Everyone knows the frustrating feeling that comes with not being able to check into a hotel before 3PM. Why, in today’s age of consumer empowerment and ultimate flexibility, do some industries still follow a business model straight out of the 1950s? Thankfully, entrepreneurs are working to inject some much-needed change into hotel booking. Enter Recharge, a new startup that aims to offer hotel access by the minute.
As another example of innovation in what is known as the sharing, online, or platform economy, Recharge charges $0.66 a minute (or about $40 an hour) for access to a hotel room. There is no base fare and Recharge earns money by taking a percent of the stay’s total cost. The company simply serves as a metered platform to connect customers with hotels.
Guests have 15 minutes after booking a recharge before the company starts the clock. The guests then check out when they leave the hotel by simply pressing a button on the app. This means that guests cannot schedule a stay in advance, unless they are willing to pay for it. In addition to a private room, Recharge offers access to hotel amenities, such as the gym and business center. But Recharge’s promise extends far beyond weary travelers. As the company’s founder Manny Bamfo told me, “I started Recharge so that everyone can have an element of home when they are on the go. When you’re at home you can nap, shower, and have total privacy. When you are traveling, commuting, shopping downtown, or jumping between meetings, you sometimes need a break space. And this need often exceeds what Starbucks can offer. That is where Recharge comes in.”
As Bamfo explained, Recharge’s main competitors are coffeehouses such as Starbucks or business centers such as Regis, since both of these options offer an ability to get work done or relax. However, they do not come with the level of privacy and the other amenities that hotels offer.There is no minimum or maximum number of minutes that someone can rent a room. But given the pricing and the sort of people to which Recharge caters, it is easy to imagine a single room being used by five to seven guests a day (the average recharge is two to three hours). Hotel rooms are still cleaned by staff in between guests’ stays.
People are willing to pay for this convenience and flexibility. While $40 an hour would come out to more than four-star hotels charge per day, the premium for consumer control can be likened to a parking lot. A parking lot’s hourly rate seems to be expensive when you multiply it by 24, but most people do not need to use the space for a full day, and paying by shorter increments is a better deal.
Recharge works directly with hotels, so this is not the case of someone who has already rented a room “subrenting” it to other people. While Recharge currently only operates in four-star hotels in San Francisco, the company recently secured $2.3 million in seed funding, led by Binary Capital.
The company’s current offerings include select Hyatt, Starwood and Highgate hotels. Because of the startup’s relationships with large hotel chains, jumping to other major cities such as Chicago, Los Angeles, New York and Washington could happen relatively quickly. Expansion to other types of hotel chains, and three- and five-star hotels, is another clear future step for growth.
In a rare development for a sharing-economy company, Recharge has not experienced any pushback from regulators or entrenched interests. Contrasted with hotel chains’opposition to Airbnb and other home-sharing platforms, this seems to be a case of clear progress that also benefits established players in the hotel industry.Hotels are warming up to the idea of partnering with Recharge. They specialize in catering to out-of-town guests, and Recharge, while it offers some benefits for visitors, is primarily focused on opening up hotels to locals on a short-term basis. Just as Uber and Lyft did not simply poach existing taxi drivers, Recharge has the potential to expand the proverbial “pie” of hotel users.
If this business model proves successful, hotels could try to replicate Recharge on their own. But one of the appeals of the app is that it spans across an increasingly wide array of options. Someone is much more likely to use a short-term hotel stay if they can go to a variety of hotels rather than trekking to, for example, the city’s closest Marriott.
Additionally, hotels are usually only at capacity at night. During the day, many of their rooms remain unused. This provides an opportunity for hotels to earn incremental revenue, as hotels have little experience marketing themselves to locals instead of travelers.
Putting empty rooms, or “dead capital,” to use is one of the main benefits of the sharing economy. Many products and services, from unused tools to empty seats in a car, can now easily be put to productive (and lucrative) use. This is because what economists refer to as “transactions costs” have dramatically fallen with the increased connectivity offered by the Internet. In other words, it is easier than ever before to match someone who has something with someone who wants that thing.
While Bamfo says potential clients first assumed that Recharge’s customers would use the service to engage in illegal activities (prostitution and drug use come to mind), the company’s experience so far has proven those concerns to be overstated.One way to help ensure customers are on their best behavior is by allowing hotels to rate their guests. This follows the example of countless other sharing-economy companies that embrace feedback systems to increase trust and safety. Airbnb, for example, encourages its renters and hosts to rate each other.
Another way Recharge resembles sharing-economy giants such as Uber and Lyft is that it plans on instituting a form of dynamic pricing (similar to Uber’s Surge or Lyft’s Prime Time) for times when demand outpaces supply. This is a major reason why sharing economy companies are so successful—they can instantaneously adjust prices to reflect the levels of supply and demand.
Policymakers need to keep in mind that the technological progress driving the sharing economy is unquestionably a positive development. Increased connectivity has led to a drastic increase in consumer well-being and empowerment. Recharge is just one example of how the sharing economy can revitalize entire industries and make us all better off.
This article originally appeared on Forbes
Jared Meyer is a fellow at the Manhattan Institute for Policy Research and the author of the new monograph Uber-Positive: Why Americans Love the Sharing Economy. Follow him on Twitter here.
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