Ostrovok.ru Raises Funds From Yuri Milner and Former Expedia CEO

Ostrovok.ru, a Russian hotel booking service, said it raised $25 million from investors including Facebook Inc. (FB) shareholder Yuri Milner and former Expedia Inc. (EXPE) head Eric Blachford.

Ostrovok, which offers a choice of 135,000 hotels in 200 countries, plans to use the proceeds for expansion, product development and increasing its sales force, the Moscow-based company said in a statement today.

The Russian travel market was worth $48.6 billion in 2011, of which just 10 percent came from online services, according to researcher PhoCusWright. Ostrovok competes with Priceline.com Inc.’s (PCLN) booking.com and local rivals including oktogo.ru and iglobe.ru.

“Hotel booking is the largest and most profitable segment of online travel,” Ostrovok co-founder Serge Faguet said by phone. “In Russia, where online-travel is under-penetrated, this segment may grow fivefold within five years.”

Online agencies can earn 15 percent to 22 percent commission selling hotel bookings and a 4 percent to 5 percent fee on airline tickets, Faguet said. He and partner Kirill Makharinsky, both born in Russia, founded Ostrovok in 2010 after working in Silicon Valley.

Ostrovok has more than 1 million monthly unique visitors, and has increased revenue more than 10-fold in the last 12 months, Faguet said, declining to disclose precise numbers.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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