Inside Africa's Secret Rental Market

And the startup taking on Africa's $46 billion travel industry 🏝

Author

Caleb Maru
November 23, 2023

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Today we’re exploring Africa’s Tourism Industry and diving into the world of ‘Offline Airbnb.’

This is also an investment memo for our second Tech Safari Syndicate deal: Tripitaca.

We’re pumped to share it with you.

ICYMI: We have a syndicate of over 200 members from around the world investing in African tech with us. To join (and get access to the deal) sign up here.

This investment memo is me flexing a bit of that thinking and showing you the guts of how I make an investment decision.

I’m always open to feedback, dissent, disagreement, etc so if you have any, hit me back.

We’re also hosting an AMA with the founders next week. You can save your spot (and submit questions here).

And of course, this is not investment advice.

Alright, let’s go!

If you've checked out Tech Safari, you've seen our travels across Africa.

We've explored amazing places like Ivory Coast, Tanzania, Rwanda, Nigeria, Kenya, and Ethiopia.

And what’s special about all these countries?

They all had so much to offer.

Good food, friendly locals, amazing cultures, and incredible views.

Africa is becoming the ‘it’ location for tourism thanks to its world-famous attractions like Egypt’s pyramids, Rwanda’s mountain gorillas, Tanzania’s beaches, and Kenya’s wildlife safaris.

But tourism isn't all about vacations and holidays.

Tourism in Africa is also about business. Big business.

Right now, ‘travel’ in Sub-Saharan Africa makes up 5.1% of the continent’s total GDP.

And it’s booming - expected to grow at 6.8% each year until 2032.

Zoom in on Kenya, and you have an idea of how Africa is traveling.

Kenya is the heart of East African tourism.

Just last year, close to 1.5 million tourists poured in from all around the world.

Tourism makes up one-tenth of its economy, and total earnings could hit 3.37 billion in 2023.

But this is where it gets interesting.

While dollar-flush tourists get a lot of attention, local tourists are the ones making it rain.

Domestic tourism is on the up.

And hotel occupancy numbers tell the story.

Between 2015 to 2018, more than half of the beds in Kenyan hotels were filled by domestic tourists.

And last year, domestic bed occupancy hit 3.6 million.

Compare this to international bed occupancy, which stood at about 2 million.

In the numbers game (and it definitely matters), domestic tourism is the one to keep an eye on.

It generates 55% of Africa’s travel and tourism spending.

And domestic tourism is where governments are doubling down to increase domestic demand.

Kenya Tourism Board’s (KTB’s) ‘You Deserve a Holiday’ campaign with Jambojet - (Kenyan budget airline provider) to encourage local tourism.

As it goes full speed ahead, it’s bringing other sectors along for the ride.

Accommodation is one of those sectors.

It’s a big winner in Africa’s domestic tourism industry. Why?

Because picking your stay is a big deal when planning a trip. And it’s also the biggest spend category while traveling.

So where do you go to find a place to stay?

If you’re me, the first platform that comes to mind would be Airbnb or Booking.com.

But across African countries, there’s a whole world of accommodation you probably don't know about.

They exist offline - rentals you won't find on Airbnb.

And this is especially true for domestic tourism.

Their owners take bookings through informal channels - like WhatsApp, Facebook groups, Instagram, and through word of mouth.

Enter: Tripitaca

These guys are helping offline accommodation providers organize their operations and grow their businesses.

Tripitaca was started by Peter and Collins, two young but experienced founders who get the problem firsthand.

Peter grew up in his mother’s guest house in Lamu on the Kenyan coast.

He eventually co-founded his own agency that managed over 1,000 Airbnbs and guest houses across Kenya, Uganda, and Tanzania.

He realised that a lot of accommodation providers had the same problems around bookings, payments, and banking.

And more importantly: that tech could solve these problems.

Before we dive deeper into the product, team, and traction we need to understand who Tripitaca serves.

We’re going to explore the whole offline world of booking accommodation.

We’re calling it: Offline Airbnb. And it’s where all the action happens.

Meet ‘Offline Airbnb’

I’ve used ‘Offline AirBnB’ to bundle ways that travelers search for accommodation that are not online marketplaces (like AirBnB and Booking.com).

‘Offline AirBnB’ is a catch-all for Facebook, Instagram, WhatsApp and word-of-mouth channels. Non-marketplace channels to find and book your accommodation.

Let’s put it in practice: say you and your partner are going to Mombasa for the weekend.

You have two options.

Option 1: Online AirBnB.

You can jump on AirBnB to look for a room for a week.

The average price you will get: is somewhere near $65 USD per night. And 14% of the price you will pay is a markup from AirBnB. And the host will pay a small fee too.

Option 2: ‘Offline AirBnB’.

Instead of going to Airbnb.com and looking up ‘Mombasa,’ you go to Facebook instead.

And you search ‘Airbnb Mombasa Kenya.’ This is what you get. Pick your group of choice.

You scroll through a group page and find a place you like. Let's say like this one;

And you notice a couple of things:

  • There are tons of options like these, and accommodation pages managed entirely offline. (ie, not on booking platforms).

  • Rather than $70 USD (10,000 Kenyan Shillings) per night for a one-bedroom, prices are much lower (about $21-35 USD or 3000-5000 Kenyan Shillings) for a two-bedroom. It’s much more affordable

  • These bookings are made over WhatsApp - and are usually paid by MPesa (mobile money in Kenya).

While ‘Offline Airbnb’ doesn't quite have the same shine online as AirBnB, it’s built for local travel.

It’s cheaper, there is more variety, and most importantly: it’s built with the average Kenyan in mind when it comes to price and the communication platform of choice (WhatsApp).

And for hosts - they can post their available accommodation in as many groups as they want for free. (or in some cases, for a small charge).

@tripitacake

Isaac's story shows us that when you follow your heart and work hard, even simple beginnings can lead to amazing adventures. He went from ... See more

From speaking to hosts and looking at the activity in these offline channels, online platforms (like Airbnb and Booking.com) are a small fraction of total accommodation options.

Market Sizing: How many of these travel businesses are there?

So, ‘Offline Airbnb’ exists.

There’s an entire accommodation market transacting in these offline channels.

But how big is this market?

While it’s hard to put an exact number on it, we have a few data points:

  • Kenya’s 2019 census shows that there are 4 million rented households in Kenya.

  • Most offline travel properties come from these rented households, where accommodation providers sublease their spaces to guests.

  • But in Kenya, there are 27,000 ‘online’ vacation rental listings (on platforms like Airbnb and Booking.com) which only make up 0.6% of total rental stock.

  • Based on Facebook group counts and host conversations, online platforms make up only a small fraction of property listings.

  • Tripitaca’s customer base also extends to short-term rentals (stays of 3-6 months), which opens up this market even further.

On the low side, if we assume the ‘Offline’ market is just three times larger than the online market, there is a market size of over 80,000 of these guest houses.

To size this up: today Tripitaca is making $2 million in annualised revenue with 2,300 guest houses.

They have the goal of reaching $10 million in revenue within Kenya between now and their next round - which we think is feasible.

So, across Kenya, guest houses are operated informally, and they list on offline channels (like Facebook, Instagram, and WhatsApp).

And, because of this, guest house providers run into the same three big problems:

  • Manual, complex, and fragmented operations

  • Payments and Reconciliation

  • Underbanked Business owners

This is where Tripitaca comes in.

Today, Tripitaca has over 2,000 guest house operators on their platform and solves for each of these problems.

Let’s dive into each of these problems and how Tripitaca is addressing them through their product.

Product

🏚️ Problem: Manual, Complex Operations.

Many African travel houses use Excel sheets at best, and pen and paper at worst to manage their operations.

Imagine using the same Excel sheet as a:

  • Calendar, to manage your bookings

  • Hour log to track your staff’s time

  • Logging and keeping track of payments

  • Managing communications on each platform - like AirBnB, Facebook, WhatsApp and Instagram.

Not the most foolproof system, and it leads to problems like double bookings due to separate calendars, lost messages, and fraudulent (or no) payments.

🏡 Solution: Source of Truth.

Tripitaca’s Unified Inbox

Tripitaca is an operating system and ‘source of truth’ for these guest house operators: With calendar functions, payment collection, staff management, and an inbox for all messaging channels (Airbnb, Facebook, WhatsApp) that uses AI.

@tripitacake

Automate your messages an an #airbnbhost. #ai #messaging #tipsandtricks #bnb #hostlife

🏚️ Problem: Payments and Reconciliations.

Managing payments and reconciliations for apartments is a headache for a few reasons:

  • Online channels (AirBnB and Booking.com) don't accept local payment methods.

  • Hosts use their personal accounts and mobile money for payments. Reconciling these payments is a painful, line-by-line exercise.

  • Informal channels can be risky for hosts, with fraud and travelers refusing to pay.

As a customer mentioned: ‘I used to experience fraud cases… someone would send me some edited message saying that they paid for the booking… I would get the person on the ground to let them in only to find out later that the payment was never made…’

🏡 Solution: Tripitaca lets guest houses accept payments and pay expenses.

Tripitaca lets hosts send payment links to customers and track which guests have paid.

This drops the chance of fraud occurring and makes payment collections easy for customers.

It also lets hosts manage, reconcile, and make payments from the platform too.

🏚️ Problem: Underbanked business owners.

Many hosts are underbanked. Setting up a business bank account is painful and requires formal business registration. Travel businesses are locked out of financial services like revenue financing and credit.

A Tripitaca user we spoke to explained how they get financing. In many cases, it’s not from the bank. Instead, loan sharks are the fastest way to get credit:

‘The deal is you get a loan for a maximum of 3 months – you maybe get a loan of $1,000 – by the time you pay back the loan, you will have paid back $1,800.. They prey on the fact that you cannot access the loans from institutions.’

🏡 Solution: Credit for travel SMEs

Tripitaca can provide credit for travel SMEs, and have an edge by collecting strong data on travel businesses bookings, cash flow, and demand.

This lets them finance travel SMEs to get them through ‘low seasons’ and improve their properties while minimising default risk.

And as the main payment platform for travel businesses, they can collect repayments from their customers directly.

Through a partnership with a Kenyan commercial bank, they piloted financing with 10 of their customers last year. Tripitaca will continue to test financing before rolling it out to all customers next year.

Customer Love

As a result of building out these features for travel businesses, they have a very high customer love.

Tripitaca has a Net Promoter Score (or, a customer loyalty score) of 71.

A score of 30 is considered high, and 71 is very high. And it’s not just in the feedback: it’s in the traction, too.

Traction

Tripitaca has 2300+ business owners paying monthly on their platform.

Last month, they crossed $2 million USD in annualised revenue.

This is very fast revenue growth: tripling revenue since January this year and speeding up.

And while their revenue grows, their customers are staying on the platform with an average of 84% yearly retention.

Tripitaca’s product retention is also growing over time, which means their product is improving and customers are staying on the platform for longer.

Tripitaca makes money in three ways:

  • Subscriptions: The monthly SaaS fee paid by the Accommodation Providers

  • Commissions: For trips booked through Tripitaca’s online platform, Tripitaca will take a commission.

  • Payments Processing: Accommodation providers share payment links to their customers - Tripitaca takes a clip of these payments.

Go To Market

Tripitaca’s core go-to-market is paid marketing spend to acquire hosts as qualified leads.

They also have an ‘agent model’ with a team on the ground in a typical B2B software sales model.

They use ads to get leads and have sales agents close them.

Peter and the team will also develop their referral campaign, build their agent model, and build a brand to reduce their cost of acquisition over time.

Tech Safari will play a role in advising Tripitaca on its brand and organic growth as the go-to for African travel hosts.

@tripitacake

As an #airbnbhost automation will have you achieving more while doing less. Unlock efficiency by #automation with Tripitaca.

Team

Tripitaca has a strong and experienced team behind them who have deep knowledge of the travel industry. Starting with:

Peter grew up in his mother’s guest house in Lamu, Kenya, and eventually co-founded his own agency that managed AirBnB and guest houses.

He is a serial entrepreneur and exited a social enterprise clean water initiative to US philanthropic arm Pure Aqua after winning Africa’s biggest business competition at the time.

Peter experienced the problems these travel businesses have firsthand decided to start Tripitaca.

Collins and Peter go way back to their high school days.

After founding his own software consultancy firm, Collins founded BodaCare - an Insurtech helping motorbike operators to get insurance. He had a small exit to Directline before joining Peter at Tripitaca.

Carol Njuho, Head of Marketing

Carol joined Tripitaca from her prior role as the Head of Digital Marketing (Kenya) at InterContinental Hotels Group and ex-Betika (largest betting company in Africa).

We think they are the right team to build a venture-scale solution like this for Africa’s travel industry.

What we love

There is a lot to love about Tripitaca, but here are the highlights:

  • Customer love (in stories and numbers): The reviews from customers are glowing, and the numbers show that more and more customers are happy to pay recurring revenue to use Tripitaca as their retention grows.

  • Great unit economics: Monthly SaaS is extremely hard to pull off across Africa. This team is making it work and have the strong unit economics you need to build a great SaaS business.

  • Underserved market: The travel rental market is untouched, hard to find, and underserved. No one is building for them - although they turn over significant revenue. Tripitaca has an opportunity to build services around these businesses and become the one-stop shop for everything travel in Africa.

Risks

  • Addiction to Paid Marketing: Tripitaca is reliant on paid marketing as the main growth lever. There is a risk that CAC keeps rising as they grow in spite of their attempts to reduce it.

  • Geographic Expansion: Kenya is the largest East African market, but if Tripitaca wants to be venture scale they will need to expand. Scaling out of East Africa will be a tough task - requiring local execution and winning markets house by house.

Tripitaca and the world of Offline AirBnB

In Africa, the real opportunity is rarely visible online. It’s offline and informal: systems which are manual, tricky to navigate, and hard to find or understand.

Tripitaca has found Offline AirBnB: a massive offline and informal market and they are solving problems for rental owners: making it safer and more efficient for them to grow their business through tech.

If you want to get involved

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