H2O Hospitality, a vacation rental management company in Japan announced on Feb. 4 it has raised US$7 million in Series B funding from Korea’s venture capitals.
Led by Samsung Ventures, Stonebridge Ventures, IMM Investment, and Shinhan Capital also joined the funding round that came as the two-year old company reached a milestone of 5,000 managed rooms in Japan.
The latest fundraise brings H2O’s total funding to US$18 million.
“We’re pleased to be part of the fastest growing hospitality company in Japan,” said Eric Kim from Samsung Ventures. “H2O has already proven product market fit within Japan, and we expect them to continue to thrive as they expand outside of major cities.”
An interior of one of H2O’s accomdations (H2O hospitality)
H2O’s new influx of capital will be used to support the company’s fast-growing working capital needs on the back of their strong growth every quarter, the company said in a statement. Since 3Q2018, H2O’s revenue has been doubling every quarter, it added.
H2O manages accommodation facilities without any on-site human resources by automating all the operational flows through the property management system H2O developed that links and manages calendars between the guests, rooms, and housekeepers. This allows significant decrease in fixed cost of the operational expenses, increasing the yield of the facility.
In June 2018, Japan implemented the Housing and Accommodation Business Act, which legalized vacation rental management, in order to supplement the hotel-centered accommodation business and mitigate the extreme shortage of accommodation facilities due to the sharply rising number of visitors.
This has led many monthly mansion owners to convert their buildings into vacation rental facilities, and H2O benefitted the most as H2O, on average, made 300 percent additional profit for the building owners after vacation rental conversion compared to what they were making through monthly rent.
Since its launch in December 2017 in Tokyo, H2O increased its inventory to 5,000 rooms and has been selling its rooms through 25 different global and local OTAs which are all directly connected with their PMS.
H2O’s average ADR in 2019 was around $160 with average occupancy rate of 87 percent.
Founder and CEO John Lee attributes H2O’s success to laser-sharp focus on maintaining the highest standards of quality while using technology to minimize the traditional fixed costs that lowered the yield of hotel real estate.
“We found that the way hotels have been managing the real estate hasn’t changed over centuries and figured it was very inefficient. I named our company H2O, which is a shortened version of Hospitality 2.0, to show people that we are aiming to develop 2nd generation of operational method for hospitality facilities that can be and should be managed without on-site human resources.” Lee noted.
H2O Hospitality is an online/off-line integrated hospitality management group established in 2015, which launched its ‘Wahome’ service in Korea, and in 2017 acquired online/offline accommodation management companies in Japan to advance into the Japanese market.
By Park Ga-young (firstname.lastname@example.org)