Treebo Hotels: Big Bang For The Buck

The budget hotel space in India is largely unorganised and struggles with a unique two-sided problem. While on one hand, there is a huge demand for quality stays at affordable prices, on the other hand, hotel owners struggle to fill their rooms. When it comes to booking budget hotels, consumers often have to live with anxiety naturally associated with staying at such hotels — stained bedsheets, worn out towels, unhelpful staff, and unhygienic bathrooms. Ironically, the hotel owners struggle with low occupancy levels as their hotels don’t have any differentiation or brand recall.

Treebo Hotels has disrupted the existing two-sided problem by offering guaranteed quality across all aspects of a hotel stay, including spotless linen, free WiFi, complimentary breakfast, friendly and prompt service, branded toiletries, and much more to the guests. At the same time, it offers the hotel owners not just the possibility of earning 4-5x more money from their properties by improving their occupancy from about 50 per cent to 75 per cent, but also the opportunity to become part of a professional, loved consumer brand.

Treebo follows a technology-enabled franchise model, where new and existing hotels take their brand’s franchise and become part of the Treebo Hotels network. “Our hotel partners manage the day-to-day operations of the property as per our standards such that customers get a great experience. Our Quality Managers audit these properties everyday to ensure compliance to our standards. On the other hand, we take the responsibility for generating sales for the property. Thus, it is a win-win situation,” says Sidharth Gupta, co-founder of the company.

The founders at Treebo believe they are actually disrupting the other startups in this space as most of them are building aggregators, not hotel chains. “They take a few rooms at many hotels and sell them online. They are therefore no different from — but not nearly as strong as — a MakeMyTrip or a GoIbibo, except that they put their signboard at the property. But that obviously is not sufficient to professionalise that property and improve its quality,” Gupta says.
Unlike other players, Treebo works only on the full-inventory model at each of its properties, which give it better control on the experience delivered to guests. “For the customer, Treebo is the hotel. As a result, while other players have struggled with consistently poor customer reviews and a deteriorating reputation, Treebo has managed to earn customer trust and love as a credible provider of quality accommodation,” Gupta says.

In comparison with other conventional hotel chains like Ginger, Ibis, etc., Gupta says, Treebo’s difference lies in their wider reach and scale, lower price points (Rs 1,000-3,000 per night as opposed to Rs 3,000+ for most of the other players) and warm Indian hospitality.

Treebo has clocked an annualised GBV (Gross Booking Value) run rate of $25 million in FY16. “We usually take 18-25 per cent share of topline from our hotel partners as our fee. This fee is what comprises our revenue,” Gupta says.

Soon after launching operations in June 2015, it has raised a Series A investment of $6 million by SAIF Partners and Matrix Partners — two of the leading venture capital funds in the country. Then, in July 2016, it received its Series B funding of $17 million led by Bertelsmann India Investments (BII) with participation from existing investors, SAIF Partners & Matrix Partners India.

Treebo Hotels

Category: 0-3 years
Founders: Sidharth Gupta, Rahul Chaudhary, Kadamjeet Jain
Year of Founding: 2015
What it does: Treebo is a tech-enabled hotel chain that is now the largest and most loved in the budget segment. It works on an asset-light, franchisebased model with hotel partners and offers customers unprecedented value-for-money
Growth Potential: Grew from 4 hotels, 81 rooms, and 50 room nights in July 2015 to 150 hotels, 4,000 rooms, and 3,000 room nights now
Revenue: Works on an 18-25 per cent commission structure with hotel partners. Exact revenue undisclosed
No. of employees: 300+

ayushman@businessworld.in