Turnstay, a South African startup that helps hotels receive booking payments, has raised a $300,000 pre-seed round at a $3.5 million post-money valuation to onboard more hotels. DFS Lab and DCG led the funding round.
Founded in 2022 by Alon Stern and James Hedley, Turnstay allows hotels to bypass online travel agencies (OTAs) like Booking.com and directly receive payments for bookings. Most hotels in South Africa use OTAs that charge commissions as high as 25% of each booking fee. For hotels that already collect payments, Turnstay claims it reduces their transaction costs by 70%. These transaction costs can also be as high as 7% of the booking fee.
Turnstay earns a 1.5% commission per transaction. The company claims to have processed R50 million ($2.7 million) in direct bookings from 20 hotels including Cape Town’s Hout & About and Idis House. It aims to onboard more hotels in South Africa and eventually in the southern Africa region.
“Hotels in emerging markets spend so much money just to receive payments for bookings,” co-founder Alon Stern said. “It is because OTA systems were not built for them and we want to change that.”
South Africa’s tourist accommodation market is valued at R35 billion ($1.9 billion), with 35% of the bookings made online. However, according to the Competition Commission of South Africa, more than half of the online booking revenue went to Booking.com and its subsidiaries. Turnstay wants to tip the scales in favour of local hotels by providing them with a way to directly access this value.
Turnstay claims its payment gateway also halves the number of failed transactions. It is integrated with local payment processors including Stitch and Revio for local tourist bookings and Stripe for international bookings.
“Turnstay not only fills a critical niche, but we believe what they're building will raise the bottom line for the African travel and tourism industry,” said Stephen Deng, general partner at DFS Lab.