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Feature

The art of
calculated risk

Big swings are a top reason for Cloudbeds’ success. 

Portrait of Adam Harris, Co-Founder & CEO of Cloudbeds
It was crazy, but every one of our board members would say it’s the smartest thing we’ve ever done.”
–ADAM HARRIS, CO-FOUNDER & CEO, CLOUDBEDS

Global
and
distributed

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The massive global accommodations sector ranges from hostels to motels, boutique properties, large chains, and a growing number of vacation and short-term rentals.

1.4M
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Vacation and short-term rentals, the industry’s fastest growing segment, now represent about 2.5M guest rooms, or about 14% of total.

17.5M
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In 2022, the Americas accounted for nearly half of the industry’s total revenue, followed by Europe (25%), APAC (22%), the Middle East (3%), and Africa (2%).

$903B
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After COVID-19 cut industry revenue by more than half, the sector has rebounded but remains below its peak.

20%
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While “revenge travel,” the desire to travel more post-pandemic, is helping the industry rebound, remote work continues to dampen the recovery in business travel.

66%
Illustration of passport filled with stamps against a blue and green background
Remote is a business strategy and how we see putting our strategy into action.”–ADAM HARRIS, CO-FOUNDER & CEO, CLOUDBEDS

As the person overseeing engineering and product teams, Castle knew that building a similar product involved technical challenges. “MyAllocator was as good of a product as there was,” he says. “It had an incredible brand and reputation and was completely bootstrapped.” As he and Harris discussed the deal, they quickly came to a consensus that not going forward with the acquisition might be the greater risk for Cloudbeds. They negotiated a purchase price of $1 million—nearly half their cash on hand. The pair wrote a memo to the board, which unanimously signed off on the deal.

Portrait of Richard Castle, Co-Founder, President, & COO of Cloudbeds
That’s what being an entrepreneur is. Taking risks and then dealing with whatever surprises come along.”
–RICHARD CASTLE, CO-FOUNDER, PRESIDENT & COO, CLOUDBEDS
A hand holding a key card against a blue background

“MyAllocator really opened our eyes to the rest of the world,” Castle says. “We didn’t realize how large the problem was in other countries.” There were language barriers and other challenges, but rather than focus on one or two regions, Cloudbeds embraced the world as its market. By the end of 2014, it already had customers in 60 countries.

Another strategic bet was who they hired. Most of the company’s earliest employees were expats who were generally comfortable working in non-traditional jobs and presumably loved to travel. “We took tremendous risk in the people we hired and it really paid off,” Harris says. To oversee their APAC sales operations, for instance, they hired an Australian expat who had run hostels in Vietnam and was also a former bicycle courier “who did all kinds of crazy things all over the world,” Castle says. “That was his path to becoming a great manager and great leader for us.” 

Adam and I are always talking about what the next big bet looks like.”–ANDREW ZLOTO, SOFTBANK PARTNER & CLOUDBEDS BOARD MEMBER

“Remote is a business strategy and how we see putting our strategy into action,” Harris says. If they want Cloudbeds to be everywhere in the world, their people should be free to live and work where they want. 

Another gamble that paid off was the decision to anchor an engineering team of around 65 people in Ukraine, despite the risks of operating there since the Russian annexation of Crimea in 2014. While a few members have left the country since the Russian invasion began in February 2022, the bulk of the team remains there and highly engaged in their work, as Cloudbeds continues to support them by paying relocation expenses when necessary or by holding their jobs when employees are affected by blackouts or bombing raids in their region.

Harnessing risk strategically

1
Get educatedTriangulate. Speak to different people to gain input. But don’t let the popularity of an idea cloud your thinking.
2
Find a balanceSpell out downside scenarios and calculate the opportunity costs. “This can be taxing but it can be incredibly fun,” Adam Harris says.
3
CalibrateThe more significant a risk, the more important that an organization is on board with a decision.
4
Be dispassionateFalling in love is dangerous when considering a strategic risk. “If you fall in love with a decision, it's really hard to fall out of love with one,” Harris says.
5
Trust your instinctsUltimately, follow your gut and go. Taking risks will open up new possibilities.
Illustration of bungee jumper in the air against a green background
Emotion is the dark knight that you need to fend off, always. Because if you fall in love with something, you’re done.”–ADAM HARRIS, CO-FOUNDER & CEO, CLOUDBEDS

Ultimately, entrepreneurs have only their instincts. They are focused on what Zloto sees as an “addressable market that today is probably a $3 billion opportunity.” They recognize that hospitality is far behind other major industries, ranking near the bottom of a digitization index created by McKinsey to measure the top 20 world industries, ahead of only agriculture and construction.