Chinese conglomerate Shanda Group invested $5.6 million Series A in Malaysian startup NIDA on February 2017 in order to further tap into Southeast Asia regions, the next booming travel destination for Chinese tourists.

In fact, Southeast Asian countries remain top destinations for Chinese outbound tourists. Thailand, Singapore, Vietnam, Malaysia, Indonesia and the Philippines are among the 10 most popular destinations for outbound travelers during the National holiday according to the China Tourism Academy.

But why did the global privately-owned investment group Shanda (盛大集团) invest in the 3-year-old Malaysian company?

“The primary reason is that Shanda Group wants to establish a similar model to HomeInns in SEA,” Kaneswaran Avili, CEO of NIDA told TechNode.

HomeInn Hotels Co. (首旅如家) and Ctrip jointly established an economic hotel chain HomeInn (如家酒店, means “Home-like hotel”) in 2002. HomeInn’s first branch opened in Beijing, and has since furthered its expansion to more than 2300 hotels in and outside of China over the decade, and was listed as one of the top 50 hotel chain brands in 2016 in the HOTELS magazine. It seems that Shanda, seeing the SEA as the next market, is betting on NIDA to do the same.

Southeast Asia’s economy hotel room network NIDA secures over 4,000 hotel partners in Indonesia, Thailand, Malaysia, Philippines, with additional plans to launch in Singapore. As Shanda’s investment group is headquartered in Singapore, this might help NIDA’s expansion in the neighboring country.

“NIDA caught our attention as they have developed a business model that enables the Company to quickly build a highly scalable platform with a strong brand by effectively addressing the needs of travelers and local hotels in the fragmented, less digitalized yet large and rapidly growing economy hotel sector in Southeast Asia,” said Robert Chiu, President of Shanda Group said in the press release when NIDA received investment.

We asked Shanda to further comment on this investment and future expansion in the Southeast Asian market, but the company declined to comment.

Why Shanda invested in NIDA

There are handful of competitors in the booming Southeast Asian travel market including local players like Indonesian hotel and flight booking site Traveloka, hotel reservation company Agoda, Expedia, booking.com, Ctrip and international players like Trip Advisor, Hotel Quickly, hotel price comparison site Trivago.

Established in September 2015, NIDA is comparably a new player in the sector, but has found the niche in the accommodation market: economy hotels.

The boutique hotel TechNode visited in September changed its name to Hotel NIDA (Image Credit: TechNode, NIDA)

We visited one of the hotels integrated to NIDA, called Javelin boutique hotel in Kuala Lumpur, Malaysia. At a first glance, the hotel looked like just an ordinary hotel. At the time, Kaneswaran said soon this hotel will change its name to Hotel NIDA, and it actually did, as the picture above shows. Why would these boutique hotels give up their brands to join NIDA?

“They are not interesting brands. Brand does not add significance to these independently owned hotels,” he says. “Joining the network of a bigger brand brings significant benefit for them, in terms of technology, customer attraction and lower operation cost.”

NIDA automates the registration process so that hotels can gradually decrease the people in the front line. This makes the check-in and out process efficient so that customers can check in much earlier, and improves the financial account of hotels by reducing human labor. When a customer checks out, the company sends the alert the cleaning people so that the room can be sold much quickly to new customers.

“Normally customers have to check out by 12 p.m., and can check in after 2 p.m. We want to change that policy, because business people arrive at the airport with morning flight, arrive in the hotel early in the morning, and want to have early morning shower and go to meeting, but current hotel system doesn’t allow that,” Kaneswaran, a former director of AirAsia said. When AirAsia, Malaysia’s top-grossing budget airlines started with two domestic air craft in 2001, he implemented company’s various distribution channels in all markets. He sees the economic hotels going same for tourists.

“Travelers are spending more time and money outside, and spend little time and money in the hotel room. They spend lower than $40 per night,” Kaneswaran says.

NIDA is already tapping to Chinese customers. Thailand’s hotels that joined NIDA are integrated with Chinese provider of travel services Ctrip. “Chinese tourists’ demand for Thailand’s hotel rooms is much higher [than rest of SEA countries],” he explains.

Prior to Shanda’s investment, NIDA landed $4.2 million pre-Series A investment in April of 2016 from Japanese fund CyberAgent Ventures and Convergence Ventures.