And investors continue to remain bullish about the budget hotel aggregator space. As a result, a growing chain of budget hotels — Treebo, which has a slightly different business model than Oyo — has closed a decent $17 Million in its fresh round..
Bertelsmann India Investments (BII) led the round with other investors. Existing investors namely, SAIF Partners and Matrix Partners India also participated in the round.
Treebo will be deploying this freshly raised capital in expanding its network of hotels. It plans to increase the number rooms four times from 3000 rooms to reach 12000 rooms across 450 properties in next one year.
Founded last year in February, Treebo typically offers rooms in the price range of 1000-3000 INR. It claims an average occupancy rate of 75% which has led to its success. Also, running a more compact, less expansive, smaller scale model has helped the company bring in better cashflows.
Talking about same, Tarun Davda, MD at Matrix Partners said,
Treebo has shown a tremendous ability to drive steady scale, and healthy unit economics at the same time.
Matrix partners had led the last round for Treebo along with SAIF Partners in June last year. At that time, Treebo had raised $6 million (around 38 crores) from these set of investors. In a way, last year, Treebo was far away from competing with Oyo rooms which was riding high on massive investments by Sequoia and Softbank.
However, since then, Treebo has strengthened its operations and remained largely focussed on improving its offering rather than extensive expansion (taking lessons from Oyo’s ups and downs I suppose!). And that is what led BII to lead its latest funding round.
Commenting on his investment, Bertelsmann India MD Pankaj Makkar said,
Over the last one year, they have maintained razor sharp focus on delivering a great guest experience, and have extensively deployed technology in all parts of their operations to accomplish this objective.
Both Treebo and Oyo work towards improving the experience of budget hotel travellers. This involves standardising services of budget rooms by offering basic amenities like AC, television, Wi-Fi, complimentary breakfast and wifi. They usually work with smaller hotels, typically with a rooms between 10-50.
However, there lies a basic difference in both of these models. While Oyo owns only a part of hotel inventory, Treebo has control over the entire inventory. This allows Treebo to offer services to customers freely on its own terms on behalf of the hotel.
Explaining the same, founder of Treebo, Sidharth Gupta says,
One thing that worked was completely undiluted attention on customer experience, everything else followed from that like tighter control over the full inventory of the property. We understood early on that these two things are interlinked, and part room aggregation will not get us the customer experience.
Notably, Fabhotels, which secured $8 million last month, also works on a similar model. This basic difference has given a slight edge to Treebo over Oyo Rooms.
Due to intense competition from Zo Rooms & other smaller chains, Oyo — backed by a massive bank balance from Softbank, once offered its rooms at heavy discounts. This not only led to severe cash burn for both firms but also resulted in them getting kicked off from online travel portals like GoIbibo and MakeMyTrip.
On the other hand, Treebo not only managed to hold its place on these portals but also became among top 3 hotel chains on most. As per Gupta, Treebo still comes among top 3 chains in terms of number of rooms booked on these OTAs.