How online revolution is disrupting hotel industry in India's remotest parts

I'm in a remote town, about 30 kilometres north of Gangtok. A small hotel is located off road in desolate place, with a great valley view. However, with no local transport or proper road to the place, I wonder how people would discover it.

As I walk in, am told that the hotel is completely packed, all booked through online room aggregator sites and marketed through the medium of Facebook posts and hotel review sites. Am lured by the same modus operandi.

The valley along the river Teesta in the Himalayan state has great telecom coverage. Even near China border, one can catch the telecom signals, making hotels in towns of Lachung and Yumthang get discoverable by people sitting in cubicles in India’s metro cities.

The telecom revolution coupled with the emergence of the hotel aggregation startups has changed the Indian travel industry.

As per ICRA estimates, one in every four hotel rooms in India is booked by online means. This is low as compared to a 70 percent online booking rate in Europe, leaving a huge opportunity for innovation in the sector.

Even in bigger Indian cities, long forgotten heritage villas and summer homes of Maharajas, are now becoming available for as low as Rs 999 a night, unheard of a few years ago.

Even as occupancies have increased ARRs (Average room rentals) have remained constant, as per ICRA. This indicates to a clear case of disruption.

While the sites such as MakeMyTrip, Expedia, Booking, Yatra, ClearTrip, GoIbibo have existed for over a decade, the entry of startups such as OyoRooms, Treebo, FabHotels, GoStays, etc has disrupted the segment, pricing even the upper segment hotels as budget stays, and increasing occupancy rates.

It has made even five-star and four-star properties list on budget room aggregation sites.

Sales and marketing are the biggest pain points for a property owner. In big cities such as a Delhi or Bangalore, people have started vacating their homes to make way for budget hotels. These homes along arterial and busy traffic ridden roads make for prime property for hotels.

Such properties have started becoming a big draw for business travellers, even tourists on a budget.

The entry of a FabHotels, Treebo have led to a standardisation of room linen, to staff behaviour to bathroom toiletries at such properties.

Some startups have gone ahead to order furniture in bulk and taking the property on lease from the owners for a period of up to three years.

Often property owners liaison with these startups before they renovate the property. This leads to better standardisation, from the colour of bathroom tiles to the luggage rack in rooms.

Of course, the moolah is all spent by the property owner. The same model is being witnessed in India's emerging co-working startups which take a well-furnished property and market it on their platform in a revenue share arrangement with the property owner.

The online startups help in marketing the property across cyberspace and in the real world through huge signages, visible from a distance.

The check-in software and inventory management are being created by these startups. Most provide Android tablets for check-in and check-out procedures.

Some, try to lure the customer into paying them online first, by offering a discount for pre-payment than the 'pay at hotel' option.

Room rental prices in India’s central business districts of big towns have fallen to as low as Rs 1500 a night, from Rs 4,500 a night on an average, about 7 years ago, despite inflationary pressures on the property owner. Often aggregation sites discount the room rates from their own pocket. At other times, they offer a minimum guarantee to the property owner, offering them a minimum occupancy rate, at all times.

All thanks to the young startups, room occupancy rates have improved and even corporates prefer to make their staff stay in such properties than the heavily priced luxury hotels.

The entry of the likes of Airbnb has opened doors of vacant rooms inside houses of city dwellers to travellers.

Most property owners are not hell bent upon maintaining a brand of their guest house, as long as they get a fixed income. Some don't even stay in the country and are happy to see a fixed sum with online transparency available through online tools. It has also reduced leakage in the system.

Hotel managers earlier used to book a large number of walk-ins. However, they used to show only a small number on the books, pocketing a huge sum, even as a property owner, often overseas Indians remained clueless about falling sales.

This week, myHQ, a co-working startup has taken workspace in two of Oyo's Townhouse properties in Delhi NCR, making way for a work-stay model.

Townhouse is a hotel brand launched by Oyo to cater to the premium mid-market segment. More such experiments are likely to follow where on-demand work-stay-play models will be witnessed in Indian neighbourhoods.

The online disruption has changed the industry and changed the way Indian traveller books a room.

Of course, the online aggregators also try and keep a check on the quality of inventory through user reviews, which is one of the first ways to check, if anything is amiss in the property.

Globally, about USD 5 billion was pumped in the OTA segment in 2016, with a large amount diverted to companies based in China and India. China accounted for the top four most funded players in this space in 2016, as well. Many have gone ahead for an IPO in this space in China. The largest investment in the space in 2016 went to Airbnb of about USD 555 million followed by India's GoIbibo which received USD 250 million from Naspers and Tencent in February.

Globally, about 744 companies were started in 2015 in online travel space. This number fell to 268 in 2016, followed by a rationalisation in investment scenario.

In India, the only threat to this industry is the lack of new entrepreneurs and consolidation amongst existing ones.

In October 2016, MakeMyTrip bought out its second biggest rival GoIbibo. OyoRooms had acquired its smaller rival ZoRooms in 2016, while Stayzlila and RoomsTonite shutdown due to lack of funds.

More shutdowns in this nascent space will only impede the disruption. Lesser competition would again start pushing prices up for rooms, even as quality could deteriorate.

That’s one thing the Indian traveller will not like.

harsimran.julka@nw18.com