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IPO Hopeful 9 – Revenue Per Room?
Continuing from the last post—now it’s time to talk numbers. After all, it all comes down to the financials!
Terry started with a grin, “Let me tell you a joke. All the financial projections you’re looking at right now are estimating $15 in revenue per room per day. But—” he paused, “I later told Kevin I might’ve made a mistake. His face dropped immediately. Then I said, ‘Actually, I think I can get you more like $60+ per room.’ And then he was smiling again. 😂”
Four times the projected revenue! Why?
Terry explained, “The $15 per room you see is only from the Ad Exchanges, think of them as the lowest baseline, extremely scaleable, but the lowest payer, and we are counting ads on the ‘Screen-saver’ (when the system is not in use), only.
But here’s the thing: direct ad campaigns, sold by the ad agency to the major brands will pay 3 to 6 times as much, maybe not for every room in the fleet, so not as directly scaleable, but that revenue will shoot the numbers way up. Then we have ‘specialty advertising, like the beverage “Sampling” (the guest receives an actual sample of a product, as well as the advertising, as well as manuy forms of advertising that will come once the tablet is in use, i.e. reading free magazines.
where ads will be running on the side, Add it all together, and you’re looking at $50+ per room, easy.”
He smirked, adding, “Oh, and don’t worry—the financial projections you’re looking at still only show $15 per room. All that extra revenue? It’s not even included yet. 😂”
Another guy at the dinner chimed in, “I was actually going to ask you about that. I used to run an ad agency, and when I heard $15 per room, I thought that sounded off—way too low. I was estimating closer to $50 to $80. Now it makes sense! I was gonna battle with you on that point 😂”
I further asked, “What’s your cost to scale up?”
Kevin jumped in, “Like I said before, the cost to install a new tablet is just $5 per unit per month (financed). The margin is incredible. Most of the expenses went into early-stage software development. The hardware itself is dirt cheap.”
Still curious, I pressed, “With such low marginal costs, aren’t you worried someone else will come in, do the same thing, and steal your contracts with the big hotel chains?”
Kevin grinned. Till next time.