Yanolja Expands Scope by Growing New Businesses... Hotel Solution Sales Account for 30%
YeoGieOtta Focuses on Core Business... Accommodation App Sales Account for 95%
Yogiyo Could Be a Variable... "Expecting Synergy"
[Asia Economy Reporter Junhyung Lee] The future strategies of the top two players in the accommodation application (app) market have diverged. The market leader, Yanolja, is pursuing business diversification by breaking away from its existing image, while Yeogi Eottae intends to focus on its core business to reclaim the industry’s number one spot. The delivery app Yogiyo is also emerging as a potential variable.
Yanolja “Business Diversification” Yeogi Eottae “Strengthening Core Business”
Yanolja has been expanding its scope for several years by growing new businesses such as hotel service solutions (SaaS) and its own brand hotels. This reflects the will of founder and CEO Sujin Lee to grow the company into a global enterprise. Since existing accommodation apps rely solely on networks with domestic establishments, making it difficult to target the global market, the company judged that it must diversify its business portfolio. As a result, Yanolja’s sales last year reached 192 billion KRW, a 43.8% increase from the previous year (133.5 billion KRW), and it also succeeded in turning a profit. Considering that the accommodation industry was hit hard by COVID-19, this is a significant achievement.
This was thanks to risk dispersion through business diversification. In particular, the hotel solution segment showed remarkable growth, supported by the trend of digital transformation. Yanolja expanded the size of its solution division through mergers and acquisitions (M&A), rising to second place globally just two years after launching. The number of client companies increased by more than 30% year-on-year to about 27,000 last year. The company plans to increase the solution sales ratio from about 30% last year to 50% within a few years.
Competitor Yeogi Eottae is focusing on its core accommodation app business. The company’s medium- to short-term goal is to strengthen its existing business and rise to number one in the industry. Yeogi Eottae’s accommodation app accounts for about 95% of its sales. Although it has businesses such as franchise hotels, there are no other businesses generating significant revenue outside the platform. A company official said, “Starting as a motel reservation app, it has developed into an accommodation app widely used during travel, which means the business has expanded. Although we have not aggressively diversified like Yanolja, so dramatic external expansion has not occurred, our fundamentals have become solid.”
Looking only at platform profitability, the chase is steep. Although Yanolja leads Yeogi Eottae in user numbers, the difference in actual platform revenue is not large. According to mobile big data company IGAWorks, from January to March this year, the monthly active users (MAU) of Yanolja and Yeogi Eottae were 8.39 million and 6.37 million respectively, with Yeogi Eottae’s MAU at 76% of Yanolja’s. However, as of 2019, the difference in accommodation app sales between Yanolja and Yeogi Eottae was only about 700 million KRW.
A delivery motorcycle is parked in front of Yogiyo Plus in Seongdong-gu, Seoul. Photo by Moon Honam munonam@
Yogiyo Could Become a Variable... Expecting Accommodation-Delivery Synergy
There is also a prospect that Yogiyo could emerge as a variable. CVC Capital, a UK-based private equity fund (PEF) and major shareholder of Yeogi Eottae, and Yanolja have both expressed intentions to acquire Delivery Hero (DH) Korea, the operator of Yogiyo. Yanolja recently submitted a letter of intent for the preliminary bidding of DH Korea. Earlier, CVC Capital received an information memorandum (IM) sent by Morgan Stanley, the sales agent, to potential buyers. Although Yeogi Eottae is a portfolio company of CVC Capital, the acquisition of DH Korea is evaluated as part of a bolt-on strategy. Bolt-on is a strategy of acquiring companies related to portfolio companies to increase corporate value.
The expectation of synergy with accommodation apps is the background for participating in the acquisition battle. Most travelers visit both accommodation establishments and restaurants, and there is high demand for delivery food among motel users, so the service expansion potential is significant, as is the lock-in effect for existing users.
In fact, the two companies have accelerated business linkage since last year by acquiring food service startups. Yanolja decided on a conditional investment in Nowbusking, which developed a queue management customer solution, while Yeogi Eottae acquired the gourmet recommendation platform MangoPlate. An industry insider said, “Combining accommodation apps and food services allows planning functions that link restaurants and accommodation establishments as a whole. If combined with existing member infrastructure to offer various services, it could become a growth engine.”
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