Who knew that procrastination pays dividends?
On Thursday, Capital One (COF) - Get Report announced a partnership with last-minute booking app HotelTonight that offers a special discount for holders of Capital One's Venture and VentureOne cards. This is a big deal for the San Francisco-based HotelTonight, because Capital One is a leader in financial technology, or fintech, and because the hotel app is barreling toward a 2017 IPO.
After struggling and cutting its workforce, HotelTonight seems to have righted the ship, and it's becoming a disruptive force in the hotel industry. The company, says it became profitable in April 2016 after cutting 20% of its workers in November 2015.
"We are obsessed with how to save our customers time and money," said Manan Mahadevia, managing vice president at Capital One, in a statement announcing the partnership. "How do we help them plan less and save more when they travel? It's a natural fit for our two companies to work together and find ways for people to save more."
Here's how it works.
With airlines, you buy early in order to score cheaper fares. But when it comes to your accommodations, the secret to saving is to delay, wait and stall on your reservation. HotelTonight lists discounted rates at various hotels around your city, and the prices drop the longer you wait.
It's a last-minute booking app and travelers reserve their rooms one week or even a few hours before checking-in at the lobby. Hotels offer lower rates the more you wait because they're motivated to increase their occupancy. The app lists hotels in nearly 300 cities.
Pricing works interestingly in the hotel industry. If you're too eager to pay (let's say you reserve your room weeks or months in advance), chances are you'll get charged a premium to sleep in that comfy bed. Seems unfair doesn't it? After all, why get dinged for being a sound planner?
In terms of differentiation, the mobile experience is another factor. Priceline (PCLN) and Expedia (EXPE) - Get Report are two goliaths that have dominated the booking market for years, but tectonic shifts are occurring. Bigger sites may offer a ton of options, but HotelTonight simplifies the choices and the user experience.
"We can help consumers [book a hotel room] in 10 seconds, and that [consists of] three taps and a swipe [on your mobile device]," says Shank.
With the Capital One deal, Venture and VentureOne cardholders can enter the code "Venture" to unlock the 10% discount on top of other offers. Venture cardholders will continue to earn unlimited double miles while VentureOne customers will still earn 1.25 miles on every purchase.
"With hotel bookings, it works the opposite of flight booking where the price increases the longer you wait," said HotelTonight founder and CEO Sam Shank. "Generally, with hotel booking, the longer you wait the better deals you get. There are a number of dynamics in the industry that make this possible. But from a consumer's standpoint, that's what the takeaway is."
According to a Phocuswright study, the travel industry is growing 6%, but the U.S. hotel industry is growing faster, at 8%. The rise of mobile booking (which is replacing PC-based purchases), millennial travelers (who are outnumbering baby boomers) and the growth of last-minute bookings all portend brighter days for HotelTonight.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.