September 26, 2017

In a 'tête-à-tête' with Voyager’s World, Sidharth Gupta, Co-Founder, dwells at length about how the brand has managed to carve a niche for itself in the budget hotel chain segment and also about the recent successful fundraise of $34million.

Anju Anna Alex

Founded in 2015, Treebo Hotels is a technology-enabled budget hotel brand with close to 300 franchisees operating exclusively under its brand across more than 50 cities that offer high-quality accommodation options to travellers at budget friendly rates. Recently, Treebo Hotels, raised $34 Million (INR 220 crore) in its Series C funding round led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital. Existing investors, SAIF Partners, Matrix Partners India, and Bertelsmann India Investments also participated in the round.

Comment on the fundraise
Ward Ferry and Karst Peak are both seasoned investors in the global markets including in the travel and hospitality space. Between them they have invested in hotel chains, cruise ships, OTAs, F&B chains, duty free shops, and several other sub-segments within the space. We are glad that our approach of building a sustainable, long-term business resonated with them. We feel privileged to have them onboard and look forward to leveraging their experience in driving business growth.

Treebo’s business model
Treebo is a budget hotel chain and works on the full-inventory franchise model. We have a technology-enabled model where the hotel partners manage the day-to-day operations of the property as per Treebo’s standards such that customers get a great experience. On the other hand, we take the responsibility for generating sales for the property. Treebo’s model is firmly based on forming deep partnerships with the owners and giving cx a consistent, high-quality experience to the guests.
We also work closely and efficiently with the partners on operational aspects like SOPs, staff training, materials procurement, etc. consistently for the full property. As a result of all of this, customers get a high-quality yet affordable experience.

Competition in this segment & how do you stand out among the competitors?
Our 2 set of competitors include the traditional hotel chains and start-ups in the hospitality sector.If we talk about the traditional hotel chains in the segment, one clear competitive advantage that we have over them is the price point. We truly cater to the budget segment in the country as compared to the others who offer a stay option well above Rs. 3000. Secondly, we have a stronger and larger network of hotels, covering more locations, as opposed to the traditional chains which usually have a large inventory at one location, proving limited options and flexibility to the customers. And the third is the customer experience that we provide across properties. Ours is a very Indian, warm form of hospitality as compared to their western, cold model adopted by others. We have intentionally not cut corners on some key elements of hospitality including room service, luggage assistance, and room size, and have rather managed economics by choosing to be present in quieter neighbourhoods off the main roads.

When it comes to the other start-ups, our full-inventory based franchise business model has enabled us to be leaps and bounds ahead of them in terms of its effectiveness in solving the core quality problem and in terms of its unit economics. Other start-ups followed a middle-of-the-road business model trying to be an OTA and a brand at the same time and failed at being successful at both. Realizing the flaw in their model they are now trying to pivot to our model. While it’s flattering to have followers, it’s definitely not going to be straightforward emulation for them. It remains to be seen whether they can also build an honest ‘guest service’ DNA which powers our model. In addition to the high-quality experience, our unique, industry-first technology innovation differentiates Treebo from others in the segment. In the last 2 years, we have introduced unique, industry-first solutions and programs including our revenue and property management systems, Friends of Treebo and audit system.

Expansion Plans and Challenges
We envision to be India’s most loved hotel brand. For which, we will mindfully expand to newer cities in the country. By the end of CY 2018, we aim at expanding to 150+ cities with 1500 properties and 40,000 rooms. To be relevant to our target customers, we need to be present wherever our customers travel. Hence the need to have a wider reach across the country.

What are your growth expectations in terms of revenue?
We are the only company in the segment to have positive contribution margin. We are not profitable at EBITDA level as we are making crucial investments for the future, including hiring talented employees, marketing campaigns to build the brand, building state-of-the-art technology solutions all of which will bear fruit in the future. We are looking at achieving profitability in the next 2-3 years.

Outlook for 2017 & the impact of GST
We are excited about this tax reform since this lowers the tax rate for budget hotels and enforces tighter compliance in the ecosystem. The unique thing about GST readiness is that you don't just need to be ready yourself, your ecosystem of customers, suppliers, vendors need to be ready. We are a 100% GST complied hotel chain. Over the last few months, we have worked tirelessly with our 250+ hotel partners, 3000+ corporate clients, and 1000+ vendors to get ready for GST. Overall, it’s a progressive step towards building a fair market and levelling the ground for brands across sectors. 2017 has been full of action for us. We launched our biggest brand campaign in May and announced Irrfan Khan as our endorser. We also got industry recognition for our PWA at Google I/O 2017. We recently raised $34million in Series C round from new and existing investors. We will continue to invest in delivering high-quality guest experience and mindfully expanding to new locations.

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