Both Roomer and Cancelon arose from the same situation: Out of every 100 hotel reservations in the United States alone, six incur a cancellation fee for a last-minute change of plans. Plus, many discounted advance reservation deals are non-refundable.
These online services, which differ from one another slightly in the details, help the reservation-holder recoup losses, offer buyers attractive deals on rooms even in fully booked hotels; and boost occupancy rates in hotels.
“We are proving the concept that there are enough cancellations every day to create this market,” says Gon Ben-David, 26, co-founder of Roomer. “It happens all the time—86 million times per year in the US,” he tells online news magazine ISRAEL21c.
Like many good ideas, Roomer and Cancelon both started from personal experience.
Israeli attorney Efrat Kaul and veteran high-tech executive Omer Granot launched their website in autumn 2011.
“We were the first to have a marketplace for non-refundable hotel reservations,” Kaul tells ISRAEL21c. “We were both living in the U.S., where people travel a lot and use online travel agencies, and if you cancel you’re stuck with a reservation you cannot use, and lose your money.”
What about Craigslist? Kaul points out that people aren’t usually looking there for hotel rooms. They wanted to build a site dedicated to this one need.
After researching the market need and seeing the lack of other solutions, they used an angel investment to found Cancelon.
“We had to train the market because nothing like this existed before, and we are still working on this. But we’re surprised by the number of users,” says Kaul.
It’s free to post and search. “Once we find you a buyer for your reservation, we take a handling fee of 10 percent,” she explains.
Cancelon’s team is based in Ra’anana in central Israel, and handles reservation transactions in countries worldwide. One of the recent deals was a six-night reservation at a five-star Cannes hotel, listed by the hotel at $13,000, bought for $7,200 and resold through Cancelon for $3,000.
“The advantage of using such a platform for buyers is not only that you get the best price, because often people are willing to give you a big discount, but also you can get rooms at pre-booked hotels.”
You can negotiate if you think the seller’s asking price is too high. “I haven’t seen a seller who did not agree to a reasonable offer,” says Kaul.
Both Cancelon and Roomer had listings for hotel rooms for Super Bowl Sunday 2013 in New Orleans, even though all hotels in the area were booked solid.
Kaul estimates that 30-40% of transactions on the site (with a mobile app soon to follow) are for the upcoming week. However, many are for months in the future. That’s because many travelers make non-refundable advance reservations to get a lower price, taking the risk that their plans may change.
“Competition in the travel industry is immense, so everyone is doing what they can to reduce prices, and cancellation policies are prevalent,” she says.
Cancelon has an alert feature for users interested in specific destinations. “We see our business as a service to the public, and as part of the social trend,” says Kaul.
In late 2011, Ben-David and his classmate Ben Froumine from the Israeli university IDC were planning an American vacation, and managed to buy their hotel reservation from someone whose cancellation was going to set him back $2,000.
The two were students in IDC’s Zell Entrepreneurship Center, the classroom incubator for many a successful Israeli startup. That enabled them to act on their idea immediately, together with fellow student Adi Zellner.
“This happened to us, and two minutes later we mapped out how to connect buyers and sellers,” says Ben-David.
They formulated a business plan, designating Ben-David as CEO, Froumine as vice president for business development and Zellner as chief technology officer.
During the end-of-year Zell trip to the United States to drum up interest in student startups, Roomer won a grant of $18,000 and took first place among four Zell proposals in the monthly TechAviv competitions at both New York University and Stanford University. (These events are run by the TechAviv Israeli startup founders’ club in Israel, New York, Silicon Valley and Boston to showcase, discuss and help fellow Israeli founders and startups succeed.)
Three months later, the founders raised their first VC round of $2 million from Israel’s BRM Group. Waze co-founder and president Uri Levine, a Zell Center mentor, joined Roomer as a director, as did BRM’s Eran Barkat and Yael Reznik Cramer.
Roomer is free and operates in New York, San Francisco and Las Vegas. Occasionally it tests other cities, as it did with New Orleans for Super Bowl Sunday.
“We started with those three because the occupancy rate in those cities is in the top 10 in the US,” explains Ben-David. “People from all over are using the website, and we plan to grow to other countries.” A mobile version of Roomer is in development, and several options for monetization and partnership are being explored.