India: Budget hospitality firms Zostel, OYO, Vista Rooms witness recovery in biz

OYO in Manali, India. Photo: OYO Rooms

Hospitality firms such as hostel chain Zostel, OYO Hotels & Homes and Vista Rooms that offer budget accommodation have recorded 40-60% of pre-pandemic bookings as demand picked up September onwards.

Demand has been driven primarily by young travellers, who are increasingly booking long stay, workcation and staycation packages at destinations mostly within the driving distance of their home cities such as Goa, Himachal Pradesh (Shimla, Kasol, Manali) and outskirts of Mumbai (Mahableshwar, Pune, Alibag and Lonavala).

These firms are actively running campaigns especially on digital and social media platforms to promote discounts as well as hygiene and social distancing measures being taken at their properties to boost travellers’ confidence.

Apart from leisure, a lot of movement has also started in the manufacturing businesses across the country which has led to a lot of people in operations travelling for work, too, said KB Kachru, vice president, Hotel Association of India and chairman emeritus and principal advisor, South Asia at Radisson Hotel Group.

“In the coming months, we are expecting a bounce back of 20-30% from the current recovery rate in the budget segment,” he added.

Homegrown hospitality startup OYO Hotels & Homes which operates in the budget segment claimed that post-unlocking, its occupancy has recovered to 40% of pre-covid level with room nights sold increasing 30% month-on-month.

“So far, this is a small but significant green shoot for us. Currently, we are witnessing that the intent to book is at almost 100% the levels when compared to pre-Covid for consumers on the OYO platform and the traffic is at over 50% of pre-covid levels,” said Harshit Vyas, SVP and COO, franchise business – OYO India and South Asia.

OYO’s internal survey highlighted that the majority of its leisure destination bookings are made by group travellers, followed by solo and business travellers. Amongst these, group travellers and business travellers consider safety as their topmost priority, whereas, solo travellers are more cautious about affordability.

“Given the current situation, we feel, overall, affordability will be a key consumer offering going forward. With cost pressures increasing, we expect consumers to trade down from higher categories to high quality budget hotels,” added Vyas.

Vista Rooms, which offers affordable homestays options to travellers for an average 4 000 to 6,000 a night, is witnessing growth in bookings mostly from young travellers who are looking for workcation packages.

“These travellers are looking for long stays ranging from an average of 7 to 10 nights, therefore price becomes an important factor. In November, we have seen 120% growth in month-on-month bookings and we have managed to cross the pre-covid levels. There’s a massive spurt in demand as people are choosing a homestay over hotels. There is still a fear of sharing a common area so they are looking for private cottages or homestays,” said Amit Damani, co-founder of Vista Rooms.

Workcation bookings (over two weeks) comprise 20% of Vista Room’s overall bookings with 30% of its stays offering affordable accommodations through homestays and cottages in destinations such as Manali (Himachal Pradesh), Mukteshwar (Uttarakhand) Lonavala (Maharashtra) and Coorg (Karnataka).

Budget hospitality chain Zostel, which is offering value-driven long-stay workcation starting at 4,000 at its properties, started witnessing early signs of recovery in September having reached 20% pre-covid levels of bookings which went up to 50% in October.

“Since November and December are the seasonal travel period with Christmas and New Year, we will be targeting to touch 80% of pre-covid bookings by year end. Having said that, it all depends on veracity of coronavirus spread as it can lead to states imposing restrictions and ordering mandatory tests which can act as a deterrent,” noted Dharamveer Singh, chief executive, Zostel.

As per market research firm Euromonitor International, budget hotels market size in India was valued at $2.4 billion in 2019 growing at a compounded annual growth rate (CAGR) of 9.2% to touch $3.8 billion in 2024. The data covers spending by inbound and domestic travellers, providing a destination point of view, also known as point of supply.

The article was first published on livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.