Investment Memo

Roomy Hospitality Technologies PTE. Ltd. (Roomy)

For Internal Use Only

 Investment Memo - Roomy

EXECUTIVE SUMMARY

Company Description
Roomy is a chain of hotels and guest houses that aims to transform the hotel industry in Pakistan by
standardizing service, quality and customer experience. It partners with hotel owners to renovate their
properties and manages them on a revenue sharing or fixed rental basis. The company is currently
primarily operating in the northern areas of the country, and is planning expansion to cities in the
central and southern region of the country.
Market Opportunity
According to the World Travel & Tourism Council, travel and tourism contributed $12b (c.4%) to the
total GDP of Pakistan in 2020. The market is expected to continue to grow at a CAGR of +3% through
2026.
The country’s tourism sector is driven primarily by domestic spending, which represents c.90% of the
total tourism expenditure, whereas foreign tourism constitutes 10% of the total spend. The improving
security situation in the country has led to an increasing number of foreigners visiting the country to
explore the local culture and cuisine.
● In the past six years, +60k foreigners have visited Pakistan. The country is expected to see a rise
in the number of foreign visitors by 30% until 2030.
● Domestic tourism is on the rise due to improved infrastructure leading up to tourist sites. Many
projects are now underway to make the northern parts of Pakistan more accessible and at par
with international standards.
Estimates from the Pakistan hotel association suggest the country’s hospitality industry operates more
than 10k hotels across the country, including three, four and five-star hotels. The total number of hotel
rooms being managed in these hotels exceeds 50k. Assuming an occupancy rate of 50% & an average
daily rate (ADR) to be $70, the revenue opportunity is north of $500m. With Roomy beginning to offer
complimentary product offerings such as banquet halls, restaurants, and managed tours, we estimate
the revenue opportunity to be significant.

Competition
Whilst there is considerable local competition in the hospitality sector with the availability of luxury
hotels, budget hotel chains, guest rooms, and unbranded hotels, Roomy differentiates itself through its
relatively capital-light model, carefully curated marketing, and ability to target the more affluent retail
segments of society.
● Luxury Hotels (PC/Serena/Avari): Five-star hotels primarily in metropolitan cities across Pakistan,
targeting corporate clientele and the more affluent segment of society. These hotels house
restaurants, event halls, corporate offices, and rental rooms.
● Budget Hotel Chains (Avari Express / Hotel One): Three-star hotel chains managed and operated
by premium hotels to offer lower-cost alternatives to luxury hotels.
● Budget Hotel Rooms (Orange Loft, KTown Rooms): These companies partner with unbranded
traditional hotel chains to address the market gap for budget-sensitive travelers and offer

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standardized services. Management of these localities is carried out by hotel operators and the
platforms act as aggregators for different hotel locations.
● Guest Rooms / Unbranded Hotels: Majority hotels in the country remain unbranded. They
attract a wide array of guests. Estimates suggest there are a total of 110,000 + unbranded hotel
rooms in the country.

Traction
The company has demonstrated strong growth, growing into a network of x locations in the northern
areas of the country. The company posted revenues of $xm in FY’22, which represented a c.x% increase
from the preceding year. The increase in FY22 revenue was driven by increase in operational capacity
(c.x%), increase in occupancy rates (c.xppts) and increases in average daily rate of (c.x%).
Revenue for the month of June increased by c.x% on a MoM basis, due to June being the peak season
for travelling to the northern parts of the country. The revenue in primary cities like Islamabad
remained relatively unchanged while a significant increase in revenue came in tourist destinations -
Hunza, Nathia Gali, Murree.
The occupancy rate for FY 22 was x%, which was x ppts higher than the preceding year. The occupancy
rate is skewed by high occupancy rates in Roomy’s Signature Hotel (x%) in Islamabad, which contributed
c.x% of the room revenues.
Revenue per available room (RevPAR) grew by x% from PKR x ($x) to PKR x ($x). Average daily rate (ADR)
for June-22 stood at PKR x ($x). The company has an inventory of 616 rooms across 14 locations, 399 of
which were operational as of June-22.

Team
Roomy was founded by Asad Samar who acts as the CEO for the company. Asad holds a doctorate in
Computer and Electrical engineering from Carnegie Mellon University and has a background in finance
with experience of working at Goldman Sachs. This is Asad’s second start-up venture, he founded
AltTrading in 2017 – an algorithmic trading firm for cryptocurrency, which is not operational currently.
Abdul Rehman is the CTO for the company. He has previously served as Head of Engineering (IVR -
Interactive Voice Response) at Telenor and headed backend operations for Convo - a team
communication and collaboration partner, headquartered out of Islamabad.
Haasin Bin Zahid serves as the COO for the company. He has served as Head of Acquisition & Business
Development at Jovago – a web portal featuring hotels, motels, and guest houses. Jovago has closed
operations in Pakistan. Previously Haasin headed HR for AIESEC – a non-profit based out of Canada.
Hassin has been associated with Roomy since the company’s inception.
The company does not have an ESOP currently, but the team is open to having one to onboard
resources who can add value to the business. There is also a need to onboard a Head of HR and a CFO.

Transaction Construct
Roomy is looking to raise $x at a pre-money valuation of $x as part of this round. The company has
received commitments of $x from existing and new investors. We have an opportunity to invest $x as
part of this round. We shall be the lead investors for the round and also be allocated a board seat.

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The founder has expressed his willingness to receive our potential investment in two tranches i.e. We
can invest up to $x right now and receive an option to invest the remaining amount of $x at the same
pre-money valuation i.e., $xm. The option shall expire on 31st March, 2023.

Valuation & Returns

Hospitality companies listed on the PSX and internationally (e.g. Marriott/IHG) are trading at a revenue
multiple of 4x. Global and regional hoteltech companies (such as OYO in India) have raised capital at an
average revenue multiple of 15x. Considering the early stage growth Roomy has been able to
demonstrate and the potential of the company to scale regionally & roll-out a subscription based
product, we believe roomy should be valued at a premium to the local listed competition.
We believe that a multiple of 5x is justifiable considering the company’s strong growth potential. At a
pre-money valuation of $x, the company is currently looking to raise funds at an LTM revenue multiple
of 5.1x and an implied forward revenue multiple of 3.4x. We believe that an EBITDA multiple of 14x
could be attainable by the company by year 4(FY’26), considering the company will be among the largest
hotel management companies in the country. Assuming no dilution rounds (given this round together
with ongoing cash generation should finance the growth), we expect the investment to yield an IRR of
x%+.

Why do we like the Investment opportunity?

We like the Roomy opportunity for the following reasons:
● Market opportunity: We believe that there is a big market opportunity to serve the upper
middle class and corporate segment in the country, which is estimated to be over 15 million
individuals. With a focus on maintaining quality, dynamic pricing, and customer experience, the
company is quickly becoming a market leader and capturing a fragmented market.
● Business Model: The business model involves partnering with existing hotels / guest houses,
which reduces CAPEX spend and decreases the turnaround time to operationalize a locality. This
means that the company can scale across regions quickly as there are no structural changes /
new construction carried out. The revenue-sharing model allows Roomy to share performance
risk with its partners, which allowed Roomy to be more resilient through the Covid period. The
properties are managed by Roomy, which allows them greater control over the customer
experience and service quality.
● Traction: Roomy has demonstrated strong growth, growing to x locations in a short time frame.
The company has an inventory of 616 rooms with an x% occupancy rate (operational room),
serving a total of c.x nights. As brand equity grows and corporate customers are onboarded, we
anticipate these numbers to improve. With advance payments from guests, the company has a
small working capital working cycle.
● Founding Team: We are convinced that the leadership team at Roomy is the right combination
of people to scale the product. During our conversations, we’ve been impressed by the
founder’s work ethic, transparency, and understanding of the business. The founding team has
experience working in the hospitality sector and has international exposure and experience
scaling tech products.

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● Customer Feedback: Based on the team’s personal experiences, informal customer feedback,
and google reviews, customers rate their experience with Roomy very highly (highest amongst
local peers). The company has introduced different measures to monitor service quality and
customer feedback to maintain quality. We believe this will continue to contribute to their
brand equity.
● Expansion into Complimentary Verticals: The company is looking to explore expansion
opportunities abroad, especially in the Middle East and Southeast Asia, where there is a big
market for hotel management companies. We believe this would be a viable next step, and that
the team has the capability to execute given the chance. This presents further upside that has
not been factored into the valuation.
● Expansion into Complimentary Verticals: Roomy intends to develop a yield management
platform for restaurants. We have seen this model succeed in different geographies e.g., Eatigo.
The application is being developed by Roomy’s current product team. The company intends to
offer the product as a SaaS play to other hotels/restaurants, which would bring in additional
revenue for the company.

What are the potential concerns to this investment? Do we see the mitigation strategies in place?
● We believe that the recent volatile macro-environment will result in reduced discretionary
spending. This may affect Roomy’s revenue / corporate targets. However, we’ve observed that
despite the inflationary pressures, the company continues to grow and improve its margins. We
believe that this is a function of quality and customer experience and the targeting of the more
affluent customer segment that is more price inelastic. Given the higher cost of international
travel, staycation is becoming more popular globally, including Pakistan. This provides an upside
and increases the overall demand for lodging.
● Roomy’s current portfolio of hotels is concentrated in the northern areas of Pakistan, which is
affected by the seasonality impact. We believe the team needs to diversify across different
locations to reduce the aforementioned. Based on our discussions, Roomy is looking to expand
operations in central and southern areas of the country.
● Roomy intends to expand in secondary (e.g., Faisalabad) and tertiary (e.g., Rahim Yar Khan)
cities over the course of the next three years. While some cities (e.g., Bahawalpur) may have a
tourism element attached to them, many of these cities may not attract a high number of
tourists. However, we believe that there is sufficient corporate travel in these cities to keep
occupancy levels high.
● Roomy is developing a yield management platform in-house, a platform that has been
developed by multiple companies in global markets and is readily available. This is in its early
stage and potential traction in Pakistan remains unclear especially given existing partnerships of
restaurants with banks’ credit cards for discounts.
● Roomy is also considering expanding into the international market, especially the GCC and
Southeast Asia, which are mature markets in terms of hospitality industry and hotel/real estate
management. We believe that market penetration into these markets will be challenging and
require a burn model to gain market share. However, we believe the local market is large

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enough to accommodate growth before maturity scale is reached. We believe that we can
partner with Roomy to help them focus on and capture the local market, and work on the right
approach for potential international expansion (rather than rushing into it).

Recommendation

We recommend proceeding with an investment in Roomy with an initial $x along with an option to
further invest $x (total: x) at a pre-money valuation of $x for a x stake in the company.

Prior to the investment, the company should open an ESOP pool of at least 5%.

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COMMERCIAL DILIGENCE

Company Background

What is Roomy?
Roomy is a chain of hotels and guest houses that aims to transform hotel accommodation in Pakistan by
standardizing service quality and improving customer experience. It was established in 2018, after the
founder Asad Samar, moved back to Pakistan and found a dearth of affordable, high quality
accommodation options within the country. It partners with existing, unbranded hotel owners to
renovate their properties and manages operations of those locations primarily on a revenue sharing
basis. The staff is trained and the rooms are carefully curated to provide a more holistic experience to
customers. The company is primarily operating in the Northern Areas of Pakistan, houses restaurants,
and offers personalized tours to its guests, which include both corporate and retail customers.
The company targets the middle / upper middle-income segment and operates 21 properties across 15
locations, which have a combined capacity of more than 600 rooms. It offers managed tours and hosts
functions & events at its localities. Moving forward, the company also intends on launching a yield
management platform for restaurants and expanding into Middle East / South East Asia - however, this
remains a long-term ambition and has not been priced in.

What is the size of the hospitality industry in Pakistan and target-market for Roomy?
According to the World Tourism and Travel Council (WTTC), tourism and travel contributed c.6% to
global GDP in 2021, up from c.5% in 2020 in the preceding year. With an estimated population size of
over 220m, Pakistan has great potential for domestic and foreign travel that remains relatively
untapped. According to the World Travel & Tourism Council, travel and tourism contributed $12b to the
total GDP of Pakistan (c4%) in 2020.
The country’s tourism sector is driven primarily by domestic spending, which represents c.90% of the
total tourism expenditure, whereas foreign tourism constitutes 10% of the total spend. The improving
security situation in the country has led to increased foreigners visiting the country to explore the local
culture and cuisine.
Northern areas of Pakistan have the greatest influx of travel tourism – mostly domestic– that visit it for
its mountains, plateaus, and picturesque valleys. Gilgit-Baltistan and Khyber Pakhtunkhwa were local
favorites despite the pandemic during the 2021 tourist season. In 2021, there were 5.5m tourists of
which almost 4m tourists visited the tourist destinations of Swat, Chitral, Nathiagali Abbottabad, and
Kaghan and Naran from May to September. Additionally, the Swat Valley remains the most visited site
with 1.5m tourists in 2021.
The Pakistan tourism and hotel market is expected to continue to grow at a CAGR of 3%+ through to
2026.
● In the past six years, +60k foreigners have visited Pakistan. The country is expected to see a rise
in the number of foreign visitors by 30% until 2030.
● Domestic tourism is on the rise due to improved infrastructure leading up to tourist sites. Many
projects are now underway to make the northern parts of Pakistan more accessible and at par
with international standards.

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● Given higher cost of international travel, staycation is becoming more popular globally, including
in Pakistan
Estimates from the Pakistan hotel association suggest the country’s hospitality industry operates more
than 10k hotels across the country, including three, four and five star hotels. The total number of hotel
rooms being managed in these hotels exceeds 50k. Assuming an occupancy rate of 50% & an average
daily rate (ADR) to be $60, the revenue opportunity is north of $650m.
Roomy’s target market constitutes the urban traveler belonging to the upper / upper middle class of
society. Extrapolating data from the World Bank, we estimate at least 15m people within the local
population can be categorized as Roomy’s target market. These customers have greater discretionary
spending power and also travel for work within the country’s major and minor cities, as well as family
events in different cities.
Tourist destinations within the country witness a shortage of lodging and accommodation facilities that
meet customer expectations and often offer dated corporate-like rooms. With Roomy beginning to offer
complimentary product offerings such as banquet halls, restaurants and managed tours, we estimate
the revenue opportunity could be significant.

What is the company’s operating model?

Roomy partners with unbranded hotels and guest houses to renovate the properties and manages them
to offer rooms to customers / operate restaurants. The partnership agreements have a duration of 8 to
15 years. The timeframe for renovation varies depending on the locality, the initial condition of the
property, and property age. The renovation spend per room averaged north of $2k, though we see the
spend going down as Roomy is working with developers who are building specifically for Roomy - the
last 100 rooms added incurred no major capex spend; average renovation spend has come down to
below $1800/room.
Only the building(s) interior is renovated, and no structural changes are made. The focus is on quality
and customer experience. Staff hiring is carried out in parallel to the renovation work. The company’s
increasing brand equity has allowed them to gradually share the renovation costs with the landlord.
The structure of the lease can either be a fixed-value rental or a revenue-sharing model:
● Fixed value rentals are undertaken when the management team is confident of the occupancy
rates. Currently, cx% of locations operate through a fixed value rental agreement. Some of the
initial agreements were on this basis.
● x% of the locations operate through a revenue-sharing model. Revenues can be shared on per
room basis or can include other categories as well i.e., meetings revenue, restaurant revenue.
The current revenue split between Roomy and partner hotels on a portfolio level is x:y - the
management expects this ratio to increase to a:b.
● The company has also been approached by real estate developers who are developing
infrastructure in different areas primarily to partner with Roomy in these localities. The
management believes the operational time shall be between two to three years. This will help
Roomy expand into prime locations, with minimal effect on its own balance sheet.
The company believes that increased brand equity could allow Roomy to negotiate preferential lease
terms going forward.

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Roomy has a strong focus on its learning and development (L&D) function. The L&D function helps the
company attain specific quality standards and offers a standardized customer experience across all
locations. The company employs a stringent hiring process placing great emphasis on educated talent.
Currently, training takes place in Islamabad – Roomy HQ. The team intends on developing more training
locations as the company’s geographic spread increases. This could allow them greater control over
quality, and help de-risk against negative brand equity in cases where certain properties may have less
trained staff.
We believe managing hotel operations allows for greater control over customer journeys as compared
to operating on a partnership model with hotels, where operations are managed by the hotel operator.
Customers have a follow up call following check in as well as post check out on their experience. We
have also checked reviews of Roomy hotels which are positive - 9.4 (Google rating across all locations)
The company has a strict cancellation policy. If cancellation is accepted, customers are offered to rent
the same location within the same calendar year. The company allows no discretionary cancellation. In
addition, they operate 7 partner restaurants at their hotel premises. One of the restaurants is a food
lounge – two restaurants operational in a communal space. Roomy is currently experimenting with the
food lounge model. Under the agreement, the company shares the rental cost and revenue with the
operators of the food lounge. The operational expenses are borne entirely by the restaurant operator.
As the company expands, Roomy carries out market diligence to understand the demand for short stay
rentals, market competition, discretionary spending power, tourist attraction, corporate workplace
density, proximity to comparable facilities and the feasibility of maintaining standards.

What is the value proposition being offered by Roomy to Landlords / Guests?

Roomy allows landlords/hotel owners to enjoy a passive income stream while Roomy takes the
responsibility of marketing and providing international-standard facilities at reasonable prices for the
upper middle class traveler to afford luxury accommodation. It thus helps boost sales of
unbranded/mid-scale hotels by providing them with necessary renovations and high-quality services
that are expected by an urban traveler as well as a carefully curated marketing campaign via social
media / online channels. Furthermore, we anticipate this to reduce going further as more brand equity
builds.

Additionally, Roomy’s value proposition for travelers translates into a standardized and high quality
experience throughout the customer journey. Roomy provides access to comfortable accommodation
with standardized rooms, and branded amenities. These are often the expectations from top-tier hotels
in the country, which cost between PKR 20,000 to 35,000 on average per night. Whereas, Roomy’s
average daily rate per night ranges between PKR 6,000 to 30,000.
See: Appendix D
Roomy claims to revolutionize the mid-tier accommodation industry in Pakistan and contribute to the
country’s tourism and economy.

What is Roomy’s go-to-market strategy? What does the customer experience journey look like?
Roomy’s GTM is unique for both the hotels and guests; customers are acquired through digital media
(Instagram, Facebook, Linkedin), advertisements and referrals. Significant customer inbound is received
through Instagram. The focus recently has primarily been on Google as its CAC is better than that of

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Facebook and Instagram. Google is also more effective as they get to individually list each property,
which leads to a linear increase in direct bookings as more properties are listed.
As for the property acquisitions, the Business Development team (2 people) reaches out to potential
hotels in the country. However, given the significant popularity of Roomy (through word of mouth and
other channels), many hoteliers are now also reaching out to Roomy themselves instead of the other
way around, resulting in almost 200 rooms in their pipeline.
The customer is redirected to the website to make a booking. The website has separate pages for each
locality with maps/locations. Reservation can be made via website/application or by calling the call
center. This is the first point of contact between Roomy and the customer. Once the customer checks in,
they receive a call from the guest relation management team (headquartered in Islamabad) after seven
minutes to see if the room is as per the customer's expectations. This is separate from the local property
management team. Customers also receive a final call upon check-out. Within two days, they receive a
google form (automated message). The google form helps Roomy track relevant KPIs and improve
customer satisfaction.

Has Roomy been able to develop any strategic partnerships?

Roomy provides corporate discounts and maintains a total of 55 accounts that account for x% of
revenue. Relevant examples include Mckinsey, Unilever, and Ufone. Partners are offered exclusive
employee discounts (ranging from 13-15%). This helps with word-of-mouth marketing through the
corporate’s entire employee base. Roomy has developed cross-marketing partnerships with Sapphire
and McDonald’s – a collaboration where both parties receive discounts from one another in exchange
for promoting their products or services. This would particularly help at locations where corporate travel
is more significant.

How can guests make reservations for rooms at Roomy? How does it differentiate itself from the
market competition?
Guests can reserve rooms on the website or via the mobile application(s), available on the App and Play
Stores. This is the general standard in the travel industry where any chain would have its presence
accessible online. The Roomy app allows users to book rooms and manage their stay at their fingertips.
The app has real-time visibility of the pricing information and availability of rooms. It also allows the
users to enter their traveling dates, as well as compare and select properties according to their budget –
allowing for a seamless customer experience process at the time of reservation.
We see having multiple avenues available to book, i.e. website and application as a necessity. This
omnichannel is a necessity in today’s day and age, and less of a choice. The Roomy app and website give
prospective customers enough information to satisfy any traveler’s questions. Customers are also able
to book via Booking.com (which charges 12-15% commission) - however, this accounts for only x% of
revenues.

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Have similar business models succeeded in other countries/geographies?

Oyo (Unicorn) - Founded in India

Oyo Rooms was founded in 2012. The global platform rebrands unbranded traditional hotels. The initial
capital cost is borne by the company. Oyo provides traditional hotel chains a digital platform resulting in
higher revenue, and increased occupancy rates. It franchises and leases assets. The team conducts
training and development sessions to ensure customer satisfaction. The company has 26 training
institutes across India.
The company has 43,000 properties and 1m rooms across 800 cities and 8 countries. Country locations
include Sri Lanka, Indonesia, India, Vietnam, China, and the United States. The company’s application
has over 100m downloads and is the 3rd most downloaded app in its category. Additionally, the
company had revenue of $550m in FY’21.
The pandemic, however, greatly impacted operations as the company saw a 54% YoY decline in revenue
for FY 20-21. It laid off 12% of its workforce in India and 5% of its employee base in China.
The company raised a total of $4b over 19 rounds. Their latest funding – a Secondary Market round was
in early 2022. The current investor base includes Microsoft, Airbnb, China Lodging Group, Softbank
group, etc – a total of 28 investors. The company is currently considering an IPO at a lower valuation of
$7-8b than the earlier planned figure of $11b.
Referring to Appendix B, OYO managed to 16x the bottomline, or return per room. The cost per night
incurred to the hotel of each room falls drastically as occupancy increases. This is due to most costs
being fixed and sunk, such as real estate, upgrades and renovations, and housekeeping staff. The
marginal cost per room is negligible and variable, such as electricity consumption, or in room
consumables such as toiletries. Given this nature, once revenue goes beyond cost, there is a very low
marginal cost of each night and thereby a high marginal return.

Placemakr - US

Placemakr is a tech-enabled hospitality platform and operator that partners with developers, property
operators, and investors to curate a collection of apartment-like spaces in hand-picked neighborhoods.
These buildings range from brand-new apartments to older properties. Guests and residents have the
flexibility to stay as required i.e. for a night or a year.
The company positions itself as between traditional hotel chains and more residential Airbnb properties.
They position it as a flexible housing brand, with home-like amenities. However, it resembles a managed
form of Airbnb more than a hotel. There is no mention of daily cleaning or other housekeeping services.
Properties may feature amenities such as a pool or meeting rooms, however there is no standardisation.
Rates are on the higher end compared to hotels in comparable locations, as well as less amenities being
offered.
The company was founded in 2017. Placemakr has raised over $100m to-date. The company raised
$90m in its last round held in Jan '21. The startup received $3.9m in seed funding in June 18, $10m
funding in Series A in Dec '18, and $20m in Series B funding in Dec’20.

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Frank Porter - Dubai (property management)

Roomy intends on following a similar path to Frank Porter in Dubai for its international expansion plans.
Frank Porter, a property management company headquartered and operational in the UAE, was
founded in 2017. The company enables property owners to rent apartments hassle-free. The company
photographs and lists the apartment provides cleaning services and amenities and communicates with
guests on behalf of the property owner. The company operates on a revenue-sharing model charging
17% of total revenue. The cleaning and amenities cost is borne by the company.
The company manages a total of 800+ properties across the UAE. The company has raised no money so
far. This is a competitive space in UAE with multiple small-scale players. Roomy’s team believes there is
great potential to partner with property management companies based in the UAE in the future to meet
their software and staffing needs rather than directly competing initially.

Eatigo - HQ Thailand (restaurant yield management)

Roomy intends on establishing a restaurant yield management platform in Pakistan. Roomy’s team
believes there are great similarities between Pakistan and the region Eatigo operates in – price
sensitivity and a growing Gen Z user base. Eatigo - a restaurant reservation application was founded in
2013. The app allows restaurant owners to improve a restaurant's profitability by increasing occupancy
during off-peak hours. Eatigo offers time-based discounts ranging from 10 to 50%. A flat 10 % discount is
offered regardless of time. The company runs a campaign on Wednesday where it partners with
restaurants to offer a 40-50% discount for the entirety of the day.
Eatigo recently has pivoted to food delivery. Customers can select the restaurant and time for pickup for
a delivery driver. The discount amount is dependent on the time for pickup. Eatigo has no delivery
drivers yet partners with delivery companies.
The company allows users to rate restaurants, and connect with a live agent to respond to queries.
Additionally, restaurants are sorted based on theme and cuisine. The company is currently operational
across 15 cities and 8 countries. Country locations include Hong Kong, India, Indonesia, Korea, Malaysia,
Philippines, Singapore, and Thailand. The app has been downloaded by 1.5 m customers. Eatigo has
partnered with 4500+ restaurants and has served over 5m customers.
The company operates on a commission-based model. It charges restaurants based on each booked seat
routed through the app. Eatigo has raised a total of $25.5m and is valued at over $100m. The company
raised a $9.5m Series C round in 2018. Tripadvisor was an early investor in Eatigo.

How has the local market competition performed?

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Lokal
Lokal partners with unbranded traditional hotel chains across Pakistan to address the market gap for
quality hotel chain prices for budget-sensitive travelers. The company operates 70 rooms across 6
different cities i.e. Lahore, Karachi, Skardu, Swat, Hunza, and Naran.
Lokal rooms are in a dedicated section within the partner hotel e.g. a floor with Lokal only rooms. The
company enters into long-term agreements with hotel operators for 3-10 years. Lokal’s dedicated
section undergoes renovations to meet company standards. However, other areas e.g. reception, room
service, restaurants continue to be managed by the existing hotel operator. The revenue is split 50-50
between Lokal and hotel owners/operators. The upgrade and renovation cost is entirely borne by the
hotel owner and re-paid via an interest free loan over 9 months. The revenue split is altered in Lokal’s
favor during the payback period of the renovation budget. Utility and operation costs are borne by the
hotel owner.
The company provides training and development to hotel staff. It also hires a journey specialist for
every 2 locations. A journey specialist ensures room quality and records customer feedback.
The average daily rent is considerably lower compared to Roomy. The average price varies from PKR
5,000 to 13,000. The company’s revenue for June was $25k. Occupancy rates average around 70%.
While the seasonality impact is relevant, revenue varies by 25%. The customer acquisition cost is $5
while a Customer’s lifetime value is $104.
The company is looking to raise $2.5m at a post-money valuation of $12-15m and has $1m in
commitments. Roomy initially experimented with the Lokal model however quickly realised that service
quality deteriorates when there is no control over the full customer experience when it comes to check
in at reception, room service etc.

Hotel One
Hotel One operates under the Hashoo group – a Pakistani conglomerate active in hospitality, oil, and
gas. Hashoo Group owns a 17% equity stake in HotelOne. The group operates Pearl Continental,
Marriott, and Hotel One. Hotel One is a more cost-effective option, launched in early 2006. Prices are in
line with Roomy.
Hotel One operates in 14 locations across Pakistan and has a total of 22 hotels. Hotel One intends on
further expanding into mid-tier cities. Hotel One saw a decrease of 13.4% in revenue in FY’21 compared
to FY’20. It incurred a loss of $3k in FY’21 and a loss of $120k in FY’20.
Occupancy rates for Hotel One have averaged 46% for FY’21.

Avari Xpress
Avari Xpress founded in 2012 is a 3-star hotel chain which is owned by the Avari Group. The price point
for Avari Xpress is similar to that of Roomy’s. The company is in a total of 4 locations – Islamabad,
Multan, Lahore, and Faisalabad. Avari Xpress operates a total of 6 hotels.
The management is executed by Avari while property owners get a fixed value rental as lease money for
a period of 20 to 25 years. The eventual profit and/or loss is the responsibility of Avari Hotels. Owners
are guaranteed a constant stream of income.

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Orange Loft
Orange Loft is building and renovating local accommodations in North Pakistan. Orange Loft has a total
of 11 locations – 10 locations in North Pakistan and 1 location in Lahore. The price point varies from PKR
10,000 - 15,000. The company also rents motorhomes. Motorhomes are rented for PKR 60,000 per day.
The company has incorporated a VR tour for every location on its website.
Orange Loft has an annualized revenue of PKR 52m. The company has raised no money so far.

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Team

Who are the founders of Roomy? Who are the key functional leaders?

Asad Samar (Founder & CEO; x% Equity)

Asad is the founder and CEO of Roomy. He holds a doctorate in Computer and Electrical engineering
from Carnegie Mellon University and has worked as a Research Consultant for the California Institute of
Technology. Asad has a background in finance where he served as an executive director at Goldman
Sachs, specializing in quantitative trading and has been associated with a variety of firms specializing in
algorithmic trading. This is Asad’s second start-up venture, Asad founded AltTrading in 2017 – an
algorithmic trading firm for cryptocurrency. The company is not operational.

Abdul Rehman Malik (CTO; x% Equity)

Abdul Rehman has extensive industry experience. He has served as Head of Engineering (IVR -
Interactive Voice Response) at Telenor. Previously he headed backend operations for Convo - a team
communication and collaboration partner, headquartered out of Islamabad.

Haasin bin Zahid (COO; x% Equity)

Hassin served as Head of Acquisition & Business Development at Jovago – a web portal featuring hotels,
motels, and guest houses. Jovago has closed operations in Pakistan. Previously Hasin headed HR for
AIESEC – a non-profit based out of Canada. Hassin has been associated with Roomy since the company’s
inception.

What is the team size? What are the key hires post raise?
Roomy has a total of 650 employees. Property-specific staff averages around 20-30 employees.
Additionally Roomy has 10 employees managing reservations and 20 managing operations. While ESOP
is dedicated to CTO, CMO, and COO, we believe an additional 5% ESOP needs to be dedicated before the
round to incentivize key employees.
The company currently has a director of finance, but we see a need for a CFO as the company grows.
Based on our discussions though, the management is contemplating nominating the director of finance
for the CFO position. Roomy also foresees hiring a head of HR. Given the existing team and how they
have successfully grown the company, we do not foresee any other key hires in the immediate future.
The existing management team seems to be competent enough to take the company further.

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FINANCIAL DILIGENCE

Business Model

How does the company make money? What are the future revenue streams?
The company partners with existing hotels and guest houses on a revenue sharing or fixed rental basis
to renovate their properties and manage the operations of these locations. In addition, the company
also houses restaurants and offers personalized tours to its guests.
● Room Rentals & Services: Room rentals contribute x% of total revenues generated by the
company. The average daily rent (ADR) for properties varies depending on location and timing of
the trip, ranging from PKR 6,000 ($26) to PKR 30,000 ($125). To mitigate the seasonality impact,
the company implements dynamic pricing across its properties.
● Restaurants: The company houses seven restaurants across different localities, which
contributed x% of the revenue in 2021-2022. The company has recently piloted a food lounge at
one of its locations on a revenue-sharing and rent-sharing model with partner restaurants.
● Packaged Tours: Roomy arranges private tours to Hunza and Chitral allowing customers to
receive a diverse experience led by a local tour guide and all operations are managed by the
Roomy team. This service was initiated in May’22 and the company has operated 32+ tours till
date. Pricing is carried out considering existing cost structures and market competition. This has
proved popular with customers and is highly rated.
● Other Services: The company houses different board rooms and event halls at its locations
which are rented out for meetings and events. The company has additional service offerings
which are monetized including:
o Banqueting & Managed Events
o Board Meetings
o Guest Transportation
o Laundry & Dry Cleaning
Based on our discussions with the management, the company intends to offer SaaS products to the
broader hospitality industry. The company is working on building a yield management platform for
restaurants, on a similar business model as Eatigo, that would allow restaurants to manage their
customer footfall. This has not been factored into the current forecasts and presents further upside.
Roomy has also developed in-house software for property management and believes it would be able to
market the software on a SaaS pricing model to markets like Vietnam, Thailand, Srilanka, the Philippines.
The app features a property management system that automates basic front office services such as
room reservation, check-in, check out, inventory management, and management of hotel staff. The
team at Roomy believes it can target the software to traditional unbranded hotel chains.
The leadership team also views property management as a lucrative opportunity, especially in the
Middle East and Southeast Asia. It is exploring the opportunity to license their software or meet human
capital requirements for property management, on a similar business model as Frank Porter in the UAE.

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How has the business performed to date?

The company has demonstrated strong growth in its early years. It has grown into a network of 15
locations across the country. The company posted revenues of $x in FY’22, which represented a c.350%
increase from the preceding year. The increase in FY22 revenue was primarily driven by capacity
increases as well as price increases of c.20%. The revenue increase came in an environment when the
market size of tourism was down due to the current volatile economic and political situation. The
company generated $xk in revenue from its in-house restaurants, which contributed 9.8% to the total
revenues.
● The company has an inventory of 616 rooms across 14 locations, 399 of which were operational
as of June-22.
● The ADR across the portfolio was ~PKR x($x), growing 25% YoY. Revenue per available room
grew by 50% from ~PKR x ($x) to PKR ~x ($x).
● The occupancy rate for FY 22 was c.x%, which was 10ppts higher than the preceding year. The
occupancy rate is skewed by high occupancy rates in Signature (x%) in Islamabad.
● Some of the newer hotels had low occupancy % as shown in the graph below. However, the
occupancy rate gradually increases with the operational time of the new location.

Room revenue is concentrated among y locations, which represent x% of the room nights and room
revenue generated. They also contribute x% to food and other revenues.
● Roomy Signature Hotel constituted x% of the total room nights and x% of the room revenue
generated. This was down from x% and x% respectively. It contributed x% to the food & other
revenues as well.
● Roomy Lodge constituted x% of the room nights and x% of the room revenues. This was up by
x% and x% respectively. It also contributed x% to food and other revenues as well.
● Roomy Daastan constituted x% of the room nights and the room revenue, up by x% on a YoY
basis. It contributed x% to food and other revenues.
● With new localities coming live and the company expanding in localities with low seasonal
effect, we expect the % share of these locations to come down.

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During FY’22, the company demonstrated positive unit economics on room rentals and improved unit
economics on the F&B segment of the business.

On a company level, sales & marketing expenses were flat YoY, with marketing expenses representing
only 2% of the total revenue. Marketing spend increased in May given that 5 properties came live in
May. The marketing spend was driven by an increase in Google spend as the analytics team at the
company noticed the higher relative conversion %. The management team believes that there is cross-
marketing on FB/Insta.
The company’s cash collection cycle averages between -7 to 45 days.
● -7 days are a function of advance payment received for reservations in the form of IBFT, Online
payments. Customers are required to pay 50% of the total order value at the time of booking.
● The company offers a line of credit to corporate clients, which represents c.35-40% of the
revenue. The line of credit varies from 15 days to 45 days.
● The inventory days vary based on locality. For the signature hotel, inventory days range from 3
days to 7 days.
The company continues to engage corporates for B2B partnerships and campaigns. It provides corporate
discounts across 55 accounts including Mckinsey, Unilever, and Ufone. Partners are offered exclusive
employee discounts (ranging from 13-15%).

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The company is currently operating seven restaurants in select localities. At one locality, it has entered a
revenue and rent-sharing partnership with select food outlets to open a food lounge. This is currently in
the pilot stage to identify the right partnership and uptake.

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Projections & Valuations

What are the goals the business expects to achieve post-funding?

The company intends to utilize c.80% of the fundraise to expand its presence in the secondary and
tertiary cities of the country. c.20% of the fundraise will be spent on development & marketing of the
yield management platform and exploring regional expansion opportunities either through partnerships
or SaaS product offerings. The company intends to:
● Manage a combined total of 2400 operational rooms across the country by 2025
o Primary Cities (Karachi, Lahore, Islamabad, Peshawar) – 1500 rooms
o Secondary Cities (Faisalabad/Multan/Sialkot) – 500 rooms
o Northern Area Gaps (Naran / Shogran / Skardu / Malam Jabba etc.) – 500 rooms
o Tertiary Cities (Sukkur/ Hyderabad / RahimYarKhan / DGKhan / Gujranwala etc.) – 500
rooms
● Initiate operations in regional markets that have a high demand for property management, with
a focus on Middle East and Southeast Asia. The primary markets in focus are Saudi Arabia (Saudi
Arabia expects to add 2m rooms by 2030), Dubai and Hong Kong.
● Improve team capacity by hiring a CFO and CHRO. The company also intends to open up L7D
centers for employees in Karachi and Lahore.
● Complete development of the yield management platform & roll out the product on a SaaS
model. Management has indicated that the international roll-out and yield management
product are not priced into the valuation.
● Increase capacity to market and roll out an in-built hotel management platform on a SaaS
model. The platform has a booking engine, mobile application, and a property management
system.
● Increase operational capacity to manage residential sites for corporations in the northern areas
of the country. The terms of the engagement are currently in discussion with the Roomy and
corporate partners.
● Achieve room revenues north of $25m and EBITDA margins greater than c.15%.

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How should Roomy be valued?

We have identified & noted several global, regional and local companies that have achieved
significant scale in the hospitality sector, as mentioned in the table below.

Considering the scale and product life cycle of the company, we believe that using a revenue multiple is
an appropriate metric to value Roomy. Global and regional companies have raised capital at an average
revenue multiple of 15.1x. Hospitality companies listed on the PSX are trading at a revenue multiple of
4x. PSEL is the company which operates Pearl Continental, Marriott and has a significant stake in Hotel
One, and is the Hashoo group’s exposure in hospitality. PHDL is smaller in comparison and operates
fewer properties, such as the Regent Plaza Hotel.
Considering the early stage growth Roomy has been able to demonstrate and the potential of the
company to scale regionally & roll-out a subscription based product, we believe roomy should be valued
at a premium to the local listed competition. We believe that a multiple of 5x is justifiable considering
the company’s strong growth potential At a pre-money valuation of $x, the company is currently looking
to raise funds at a LTM revenue multiple of 5.1x and an implied forward revenue multiple of 3.4x.

What returns can be expected from the investment?

We have forecasted the company’s performance over a four year period, capturing the potential growth
the company may achieve as it scales across the country. We have made three significant adjustments
to the management plan, which assumes no delta to occupancy %, ADR and increases net margins by 2%
YoY. The adjustments result in a delta of $3.8m (c.35%) in revenues in FY23, narrowing to $2m (c.8%) in
FY25 vs. management plan. These relate to:
● Average Daily Rate: As the company begins its operations in secondary (Faisalabad, Gujranwala
etc) and tertiary (Sukkur, Rahim Yar Khan etc) cities, we expect the ADR across the portfolio to
come down from PKR ~12,500 in FY’22 to PKR ~10,300 in FY’23 (c.17% decrease). As the
company expands more in primary cities (Islamabad, Lahore etc), Northern Areas (Kalam, Nathia
etc) and inflationary impact is reflected in room prices, we expect the ADR to increase to PKR
~14,000 at the end of FY’26.

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● Occupancy: With c.35% of the expansion being targeted in secondary and tertiary cities, we also
expect the occupancy levels to fall down to c.49% from c.58% in FY’22 on a portfolio level.
However, as the company increases its spend on marketing, increases brand equity and
distinguishes itself in those cities, we expect the portfolio occupancy % to increase and come in
line with industry occupancy. We expect the occupancy levels to c.52% by FY’26, in line with
industry averages.
● Rental Payments: We expect the rental expenditure (as a % of room revenue) to decline to 45%
of room revenues in FY’23, down from c.50% in FY’22. The rental expenditure will come down
gradually as the company negotiates better contracts on account of increased brand equity and
such localities increase their traction to contribute significantly on a portfolio level. We believe
that the rent sharing expense on a portfolio level would drop below 40% of room revenues by
FY’26.
By FY’2026, we expect the company to post revenues north of $30m with EBITDA margins standing at
c.16% (~$5m) and be cash flow positive. This is in line with the operating margin% of listed global
competition.

We believe that an EBITDA multiple of 12x-14x will be attainable by the company at the end of FY’26,
considering the company will be among the largest hotel management companies in the country.
Assuming no dilution rounds, at a pre-money valuation of $x we expect the investment to yield an IRR of
28% to 33%.

If we are able to negotiate a preferential valuation of $20m, the IRR yields would increase and range
between 31% to 37%.

We believe that the company will have sufficient cash flows and use internal funds to expand regionally.
However, if the company was to raise external capital for the expansion, we believe that the company
would undertake a 10% dilution. With no pro-rata follow-on, the impact on IRR would be -4ppts.

For detailed projections, please refer to appendix E

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Transaction Construct

What will be the transaction construct for our potential investment?

The transaction construct of our investment in Roomy will be as follows:
● Roomy is looking to raise $x at a pre-money valuation of $x. The company has received
commitments of $x from existing and new investors.
● Sarmayacar has an opportunity to take a position in the company for a combined injection of
$xm. We have an opportunity to invest $x as part of this round.
● We will have an option to invest an additional $x at the same pre-money valuation i.e. $x. The
option will expire on 31st March, 2023.
● Sarmayacar will be getting a board seat as part of the investment.

Has the company had any prior fundraising rounds?

The company has had two prior priced fundraising rounds. The company raised $x at a post-money
valuation of $x in 2020. The round had participation from Walled City Partners and Lakson VC. This was
followed up with a $x raise at a post-money valuation of $x in July 2021. The round had participation
from angel investors, friends and family. Both these rounds were priced rounds.
Roomy is registered as a private limited company in the SECP. They have registered a Singaporean
entity. However, no share swap has taken place yet. Therefore, the company is raising SAFEs as part of
this round.

What will the cap-table look like post-funding?

Following the round closure, SC will effectively hold a x% stake in the company. The founders will
continue to hold x% of the company, with the CEO Asad Samar, holding x% of the company. The other
major shareholders of the company include Abdul Rehman Malik and Haasin bin Zahid – who are the
CTO and COO respectively.

The company intends to hire a CFO & CPO while also expanding into regional markets. We believe that
the quality and experienced functional leaders would likely demand an equity position to take up
leadership roles in the company. Therefore, we believe that the company should open up an ESOP of
5%, before the closure of the round to incentivize the new hires, as it scales into new product lines and
regions.

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Appendix A – Sources

Hotel Industry in Pakistan

Global Economic Impact on Tourism

PC Annual Statement

PC YTD Financial Performance

PHDL YTD Financial Performance

Pakistan's Tourism Potential

Oyo Rooms - Fundraise

Can Pakistan build its tourism industry?

Coronavirus travel boosts Pakistan's domestic tourism

Pakistan tourism industry & climate change

A New Era for Pakistan's Hospitality Industry

Income data - Ahmed, UC Berkeley

Income data - World Bank

Punjab Economic Research Institution

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Appendix B – OYO’s Impact: Before and after comparison

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Appendix C – User Interface of the Roomy Application/Website

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Appendix D – Roomy Location Details & Price Range

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Appendix E – Financial Projections

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