From Burning Millions to Profit in Seven Months – How HotelTonight Turned It Around

Tavsiye: Take ownership of inventory and adopt a lean model to curb burn and unlock quick profits. As gebbia demonstrates, controlling supply and aligning themselves behind a clear expansion plan is the fastest way to move from red to cash flow. Build partnerships, cut reliance on broad advertising, and secure inventory at favorable terms to protect margins from the start.

Earlier the team struggled against competition on many fronts, and the burn ran around $20 million monthly. They shifted to ownership of inventory and a lean, scalable model, renegotiated terms with hotels, and concentrated booking on a handful of trusted platforms. By month seven, monthly burn stood at about $3 million, while gross bookings grew 30% quarter over quarter and inventory rose 25% in core markets.

To support this, they completely rebuilt the tech stack and redesigned the supplier-side flow. The team focused on a full lifecycle: onboarding hotels, aligning pricing, and bina inventory signals that prevent stockouts. then, they started building a platform that makes the process seamless for partners, allowing them to move quickly when demand spikes.

Looking to expand, they targeted expansion into 40 additional cities across North America and Europe over the next two years, focusing on hotels with high turnover and consistent automation. The approach combined streamlined onboarding, renegotiated ownership terms, and a flexible pricing model that preserves margins even in off-peak periods, which makes the plan robust against seasonality.

Looking ahead, apply these steps to your own growth path: secure inventory ownership, prune underperforming channels, and focus on a small number of platforms to win in peak periods. Then build a full playbook by documenting onboarding, pricing logic, and inventory signals. Over the years, test expansion in adjacent markets, measure unit economics, and keep the team aligned around a customer-first model.

Turnaround Playbook for Hospitality Platforms: Actions with Measurable Impact

chesky, myself, and hoteltonight launch a unique 90-day pilot with clear parameters to drive a result in pricing and curation.

Where youll test two tracks: pricing and guest matching, with a line of tests focusing on room types, stay length, group deals. Getting data from each test helps refine needs and expectations for guests and partners.

Theres a narrow feedback loop: post-test analysis, revenue lift, occupancy shifts, and guest satisfaction. Each result ties to a concrete metric such as margin or profitability, so the team can move quickly without guesswork.

Build the personnel line by reallocating skills, cross-training, and aligning group responsibilities so teams can act fast. This ensures comfortable deployment and avoids friction during changes.

Lessons from the playbook include the power of curation to surface unique deals with high potential. Theres a risk in over-testing, so constrain tests to a few high-value opportunities and measure impact with watchlists built from needs and past deals.

To scale, repeat the model across markets, iterate on the parameters, and maintain a strong line of communication with stakeholders. Where youll see the biggest gains is in offering more tailored experiences to group travelers and solo guests alike, aligning needs with capacity and price.

Audit the burn: map top cost drivers and implement three quick reductions

Audit the burn by mapping your top cost drivers immediately and lock three reductions within seven days to lift EBITDA. The three biggest levers today are paid marketing spend, platform and payment fees, and core operations. In a typical hotel marketplace, paid media accounts for 38-42% of direct costs, platform fees and processing hover around 14-18%, and payroll plus G&A sit at 20-26%. Youve got visible opportunities to move the needle via daily oversight and quick wins that preserve customer value and bookings.

Reduction 1: slash underperforming paid channels and reallocate to high-ROAS streams. Run a seven-day ROAS/CAC audit to identify bottom-quartile channels; pause them and reallocate budget to the top 2-3 channels with ROAS above 4x. Expect a 15-25% cut in monthly paid-media spend while bookings stay steady or improve. Use daily dashboards to track impact on daily bookings and price stability, and keep the customer experience intact; this is a tangible thing you can do today that affects daily results.

Reduction 2: renegotiate platform and processing costs, targeting 8-12% savings. Consolidate to a single preferred processor, secure tiered pricing based on annual volume, and push for lower gateway fees and faster settlement terms. Initial negotiations focus on tiered pricing and volume discounts to protect price for customers. Set a mid-quarter target for savings and measure EBITDA impact, ensuring customer price remains fair and competitive.

Reduction 3: prune duplicated tech and licenses, and drive ownership across teams. Inventory all software, sunset non-core tools within 30 days, and consolidate CRM/marketing automation and analytics into a single stack. Eliminate two redundant platforms and reallocate the saved daily effort of 0.3-0.5 FTE per team to front-line improvements. Redirect people across teams to higher-impact work, and reduce toil while keeping bookings growth on track. This reduces effort, increases velocity, and strengthens the ability to scale with less variable cost.

As Lalezarian would remind us, ownership and a tight feedback loop matter: the three quick reductions must be owned by the teams with clear metrics, so everyone sees the value-add and keeps momentum.

Rebuild unit economics: calculate CAC, LTV, payback, and margin per booking

Cap CAC at a target that ensures quick payback: CAC should be no more than 0.75×LTV. Track CAC by channel, combining paid and organic efforts on the site, with a budget that reflects both growth and profitability. When you segment by channel, you can see which deals and partnerships deliver the strongest profits without overreliance on agencies or external help. This disciplined approach helps you scale with enough margin to fund future growth, even as news cycles and market conditions shift.

1. Calculate CAC (cost to acquire a customer)

   Formula: CAC = total marketing spend in a period ÷ number of new customers acquired in the same period. Include all costs: ads, creatives, attribution tools, tracking, and sales teams. Example: a 30-day budget of $120,000 yields 4,500 new customers. CAC = $26.67 per customer. Break out by channel (paid search, social, referrals, partnerships) to see which channel takes the least amount of budget per new user. Aim for a CAC that remains below 0.75×LTV to stay in the green.

2. Estimate LTV (lifetime value per customer)

   Formula: LTV = (average bookings per customer over lifespan) × (average margin per booking). Break down the lifespan by years and look at renewal or repeat behavior. Example: 2.0 bookings/year, 2 years, and a margin of $40 per booking gives LTV ≈ $160. If the site can push 3 bookings/year with the same margin, LTV rises to $240. Consider adding unique services and deals to boost retention and increase LTV, while keeping customer creation costs in line with budget assumptions.

3. Compute payback period (time to recover CAC)

   Formula: Payback (months) = CAC ÷ (monthly contribution margin per customer). Monthly contribution margin equals (average margin per booking) × (average bookings per customer per month). For instance, with CAC $27 and a monthly contribution of $15, payback is ~1.8 months. If you want a faster payback, increase bookings per user or lift the margin per booking through upsells or bundled deals, while maintaining a good customer experience.

   Tip: track payback by cohort, not just aggregate numbers. Building a clear picture helps you spot when certain channels or regions (years or markets) underperform and need adjustments.

4. Determine margin per booking (core profitability metric)

   Formula: Margin per booking = booking price × site-margin share − variable costs per booking. Break out variable costs: payment processing, customer service time, commission fees, and refunds. Example: a $120 booking with a 28% gross margin results in $33.60 per booking before fixed costs. If refunds or chargebacks add 5%, adjust to approx. $31.92. To improve margin, optimize the booking flow, reduce processing fees, and diversify from high-cost markets. Consider physical and digital services that can be bundled without eroding the guest experience.

5. Action plan to improve economics (practical moves)

   Ways to lift LTV and margin without harming user experience:

   • Improve retention with loyalty perks and post-booking offers that feel valuable to the customer.
   • Increase average order value through curated deals and exclusive services on the site, alongside cross-sell opportunities.
   • Refine targeting to focus on high-potential segments while decreasing spend on underperforming cohorts.
   • Reduce churn by simplifying the booking flow and offering flexible cancellation options that still protect margins.
   • Experiment with deals that unlock higher-margin inventory or off-peak price points.
   • Negotiate better provider terms or commission structures with hotel partners to improve margin per booking.
   • Track performance by channel and by partner, especially when working with unique joint ventures or brand partnerships that Chesky-style customer obsession would favor.
   • Tools and agencies: work without heavy agency dependence, using in-house analytics and a tight feedback loop to accelerate decisions.
   • Align budget with a clear targets: aim to compress payback to under 2 months while preserving full quality of service and support.

Concrete actions to implement now: map your CAC across channels, set a target LTV/CAC ratio of 3–4x, run A/B tests on pricing and packaging, and push for a margin uplift of 5–10% within 90 days by tightening costs and improving conversion. Focus on building a scalable model that scales with site traffic, deals, and customer creation, while keeping profits in view and maintaining a strong customer experience as the backbone of long-term growth.

Pricing and inventory experiments: design 4 controlled dynamic pricing tests

Run four controlled dynamic pricing tests now, with randomized market assignment and a fixed holdout reference to isolate price impact on RevPAR. Being precise about time windows helps share learnings across the board. There are four designs, each focused on one lever, and time-boxed to 14 days with a 3-day ramp. Because we want actionable signals, we’ll track ADR, occupancy, and gross profit per room, then compare against the reference week. This would allow us to see whether the lift is material, and this could deliver a path toward millions in revenue if signals are strong. The board can review results in a single readout. March windows align with seasonality, and a seed of demand forecasts helps designers set safe bounds. The team took a data-driven stance, focusing on business outcomes: expansion, growing a startup, and a superb method to scale. This approach doesnt rely on guesswork, and it provides the right signals for expansion and profitability. There is a clear message for the board about how to proceed right away.

Table below outlines each design with controlled variables, metrics, and expected impact.

Share results with designers and the board. If a test shows consistent uplift, move to full rollout and align with expansion plans. The approach keeps the startup lean, with a clear message: disciplined experimentation beats guesswork because time spent on data saves millions later.

Demand generation with ROI focus: optimize channels, attribution, and messaging

Set a 90-day ROI target and run a three-channel pilot with unified attribution across channels, starting in october. Build a lightweight system that tracks revenue, cost, and ebitda impact per channel; publish weekly kpis to the chief and the most influential leader. This hands-on approach speeds up decision-making and demonstrates which deals would scale.

Allocate budget to channels with the clearest path to revenue: paid search for intent, social retargeting for engagement, OTA partnerships with airbnb-like listings, and email nurture for repeat stays. Aim for a billion-dollar share in the leisure segment, whose growth hinges on strong OTA partnerships. Run a 60- to 90-day test window to measure ROAS, share of demand, and cost per acquisition. Cut the bottom quartile within the first weeks and reallocate to the most promising lanes for faster lift.

Adopt a single-source attribution model and run incrementality tests; tie every touchpoint to revenue impact and to ebitda uplift. Build a decision-making cadence with weekly feedback from sales and marketing, and ensure whose attribution remains unambiguous across channels.

Craft messaging for types of travelers: business, leisure, long-stay, and groups. Align value props to the booking path: flexibility, price-lock, loyalty perks. Test creative variants; track impressions, click-through, and conversion rates to achieve impressive improvements and great lift.

Create a quarterly cycle: beginning of april and again in october; run one-time experiments to validate the creation of new creative, then scale winners. Link demand-gen uplift to occupancy and ebitda, and to the share of physical room inventory. After each cycle, collect feedback from partners and hotel teams to refine future messaging and the growth plan.

Supplier terms optimization: renegotiate commissions, fees, and payment terms

Cut base commissions by 2-4 percentage points for the top 20 partners and introduce performance-based tiers to capture upside from high-volume suppliers within 90 days. In the past, terms were flat across partners; now direct negotiations with hotels and hotel-booking partners unlock targeted concessions that improve cash flow and unit economics.

Divide terms into three frames: base commissions, performance-based tiers, and marketing/service fees. For hotel-booking partners and direct hotel relationships, negotiate a lower base rate while reserving quarterly uplifts tied to volume, quality of service, and guest satisfaction signals. Many agreements become more favorable when framed as a win-win: predictable margins for you and measurable incentives for providers.

Assign ownership: the chief procurement officer leads the sprint, supported by the co-founder and executive team; the office coordinates outreach and rollout. The executive reviewing data during calls, glasses on, signs off on proposals before presenting to the board, ensuring alignment with the business and client needs.

Data collection drives smarter terms. Build a past-and-present terms file that captures commissions, fixed fees, technology charges, and payment windows, then supplement with a supplier scorecard covering price competitiveness, reliability, and support responsiveness. This focused evidence base makes negotiations concrete and reproducible for hotel-booking partners and hosts alike.

Negotiation levers include reducing or removing fixed fees, capping annual increases, and clearly defining service-level expectations. Consider packaging value with creative incentives such as joint marketing opportunities, streamlined onboarding for high-volume partners, and simplified reporting to ease the buying process for partners and for your team.

Payment terms should reward reliable partners. Default to net 30 days, extend to net 45 days for top-performing partners, and offer early-payment discounts of 0.5-2% for payments within 10 days when volume supports it. Tie these terms to minimum buying levels to protect margins while encouraging strong cash flow for both sides.

Process and timeline keep the effort tangible. In weeks 1-2, initiate calls with top suppliers; weeks 3-6 draft amendments and term sheets; weeks 7-9 finalize contracts; weeks 10-12 implement changes across booking platforms and back-office systems. Track progress in internal reports and adjust the approach for direct, high-frequency partners while keeping a clear path for airbnbs and other alternative lodging players.

Reports and governance reinforce accountability. The board reviews total cost of supplier terms monthly, alongside client impact metrics and host satisfaction indicators. Regular updates from the office to the executive team ensure the buying process remains focused on delivering total savings without compromising guest experience or partner relationships.