View from the ‘Loo: Fast-growing Demeure charts new course for global travel Anthony Reinhart February 6, 2014 Communitech, View from the ‘Loo On a Monday afternoon in downtown Waterloo, it’s -13 and dropping fast, but toasty warm behind the door under the sign marked Demeure. From outside the old brick building on Regina Street, you wouldn’t know a team of seasoned software developers, data engineers and UX pros is hard at work inside, transforming the luxury travel industry – but that’s exactly what’s happening at Demeure. In the five years since the company launched, its growth has progressed largely out of view – in the style of its founder and CEO Peter Schwartz, the former chairman and CEO of Descartes Systems Group, the Waterloo-based logistics software company. But that progress has been nonetheless impressive. Now closing in on 100 employees, 36 of them based in Austria, Demeure has grown without institutional money, having raised several rounds from private Canadian investors. It has also made two acquisitions, neither announced in the press. The company is now hungrily recruiting developers and ramping up for further expansion as its online travel marketplace – and the algorithmic platform that underpins it – catches on with travel providers whose customers want a more curated, service-oriented experience than Airbnb, HomeAway and others can provide. When I stepped out of the blowing snow and into the airy, warehouse-like space that Demeure is rapidly filling, I sat down with chief technology officer Jeff Fedor, who brought me up to speed on the company’s story thus far. By the time I left, he’d armed me not only with a company update, but with more insight into the resilience and dynamism of the Waterloo Region tech ecosystem, and how Demeure is benefiting from it. The company’s name, French for ‘residence,’ stems from Schwartz’s travels with his family of six, who found vacation homes preferable to hotels for their more personal, home-away-from home feel. Demeure was thus born as a travel club, connecting members with owners of select properties around the world, and offering a suite of services to ensure trips are smooth and enjoyable. In an industry dominated by big names luring travellers with what look like big discounts, Demeure has set itself apart in several ways, Fedor explained. “Demeure is kind of a different breed. Most people, if they’ve seen us before, think of us as luxury travel, or a variant of a destination club,” Fedor said. “But what we really did was spend the last number of years working through and prototyping what would ultimately become a really large travel platform” that offers great deals to travellers while ensuring fair compensation for property owners. Unlike Airbnb, for example, all Demeure properties are professionally managed, ensuring the traveller gets the quality they expect. Also, few travellers know that when they book a hotel room through Expedia at what appears to be the best rate, the hotel has to pay a minimum 30 per cent commission back to the popular online service. While this might be a quick way for a hotel to fill vacant (and less-desirable) rooms, it does little to build customer loyalty. Demeure, on the other hand, plays matchmaker rather than middleman, by helping property owners with unused capacity and travellers connect on mutually agreeable terms. “We’re supply focused, so we look to look after the best interests of a hotel or villa owner, or a yacht or jet owner, any of the above, and basically look to be a yield optimizer,” Fedor said. “What we’re trying to do is basically give these asset owners a toolset that allows them to source traffic when they need to, but also engage and retain loyal travellers,” he continued. “And then put a bunch of analytics and data smarts behind it that’ll let you do that in an automated way, where the system is basically being your revenue manager for you.” Since vacation homes typically have 85 per cent unused capacity, owners can trade their unused nights through Demeure for cash they can use for their own travel to other locations in the company’s worldwide network. Those unused nights, in turn, can be sold to Demeure travellers, often at impressive discounts. “Our algorithm values what your unused capacity is worth to us based on the demand that we see across our networks,” Fedor said. “Then we give you cash that stays in the marketplace and allows you to go travel to other (homes). And that creates better discounts for people coming into the marketplace.” The technological sophistication of Demeure’s platform, built by a team that includes Descartes Systems veterans who made similar improvements to the logistics industry, means “it basically operates like a stock exchange,” he said. “The system determines when it can sell a transaction and when it can’t, and when it can, it goes ahead and does it,” Fedor said. “Sometimes that’s barter-to-barter; sometimes that’s barter-to-cash, and the system is what we’ve spent five years building, basically. And we have a patent on that.” As interesting as its technology is how Demeure exemplifies the increasing maturity of the local ecosystem. Schwartz, who through the 1990s took Descartes from a small, custom software shop to a publicly traded company worth more than $1 billion, left that company in 2003 and spent several years as an investor before jumping back into entrepreneurship with Demeure. His talent roster reads like a Waterloo Region all-star lineup, with veterans from BlackBerry, Sandvine (which grew out of PixStream, acquired by Cisco Systems for $554 million in 2000), PostRank (acquired by Google in 2011) and others. Fedor, a Niagara Region native, went on to found three venture-backed startups, including Ardesic and Covarity in Waterloo, and worked with PostRank, where he conceived and led design of the GoogleReader extension, and with Primal. With ParkVu, he helped build the first system to wirelessly sync an iTunes library with a mobile device (a BlackBerry), and went on to work as a data scientist for Live Nation in California, before Schwartz lured him back to Waterloo. When I asked Fedor why he came back, he said, “You’re asking me on a day when we have a -30 wind chill. But no, I mean, this is a great place to build a company.” Most notable, he said, is how much richer the local ecosystem’s soil has become in just a few years, thanks to the drawing power of large global companies like BlackBerry. As that company restructures, top talent is being released, and in many cases, snapped up by smaller, fast-growing firms like Demeure. “The quality of the talent pool here has not only increased, but also the depth of expertise,” Fedor said. “We’re starting to see specialization in things that we didn’t see before. Before, we had Java developers and C? developers, and now we have actual experts in different areas, and that’s not something I’ve seen in a long time, certainly not in this area.” From Fedor’s perspective, all signs point to more growth. When his company – which he said “can’t hire fast enough” –made offers to several candidates recently let go from a local company, “I think almost all of them had a minimum of three offers they were considering,” he said. Growth brings challenges, not just to companies, but to the broader community, Fedor said, citing public transit as an item in need of improvement. “If you think driving is OK right now and and that traffic’s OK, you need to think about what it’s going to be like in five years,” he said, adding that he’s perplexed by the “short-sightedness” of opponents of the Ion, Waterloo Region’s soon-to-be-built light rail transit line. “There’s so much going on here that’s just not obvious to people,” Fedor added. “I think this area has just begun.” Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.