We all are aware of Airbnb, a US-based startup that touched $25 Bn of valuation in just seven years. Airbnb is no more just a name but a service, an alternative to a hotel, or lodge accommodation for travellers.
But if you were travelling in India, you would more often come across Stayzilla than Airbnb. That so because, after taking on the accommodation marketplace, the Bangalore-based startup is expanding by venturing into alternative stay space.
But Stayzilla wasn’t Stayzilla when Yogendra Vasupal (Yogi), Rupal Yogendra and Sachit Singhi got together to launch their startup. Stayzilla started as Inasra, an online travel agency for hotel booking, in 2005. However, five years later, the trio decided to pivot the business into a hotel aggregator and renamed it Stayzilla. Till then, it had only 1500 contracts. However, since 2010 it has scaled up to 40,000 properties in 4500 cities.
“Earlier there was hesitation among the hoteliers, about the model. They would give out only a few rooms of their property at a mere 2% commission to Stayzilla. However with time it moved up to 18% as the hoteliers saw traction and became more comfortable with the business,” said Yogendra Vasupal, founder-CEO of Stayzilla.
In Yogi’s words, “Stayzilla was founded with a laser-sharp vision to become India’s largest online marketplace for stays. Going beyond the realm of just hotels, we serve a well-balanced package comprising of all manner of stay options to our customers including lodges, homestays, guesthouses, etc.”
Understanding the Business
Stayzilla’s business is bucketed into three categories – Structured, comprising of 2, 3 and 4-star hotels; Unstructured, comprising of 1-star or 0-Star hotels and lodges; and; Alternative Stay which includes homestays, hostels and bed & breakfasts.
Alternative Stay is the fastest growing among the three categories. The company had increased its focus on Alternative Stay earlier in June this year with limited rooms at its disposal. In just three months, since then, it has scaled to 33,000 rooms. With over 3.5% of the volume, today Alternative Stay accounts for over 18% of the business. Structured Stay has 4200 properties, averaging at 35 rooms per property and accounts for 25% of the business. While Alternative Stay has picked up pace increasing its contribution to 18% of the business, Unstructured Stay category still brings in bulk of business. And over 25% of the business is from weekend travel.
Stayzilla boasts of a mobile application that will cater to both homeowners and tourists looking for differentiated and unique stay experiences. The mobile application allows homeowners to choose guests on various parameters such as common interests, educational and professional connections.
Stayzilla introduced Concierge service in 2012. It has a connect platform within the app that connects the guests to the hosts. Like a typical concierge service provided by any hotel, the guests update the time of arrival and the time of departure. They can even use the platform to share their preferences, like beverage, television, internet facility and more.
Over a period of time, Alternative Stay is projected to rake in half of the total profit,while 20%-25% is expected from Structured Stay and remaining from Unstructured Stay. In three years, it is expected to grow 40 times from where it is today.
Market Size
According to ‘Make In India’ report on Tourism and Hospitality:
- The sector contributed 6.8% of country’s GDP.
- In 2014, foreign exchange earnings (FEEs) from tourism were $20.2 Bn as compared to $18.445 Bn in 2013, registering a growth of 9.7%.
- India registered 7.7 Mn Foreign Tourist Arrivals (FTAs) in 2014, registering an annual growth of 10.2% over the previous year.
- The number of domestic tourist visits in India during 2014 was 1281.95 Mn, as compared to 1145.28 Mn in 2013, recording a growth rate of 11.93%.
- FTAs (Provisional) from January to July 2015 were 4.48 Mn, an increase of 4.8% over the same period of previous year.
India faces a huge gap in demand and supply. As per the data shared by Yogi, in India, there is only one room per 1000 domestic trip. China has 7 rooms per 1000 domestic trip and that number is 9 in US. Europe is doing best with 14 rooms per 1000 domestic trips.
Competitive Landscape
Apart from the US-based Airbnb that competes in the alternative stay space, Stayzilla’s major rivals are aggregators like Makemytrip, Yatra, Goibibo, Expedia and Cleartrip. Interestingly, Stayzilla is working towards extending business partnership with hotel room aggregators Oyo Rooms and Zo Rooms to build on the hotel standardization that these startups offer.
That would leave Makemytrip as its largest rival. In the quarter that ended on September 30, 2015, Makemytrip’s revenue from standalone hotel & packages booking stood at $42.4 Mn. The 15-year old public listed startup, however, is going in just the opposite direction with aggregators. It recently blocked Oyo and Zo from listing their properties on its platform. Another player, Yatra, that also blocked Oyo and Zo, has also entered the budget accommodation space with TG Rooms and TG Stays, in partnership with TravelGuru. Stayzilla might have to face off with another new entrant – Alibaba-backed Paytm plans to foray into the accommodation space.
“We are not competing with them (Airbnb). What we aim to provide is much beyond an accommodation. Imagine a 60-year old woman in Delhi giving away space in the house for Jagjit Singh fans. A couple in Coonoor is opening up their farmhouse for Cheese-lovers. A woman is opening up her house for customers travelling with their pets. You won’t find this in Airbnb,” the Stayzilla founders point out. Also, if number numbers are to be believed, Airbnb entered India around 2013 but have acquired only 7500 rooms on their portal, while Stayzilla is adding 2500 hosts on a monthly basis.
There are a number of startups that have sprung up in this space. A few of them are Vista Rooms, a Mumbai-based online branded budget accommodation aggregator, Delhi-based Qik Stay, a hotel branding and aggregator startup, Wudstay.com, Zenrooms and Fabhotels.
Roadmap Ahead And Funding
Earlier this year, Stayzilla had raised $20 Mn in Series B funding from Nexus and Matrix Partners. Prior to that, it had raised $0.5 Mn from Indian Angel Network (IAN) in 2012.
Stayzilla is eyeing five times growth year-over-year. Its monthly run rate for September was at $5Mn, while in October it touched $6Mn. It is operating at an annual GMV of $70Mn; however, considering the last 12 months, it should touch a run rate of $120Mn by the end of this fiscal.
In next three years, Stayzilla aims to list half million properties in alternative stays, adding around 7000 rooms on a monthly basis. It is confident about ramping up the present base to 50,000, in the next three months.
Challenges
According to government data available, there were only 1376 hotels and only 76,567 hotel rooms in India in 2012, 50% of them in three-star hotels. A Cygnus report in 2011 stated that total supply (number of hotel rooms) in India is expected to reach more than 180,000 within 2016.
This number is pretty low when compared to the number of travellers in the country. Clearly, there is a huge gap in demand and supply. And that is because hotel businesses require high capex and witness low utilisation unless it is in a high-growth city or a known tourist destination. According to Yogi, the capex of 100 rooms has risen up to a million dollar. Furthermore, it is typically real estate investment, with 80-100 rooms per property. In India, the budget hotels are small and fragmented, with just 20 rooms per property. In plain terms, this translates to a web of small hotels; and players like Stayzilla are faced with the challenge of bringing them on board in order to compete with the established big players.
Editor’s Note
India’s travel and tourism sector is rapidly growing; it is set to grow at a much faster pace of 7.5 per cent and than 2014. In this scenario, stay aggregators need to explore the alternative stay options to give the tourist more choices. Stayzilla has identified the gap in the sector and got down to increasing its reach and depth while keeping its focus on affordability. The going seems good for Stayzilla as it is adding numbers to its Alternative stay sector. Stayzilla has to focus on curating the best budget options, standardizing the experience if it wants to survive the fight in the sector which is heating up by the day.
