18 October 2016 07:00:28 IST

Budget hotel start-ups enter new round of fund raising

Gearing up to compete with mid-market brands

Tech-enabled hospitality start-ups like Fab Hotels and Deyor Rooms are getting ready to compete with mid-market hotel brands like Ginger Hotels and Lemon Tree by entering into another series of fund raising to increase their room count.

For instance, Fab Hotels is planning to almost double the amount it has raised so far, having raised $8 million in Series A round from Accel Partners and RB Investments and has investors like Qualcomm Ventures and Mohandas Pai’s Aarin Capital.

“We want to be larger than players like Lemon Tree in terms of number of rooms and expect to scale up with a franchise model.

“We have already closed a seed and Series A round at $10 million.

“The plan to at least double the amount which we have raised so far in the next round of Series B which should be close to $20 million,’’ said Adarsh Manpuria, Co-Founder FabHotels.

With more than 100 hotels across 15 cities and 2,500 rooms at an average of ₹2,000 rate per night, its target is to beat players like Lemon Tree which have about 3,200 rooms in the mid-market segment.

Taking over 3-star properties in the middle of the city and refurbishing them with tech-enabled solutions, both Fab Hotels and Deyor Hotels follow a full inventory concept unlike existing aggregators like OyoRooms which tend to takeover a part of the property.

“We are not aggregators like OyoRooms which brand a particular part of the hotel. In our case, we takeover the entire hotel in the 3-star segment which forms almost 85 per cent of the budget segment today,’’ added Manpuria.

In fact having a full inventory model gives a better chance to such hotel start-ups to standardise their services uniformly instead of just taking over part of a property and trying to re-brand it under their name.

In the case of Deyor Rooms, it has recently changed its business model from a partial to full inventory and expects to brand almost 80 hotels under its name by the year-end to compete with some of the big brands in the mid- market hotel segment.

“We are getting ready for raise $10 million in Series A and are in advanced talks with investors.

“Deyor Rooms is going to have a full inventory model since it will give a better chance of building its brand and controlling customer experience in the segment.

“We would aspire to become like some of the big corporates like a Ginger which functions like a self-service hotel,’’ says Chirag Gupta, Co-Founder, Deyor Rooms.

Other full inventory budget hotel start-ups like Treebo have also been trying to compete with mid-market players like Ibis, Ginger and Key Hotels by keeping its prices a notch lower.

“We are still lower than the lowest price point of budget brands like Ginger and try to keep our rates below ₹3,000,’’ said Sidharth Gupta, Co-Founder, Treebo

Having raised $ 6 million from PE funds like Saif Partners and Matrix, Treebo is now ready to raise its hotel count from 45 to 100 by next year in the mid and budget segment.

Treebo had started with room rates between ₹1,000 and ₹1,300, which have now been raised to ₹1,999 and going up as high as ₹3,000 in places like Mumbai for its new sub-brand of Alpha which targets corporate travellers.