Small hotels and other stays get rewarded with greater room occupancy as they scale up and gain visibility out of the clutter, and a new breed of travelers going solo or in small groups get safe, budget options as they explore unfamiliar geographies not on tourist maps.
Zostel offers a chain of branded hostels for backpackers, although much hasn’t changed since it began operations in 2013.At that point of time, 90% of its customers were international travelers open to staying in dormitories.
“Social travel has not picked up in India and this change will come about slowly when people are more open to meeting co-travellers and new people,“ said Paa van Nanda, co-founder of Zostel, a chain of branded hostels for backpackers.
Until then, Zostel will co-brand 50 budget hotels under a new category across Bengaluru, Mumbai, Jaipur and Pune. “We are looking at a technology-enabled network where users can check the nearest room available on the app,“ said Nanda.
While homestays have become common, it’s still unusual for Indian families to pick an unknown budget hotel in an unfamiliar place and risk spoiling a vacation, unless it comes recommended on travel review websites such as TripAdvisor.
Ginger Hotels, owned by the Taj Group, was among the earliest chain of budget hotels in the country. Startups such as Zostel and OYO Rooms work on the same principle of providing quality budget stays, but through aggregation and co-branding rather than by owning and running their own properties.
“The reason families do not look at the budget hotel segment is because of the unpredictability of the experience,“ said Ritesh Agarwal, founder of OYO Rooms.
OYO, which recently raised `150.crore from Light Speed Ventures, Greenoak Capital, DSG Consumer Capital and Sequoia Capital, plans to add 1,000 hotels across 25 cities by the end of this year.
The co-branding model works well for marketplaces such as Zostel and OYO as their initial investment is negligible.
“It takes two months for any Zostel property to operationally break-even,“ said Nanda. Occupancy rates average between 7080% for properties listed on these websites or apps, higher than the industry average of 57%.
About 52,000 hotels rooms are expected to be added in India between 2013 and 2017, 36% of these in mid-tier hotels and 17% in budget hotels, according to a report by consultancy firm Cushman and Wakefield.
In small cities and towns that lack proper budget hotel chains, hospitality marketplaces are looking to sew up other options, similar to AirBnB’s room-sharing model.
Source: The Economic Times