Backpacker hostel brand GoStops, for instance, raised $1 million in pre-series A round led by IAN and Yuj, the family office of Xander Group founder Sid Yog
Treebo Hotels raised $16 million in series D round led by Accor
As stays at branded properties become the go-to choice for travellers, driven by factors such as continued work from home (WFH), hospitality start-ups across both budget and luxury segments have garnered investor interest that are betting big on post pandemic trend of staycations and workcations.
Backpacker hostel brand GoStops, for instance, raised $1 million in pre-series A round led by IAN and Yuj, the family office of Xander Group founder Sid Yog. Treebo Hotels raised $16 million in series D round led by Accor.
Pankaj Parwanda, co-founder, GoStops said that the demand recovery curve has become stronger after the second lockdown for hospitality sector. India saw a severe second covid 19 wave in April and May leading to restrictions and curfews in several states. According to him, the world has learned how to deal with covid with a ready playbook which states that people tend to travel when the positivity rate is low and they stay home when it is high. This trend is driven by younger segment -- the Gen Z and millennials -- who are mobile and have no attachment in the city life. Similarly, the luxury segment is witnessing revenge travel.
“Players catering to this segment are witnessing investor interest as there is immense pent-up demand. Since the real estate supply is depressed, I believe it’s the best time for any hospitality company to acquire the supply and expand its presence across the country," he added.
GoStops, which operates about 20 properties, is looking to add 40 new properties across key leisure destinations in the next 12 months. These properties will come up in Goa, Mukhteshwar, Nainital, Dehradun, Mysore, Lonavala, Matheran and Panchgani.
“Our demand bottomed out in May but by July we reached 25% higher of our pre-covid occupancy which also shows that the gestation period of recovery is declining. At GoStops, there is clear 3X jump in demand from June to July," Parwanda said.
Started in 2014 Gostops targets 18 to 35 year olds looking for a affordable accommodation. The company takes over existing hotel properties and transforms them into hostels with 70% rooms being converted into dorms and common areas along with few private rooms. They are leveraging the concept of shared economy to make high-quality branded accommodation affordable for the young travellers.
In June, Bengaluru-based budget hotel chain Treebo Hotels closed Series D investment round raising ₹118 cr (approximately $16 million) from a group of investors led by hospitality group Accor. The investment by Accor is part of its broader partnership with Treebo under which the latter said it will deploy its cloud based, comprehensive hotel management software, called ‘Hotel Superhero’, at various Accor hotels worldwide.
Treebo, which has 600 hotels across India, is also betting big on its SaaS business, Hotel Superhero, which it has relaunched in July 2020. Hotel superhero helps hotels in property management, point of sale, and other solutions for effective operations.
“We will deploy a considerable portion of the funds raised in building and rolling our Hotel SuperHero. We also plan to utilise these funds to see our hotels business turn profitable in the next year, subject to that the fact there is not another disastrous third wave of covid. We were within striking distance of EBIDTA profitability when the pandemic hit, but we hope to be profitable by June 2022," said Sidharth Gupta, Co-founder of Treebo Hotels.
Meanwhile, Mumbai-based vacation home rental chain, Vista Rooms raised ₹10 crore in funding led by DSG Consumer Partners in January. The company is investing in team building hiring talent from top hospitality players, activating partners in newer regions, adding 20 properties on a monthly basis and enhancing the technology product to offer seamless onboarding for our partners as well as guests.
“We are receiving 60% bookings from the locations which are now open for operations. For us, June and July 2021 are the best months in terms of revenue generations and business compared to other months in 2021. We have even done record sales in these two months. We are also aiming to build a presence encompassing macro markets in the next four to five months," Pranav Maheshwari, co-founder, Vista Rooms.
Jaideep Dang, managing director, Hotels and Hospitality Group, South Asia, JLL, a real estate consultancy firm noted that guest preferences have changed significantly during the pandemic. People are preferring to stay at secluded low density properties and are willing to go off the beaten track.
“As a result luxury rental housing that can be booked online, is experiencing good demand. That’s why small boutique luxury players are doing well and hence this business segment is experiencing increased interests from venture capitalists (VC)," he said.
Dang also pointed out, this model is scalable, which further interests VCs.
“Furthermore, most of these businesses are tech enabled platforms that increases their lucrativeness from an investor perspective. It makes sense for these players to invest in such models that are asset light and scalable," he added.
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