Startup Zostel offers affordable accommodation facilities to travelers.
To help make backpackers’ life easy, especially those travelling on shoe-string budgets, Dharamveer Singh Chauhan, Paavan Nanda, Akhil Mallik, Siddharth Jhangu, Chetan Chauhan, Abhishek Bhutra and Tarun Tewari set up Zostel in August 2013.
Bengaluru | Red Newswire | By ET Bureau | Dec 1, 2015 02:11 AM IST.
The startup provides accommodation services to travellers. These IIM and IIT graduates pooled in Rs 20 lakh to float the venture, starting their first hostel in Jaipur. The startup has since expanded to 10 locations—Jodhpur, Udaipur, Agra, Varanasi, Delhi, Goa, Rishikesh, Pushkar and Jaisalmer.
“During our trips abroad, when we were still in college, we stayed at some very good and cheap hotels. This experience prompted us to come up with the idea of Zostel, and fill a wide gap in the Indian hospitality space,” says Chauhan. Starting at Rs 400 a day, Zostel’s properties offer basic services such as laundry, access to the Internet, library and gaming zones. Travellers can choose between airconditioned dormitories with bunk beds and private rooms, with rack rates ranging from Rs 400-500 a day for dormitories to Rs 1,000-3,500 for rooms with two occupants.
Chauhan singles out ‘experience’ as Zostel’s USP. The attempt is to distinguish these hostels from other budget hotels by providing a clean and lively environment. Zostel’s customers come from around the world, making for an interesting cultural confluence. “Our hostels offer you to meet travellers from all over the world, exchange stories, and have the experience of a lifetime,” says Chauhan.
The startup, which hosted over 20,000 backpackers last year, across all its properties, received a funding of Rs 5 crore from Malaysia-based angel investor Presha Paragash in May 2014. In October, Zostel established its first foreign facility in Vietnam. Taking annual footfalls and average ticket size into account, the company’s 2014-15 revenue is estimated to be more than Rs 1 crore.
As backpacking has gained popularity in India, Zostel’s customer profile has undergone a marked shift. When the startup was founded in 2013, 90% of its customers were foreigners and only 10% were Indians. Now, it’s 65% foreigners and 35% Indians. “Zostel has also created a market that did not exist in India: solo female,” says Chauhan.
The biggest hurdle that Zostel founders faced at the time of starting out was lack of awareness about the concept of backpacking or solo travel. “The biggest challenge was to create awareness among domestic travellers to gain traction,” says Chauhan. The idea was to offer an alternative to travellers not interested in conventional, often expensive, hotels and looking for good, affordable options.
Given that they operate in a niche segment, where potential customers are avid Internet users, engagement through social media has been key to their success. Hotel review portals too have helped the business. “Word-ofmouth and property reviews play a very big role in our industry, which has been our strength, given the experience we provide to customers,” says Chauhan. Tapping social media has helped the founders keep marketing spends under control, which has contributed to the startups bottomline. Most Zostel properties turn profitable within 2-3 months of launch, says Chauhan.
The startup is now looking to expand its footprint to 25 destinations across India, South-east Asia and Europe by end-2015. “We are also getting into the franchise model to encourage young entrepreneurs,” says Chauhan. Through its entrepreneurship development programme, Zostel provides seed funding of `10 lakh to successful applicants. The hostel in Vietnam was the first facility to have come out of the programme.