies to expand their services and products within this area. The overall amount of mobile searches and bookings is increasing at a fast pace. Last-minute and same-day bookings are often made on mobile devices."
Yamsafer had a few false starts before hitting its stride. Its founders initially looked at opportunities in online fashion retailing, but decided that start-up costs were too high. They ended up looking at creating a hotel-booking company after noting the dominance in the region of international players like Booking.com
The company started off in 2011, creating a site for booking tickets to events such as concerts, as well as stays in hotels. It soon became apparent though that there were not enough events to sustain the business, so the company pivoted to a new model focusing exclusively on hotel bookings.
From that point, it was a chicken-and-egg story. To get customers, the company needed to sign up hotels, but to do so they needed customers, making it hard work to effectively build the business.
“Even when we did have customers it was difficult to convince hotels to sign us with Yamsafer,” says Mr Zaher. “It was just a bunch of kids (to the hotels).”
So the company decided to partner with third-party suppliers and signed several agreements with global companies that already had relationships with hotels in the region.
“We started building a name for ourselves in the hotel industry and started acquiring hotels ourselves in 2014,” says Mr Zaher.
Yamsafer now has around half a million properties listed on its website, with the company's transactions volume growing 300 to 400 per cent year-on-year.
For the moment, the company continues to focus on growth, with an expectation of becoming profitable in a year or so.
Yamsafer's journey to success began with $10,000 raised from the founders' personal savings, which ran out after six months.
“It was a hard time,” recalls Mr Alfar. “We had to convince the two employees working with us to believe in the company and to believe in what we are doing, and they did.”
The waiting paid off in December 2012, with $1 million in seed funding from Sadara Ventures, a Ramallah-based venture capital firm targeting the tech sector.
Series A and Series B followed in 2015 and 2016 with around $9m in investments from Global Founders Capital, a venture capital firm founded by the owners of Germany's e-commerce incubator Rocket Internet.
Since 90 per cent of their transactions are booked through its app, Yamsafer has invested heavily to enhance its mobile offering.
“We saw that most of the people are actually using the website through their mobile phone and we saw a lot of opportunity in the app space as well because of the customer acquisition and because of loyalty of app users,” says Mr Zaher.
“I think people will be more loyal to you: one because you are in the home screen, and two it is a more personal experience than going to Google.”
Yamsafer's first mobile offering has benefited from the success of other regional e-commerce start-ups, not least Careem, which have encouraged customers across the region to increasingly trust online businesses.
“If you look at Careem I think it is breaking some of that barrier of fear that people used to have to transact online and switch from the traditional experience and start using more sophisticated experiences,” says Mr Zaher.
In addition to beefing up its mobile offering, the company is also looking to add more hotels to its portfolio, with a particular focus on Arab travellers and their preferred destinations, since most of the travel booked is within the region, according to Mr Zaher.
Saudi Arabia, being the largest Arab economy, is the company's number one source market. Although the number of transactions in the kingdom dipped around 20 per cent in 2016 compared to 2015 because of the country's economic slowdown, other markets are offsetting these declines.
“There is so much new market being created that it doesn’t even matter if there is an external shock in one country,” says Mr Zaher.
The company's marketing strategy across the region was boosted in particular over the past 12 months thanks to its sponsorship of Arab Idol 4, the popular regional singing contest that ran for three months from November 2016.
While the hotel booking sector internationally has faced enormous disruption over the past 10 years in the form of Airbnb, Mr Zaher is unfazed by the challenge it poses.
“[Airbnb] is culturally taboo, especially in the Gulf region. Typically, in Arab culture they don’t want to stay in a house that has other people’s belongings,” he says.
The company’s answer to Airbnb is Yamsafer Homes, launched in 2016, which offers multiple-room apartment bookings.
So what is the next step for Yamsafer?
“The motivation or need for doing this has changed over time from creating a good workplace to now creating a flagship company for Palestine and the Arab world. We want to be a company that Arab youth can be inspired by and hopefully create other companies like us,” says Mr Zaher.
“We need to set a lot of precedents and basically our focus right now is to grow as quickly as we can and to beat international competition. It should not be Booking.com or an international player that wins in the Middle East. It should be an Arab player.”
Yamsafer Q and A:
Who first invested in you?
What already successful start-up do you wish you had started?
Mr Zaher: Careem, they are making a positive social impact.
Mr Alfar: Careem, they are Yamsafer in the transportation sector for the region.
What is your next big dream to make happen?
Mr Zaher: Right now we are focused on Yamsafer. If we were to move on for whatever reason, we will start another company.
Mr Alfar: We are trying to build a company that is really big. Hopefully we will be a unicorn in the middle East.
What new skills have you learnt in the process of launching your start-up?
Mr Zaher: "I think intuition may not be a skill but definitely it became better as you go with the experience of a start-up. Obviously finance, marketing, operations and technical understanding amongst others.
Company/date started: 2011
Founder/CEO: Faris Zaher, Sameh Alfar
Size: (employees/revenue) 75
Stage: Series B
Investors: Sadara Ventures, Global Founders Capital
Updated: November 20, 2017 04:42 PM