In a market where startups are seeing a slowdown in private equity investments, Stayzilla has halted all operations and now looks for a reboot with a different business model. The home-stay aggregator announced the plans in an official blog post which further stated that the platform will not welcome any bookings on Stayzilla’s website and app. However, all the prior stays with check-in dates on or before 28th February 2017 will be honoured.
Talking about this decision, Co-founder and chief executive Yogendra Vasupal said,
This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting Homestays on the map of India.
The bookings made for dates post 28th February 2017 will be cancelled with the company providing a 100% refund to their guests. Reasoning out the cause for StayZilla’s shutdown, Vasupal mentioned that the extensive investments poured into both sides of the marketplace, creating homestays as well as guests who would choose a homestay across the country. The platform claims to offer 8,000 homestays in over 900 towns, however, it seems to be inadequate for local network effects.
Vasupal also blamed platform’s inability to match the supply and demand prices. Adding to that, he wrote,
This was further exacerbated by the discounting based growth rampant in the travel industry since 2015. Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth.
Talking about the future business model, the latter described a platform favouring the supply-side of the business. The company will work closely with both online and offline travel partners to offer the best of Indian homestays to their valued customers in future. It will adopt a distribution channel that will not only target the right customers but will focus on Stayzilla’s core strength developed over the last 18 months.
The total funding for the aggregator accounts for around $33 million from significant investors such as Nexus Venture Partners and Matrix Partners which participated in multiple rounds. The company concentrated on getting back to the initial, and stable, value system, all along the past year. However, 12 months was just not enough time to shift paths.
Discussing similar concerns, Stayzilla’s Co-founder Rupal Yogendra said,
The initial 7 years were all about having negative working capital, positive cash flow and a sustained ability to fund our own growth. Those were the only metrics we tracked. In the last 3–4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.
The news comes on the heels of the merger of two of popular travel booking giants Ibibo group and MakeMyTrip. The merged identity possessed a massive threat to the survival of Stayzilla on the existing business model. Moreover, Yatra yet another competitor in the market got listed on Nasdaq after a reverse merger last year. The prior attempts of consolidation of product and engineering teams in Bengaluru also hinted towards the sudden demise of the platform.