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File photo of a hotel in Gurgaon that has a tie-up with Treebo Hotels. Positioned as a budget hotels chain, Treebo Hotels competes with the likes of FabHotels and larger rival OYO.
File photo of a hotel in Gurgaon that has a tie-up with Treebo Hotels. Positioned as a budget hotels chain, Treebo Hotels competes with the likes of FabHotels and larger rival OYO.

Treebo Hotels reports Rs73.5 crore loss in FY17

Treebo Hotels spent Rs94 crore in the year under review, the bulk of which were other expenses of Rs53.3 crore, and employee costs of Rs38 crore

New Delhi: Hospitality start-up Treebo Hotels posted Rs73.5 crore in net losses in the fiscal year ended 31 March, on total sales of Rs20.6 crore, according to company documents sourced from Tofler.

Treebo, managed by Bengaluru-based Ruptub Solutions Pvt. Ltd, runs over 300 franchise hotel properties across 53 cities in the country. The start-up was founded in May 2015.

It spent Rs94 crore in the year under review, the bulk of which were other expenses of Rs53.3 crore, and employee costs of Rs38 crore. Comparative figures from the previous financial year are not available. Treebo declined a request for comments on this story.

Positioned as a budget hotels chain, Treebo competes with the likes of FabHotels and larger rival OYO. These new-age hotel start-ups allow booking and discovery through an app, use technology for a whole bunch of purposes and to aggressively sign up new properties. Treebo’s nearly Rs100-crore expenditure, in its first full year of operations, suggests just the same.

In an interview in August, co-founder Sidharth Gupta had said the company had plans to “double, rather more than double" its network of hotels over the next 12 months. “We see headroom for growth in a lot of the cities we operate in," he had told Mint.

Over the last few years, increasing online penetration and a burgeoning middle class has doubled the interest for budget hotels. The category has emerged as a priority for online travel agencies (OTAs) like Yatra and MakeMyTrip, which are servicing a large part of this demand.

A recent report by Deutsche Bank AG said gross hotel bookings were $7.2 billion in 2016 and are poised to grow to $10.9 billion by 2020.

This estimate and the view that India doesn’t have too many well-penetrated hotel networks has made major venture capital firms align themselves behind at least one major start-up in the space.

Treebo raised a $34 million in a Series C round in August, led by Hong Kong-based financial investors and follow-on VCs SAIF, Matrix and Bertelsmann. Its rival FabHotels raised $25 million from Goldman Sachs, Accel and Qualcomm Ventures in July.

But the biggest deal was done by Gurugram-based OYO. The firm, transitioning from a hotels aggregation platform to a branded hotels chain, raised $250 million from SoftBank’s $100 billion vision fund. The round was enough to show SoftBank’s continued interest in the space, and in OYO—which, with over 8,500 properties, is credited with shaping the online hotels space.

While some have succeeded and are scaling up, for some others it didn’t quite work out.

Stayzilla shut down this February amid high cash burn leading to an unsustainable business. It had raised $30 million from investors including Nexus and Matrix.

Zo Rooms, another start-up which was struggling and had held discussions last year to be acquired by OYO, has virtually shut down operations. Moreover, OYO last week said that it wasn’t pursuing the deal.

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