Hotels are all about customer experience, and that’s the formula homegrown franchise-run brand Treebo aims to crack for budget properties.
“If I look back on our journey so far, we have emerged from being a dark horse to the guy who everyone wants to emulate,” Sidharth Gupta, co-founder of Treebo told Moneycontrol in an interaction.
Treebo, launched in 2015, is a budget hotel brand that has zero inventory of its own. The startup rather works on a franchise model, where the company helps property owners develop, design and standardise hotel services. The cost is shared between Treebo and the hotel owner. The ratio of expenditure between the two varies on a case to case basis.
According to Gupta, Treebo’s negotiations with the property owners is based on a minimum guarantee (MG), a model that most other aggregators and OTA operators have rejected for being highly cash burning. However, Treebo is not an aggregator, neither an OTA, Sidharth insists.
"MGs don’t cost us much. It has to be viewed in the right context. MGs can be dangerous if you are not able to generate business for your partner properties. An aggregator cares about the network of properties as a whole, not about each node in the network. So they can't drive high occupancies at a given property and can therefore not offer MGs without burning a hole in the pocket," said Sidharth.
Treebo, on the other hand, has full control on the quality of service being offered. Sidharth claims that just about eight percent of all the properties Treebo manages have missed minimum guarantee targets.
The startup today manages over 300 properties, or 7,000 rooms, across 53 cities. The company expects to double the number of properties and rooms under management over the next 12 months.
Aggressive pricing and discounts are not the way Treebo wants to go. "For us, scale is not important. It’s a given that, in this large market, if we continue to add value to our customers and to our partners we will scale. Our single-minded focus therefore is on creating an unbeatable experience. Everything else, including scale and economics, will follow,” Sidharth says.
While a discount war continues among the organised players as they look to build inventory while grabbing a larger slice of the customer’s wallet, Treebo is consciously choosing to stay away from it.
“We will run discounts and dynamic pricing, but we don’t think of it as a differentiator. There’s no doubt we need to be competitive on pricing, but our bet is more on experience and building the most loved hotel brand,” he adds.
That’s the reason Treebo is not keen on cutting prices beyond Rs 500 even after a positive impact due to the new tax regime of GST.
“We will instead make it harder and harder for competitors to catch on with the value we create for our property partners and the end-users through more innovative services,” Sidharth said.
This is much against rival Oyo's vision that says it will continue to offer Rs 499 rooms per night as it hits new markets.
Treebo, which raised USD 34 million in fresh funding in August, plans to use a chunk of the proceeds to build on its technology platform, expanding its footprint geographically, and to invest in improving the guest experience.
The company has launched several initiatives to test the waters. The most significant of all is Treebo’s centralised kitchen for a cluster of properties.
“We found that some of the properties were not able to offer good breakfast consistently to the guests. We want to standardise it across properties. So we thought we will deliver breakfast for them,” Sidharth says.
The pilot project is currently underway with one kitchen servicing about 10 of the 40 odd properties in Bangalore. The startup plans to expand first in the metros with a higher cluster of properties. But the economies of scale for Treebo’s centralised kitchen will depend on the success and feasibility of the pilot project.