NEW YORK (TheStreet) -- Call it innovator’s poignancy. Sometimes a startup identifies an ignored niche, validates that there's money to be made, then gets trampled by bigger companies that suddenly smell cash.
Is that about to happen to San Francisco-based hotel booking service startup HotelTonight? The company's premise has been simple in its elegance. Surrounded by empty rooms that are worthless without guests, a smart hotel operator will bend on price to put a head on the bed. And mobile, with its built-in ubiquity and immediacy, ties it all together.
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HotelTonight debuted four years ago and by now its apps are on over an estimated 10 million iPhones and Androids. The company isn't worried about the onslaught of competition from the larger industry players, citing its singular focus on just hotel rooms and its lower-commission rate for hotels business model.
Now that HotelTonight is becoming a household name, suddenly, Priceline (PCLN) (market cap: $60 billion), Expedia (EXPE) (market cap: $11.1 billion), Orbitz (OWW) (market cap: $845 million), and the big chains such as Marriott (MAR) , Hilton (HLT) and Starwood (HOT) are piling into the same-day hotel booking niche. The reason is their sense that this is a fast-growing market.
“I was suspicious of the size of the opportunity,” said Douglas Quinby, vice president of research at Phocuswright, a travel market research company. “Subsequent to the research we did, I am less suspicious. We see quite a bit of demand for close in [to the travel date] hotel shopping.” He added that “the OTAs [online travel agencies such as Expedia and Priceline's Booking.com] are in this very aggressively. It's a very crowded, competitive market.” One reason, Quinby suggested, is that across the sector, operators report rising bookings via mobile devices and those bookings, as a rule, tend to be short notice.
The big online travel agencies admit they are interested. “Same-day booking is a real market,” said Keith Nowak, director of communications at Travelocity, which claims annual gross bookings of $10 billion.
Then there also are many smaller competitors such as Hong Kong-based HotelQuickly and LMT -- aka Last Minute Travel. Groupon (GRPN) , travel site Hipmunk and a parade of others also have had eyes on the same-day market.