Moneycontrol
Aug 11, 2016 09:02 AM IST | Source: Moneycontrol.com

Stay comfy, pay less: That's what budget hotels are here for

While 5-Star hotels will never run out of patrons, a new breed of hoteliers are becoming popular among the middle-class. Think ultra-budget hotels with clean rooms, good room service and edible food. Such bed-and-breakfast joints have sprouted in huge numbers. And, what is more, they are also in demand.

Rishma Kapur
moneycontrol.com

Planning a vacation? And you can't find a decent hotel that fits into your budget? Well, have no worries.

While 5-Star hotels will never run out of patrons, a new breed of hoteliers are becoming popular among the middle-class. Think ultra-budget hotels with clean rooms, good room service and edible food. Such bed-and-breakfast joints have sprouted in huge numbers to feed a growing section of India who are against spending a lot of money for a night's stay away from home.

And the stats reveal it all.

Tourism in India contributed about USD 295.7 billion or 19.2 percent to India’s gross domestic product in 2015-16 and has been growing 8.9 percent year-on-year, mentions a report by India Brand Equity Foundation.

“The rise in tourism can be attributed to increasing per capita income of citizens as well as factors like social exposure,” says Sidharth Gupta, co-founder of Treebo Hotels. Treebo is a hotel aggregator and (according to its website) offers 'shelter to travelers without discriminating between the rich and the poor.' It operates in the space where the likes of OYO Rooms and FabHotels have made a name for itself as a go-to website to book cheap rooms.

The Bengaluru-based Treebo has expanded its footprint to 25 cities since its inception a year ago. The tourism industry, which is pegged at USD 20 billion, comprises 70 percent of budget hotels, explains Gupta who has previously worked with Myntra and Mckinsey & Company.

Lack of budget hotels, especially ones that let out rooms for as little as Rs 1,000-3,000, while ensuring quality is missing in the current market. This has led to aggregators.

The UK-based Chototel (which calls itself the People's Hotel) targets the lower-middle. It has a 240-room set-up in Nagothane, an industrial town, 70 kilometres south of Mumbai. It can cater to 1,000 guests. The rooms are as cheap as Rs 200-332 (USD 3-5) per day. 

Terming it as a 'social business', Chototel's Managing Director and Founder Rhea Silva says that it is "a business which serves the masses." Silva also has plans to tie up with corporates for short stays for their employees.

Why is competition with established brands not a concern?

Budget hotels need not be too worried about competition from bigger counterparts. High priced competitors, focus on luxurious services and fragmented footprint are the reasons that set large hotels apart from budget hotels.

Treebo's Gupta is of the opinion that limited footprint of larger counterparts in smaller cities works well for aggregators such as his. "Our relevance extends to travelers in small cities," he says.

The idea is not to offer luxury services like swimming pools and gym, but to provide basic necessities like clean, comfortable rooms and friendly customer-services.

"Demand will not be a problem," says Silva, adding that the need for accommodation is on the rise.

Challenges Ahead

"The biggest challenge is maintaining superior quality even as we scale up," says Gupta. Innovative and creative models will help them survive.

On the other hand, for Chototel, the main challenge is raising capital and expanding the business. This is true in the current scenario where the fund flows have reduced considerably over a period of time.

While challenges may differ from organisation to organisation, the key challenge for budget hotels would be to set themselves apart from competitors in order to survive.
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