Treebo Hotels: Aims to Build Country's Largest Hospitality Brand

BWDisrupt's interacted with Sidharth Gupta, the Co-founder of Treebo Hotels

Founding Date: 20th June 2015

Please explain about Treebo Hotels in brief. How did you conceptualize it?
Treebo Hotels is a ‘digital hotel chain’. We work with the mind of an engineer and the heart of a hotelier to deliver high quality hospitality in the unorganised and fragmented budget segment of this industry. Ours is a technology-enabled franchise model where new and existing hotels take our brand’s franchise and become part of the Treebo Hotels network. Our hotel partners manage the day-to-day operations of the property as per our standards such that customers get a great experience. Our Quality Managers audit these properties everyday to ensure compliance to our standards. On the other hand we take the responsibility for generating sales for the property. Thus it is a win-win situation. We extensively use technology in all aspects of our business whether it is revenue management or quality control.

For most travellers, the hotel is a pitstop, not the destination itself. So, you do not want to spend too much in a room you’ll barely spend time in. Yet, if you spend below Rs 2000 on your hotel room, you can’t escape the anxiety that every budget traveler experiences before and during her trip. Chances are the bedsheets will have stains on them, the towels will be worn out, the staff will be rude, the bathroom will be smelly and unclean, and even worse, the place may not even be safe.

All three of us (the co-founders of Treebo) are from middle-income families. And these are the anxieties that we had personally experienced on multiple occasions during our travels. And it didn’t make sense. We wondered, when in so many other unorganised consumer sectors - food, fashion, electronics - emergence of an organised brand had offered the customer a sense of surety about the quality of product even at lower price bands, why should the same not be true for budget hotels? With this thought in mind we started Treebo with the mission of providing a budget-traveler the best value for money by building India’s first budget hotel brand. Treebo offers guaranteed quality across all aspects of a hotel stay including spotless linen, free wifi, complimentary breakfast, friendly & prompt service, branded toiletries, and many more.

What makes you different from others? What is the unique feature of your venture?
Answer to this question depends on who “others” are.
If you are talking about other recent start-ups in this space, then the difference lies in the fact that all of them are building aggregators, not hotel chains. They take a few rooms at many hotels and sell them online. They are therefore no different from a MakeMyTrip or GoIbibo, except that they put their signboard at the property. But that obviously is not sufficient to professionalise that property and improve its quality. These players show neither the willingness, nor the capability to control the experience delivered by these properties to the guests. And therefore you see all the customer outrage against the poor quality provided by these players. So contrary to their claims, they are aggregators not hotel brands.

If you are talking about other conventional hotel chains like Ginger, Ibis, etc. then the difference lies in three things - a) reach and scale - our asset-light model is much more scalable, which means that not only are we the largest budget hotel chain in the country, we also offer our guests the flexibility of many more location options within a city than any other chain, b) price point - we are much more competitive on prices with our hotels being available for Rs 1,000-3,000 per night as opposed to Rs 3,000+ for most of the other players, and c) warm vs cold hospitality - ours is a much more Indian, warm model of hospitality with larger rooms, free beverages, room service, etc. as opposed to the more western, colder model of hospitality followed by other players with small rooms, no luggage service, no room service, etc.

If you are talking about standalone budget hotels, then the differences are numerous - better understanding guest pain points, better staff training, better amenities, cleaner facilities, smarter revenue management, and the list goes on.

What is the revenue model? What is the current turnover?
We work on a revenue share basis. We take 18-25% of the top-line of the hotel as our fee for marketing the property under our brand name, and for providing expertise and support in maintaining quality standards.

How is the response of the customers? What is the traction?
The traction has been terrific. We have been humbled by the love and trust expressed by customers. We are now not only the largest budget hotel chain in the country, we are also the most loved one! Our average rating on booking.com - a portal for verified guest reviews - is 7.44/10.00, which is higher than that of Ginger, Ibis, Keys, LemonTree! Our net promoter score (NPS) is 61% and this is based on feedback from as many as 30% of all guests who stay with us. Our repeat rate is 40% for retail customers, and 80% for corporate customers. We run 75-80% occupancies at a very healthy ARR of 2100+. We started with 4 hotels and 81 keys in 1 city on 20th June. Today our group has presence in 30 cities, with 150 properties and 4000 keys.

Give us information on the funding you have received?
We raised our Series A funding round of $6M from Matrix Partners and SAIF Partners in June 2015. That gave us the resources to establish a foothold in the market quickly, and to attract good people in management early on. In July this year we raised another $17M in a Series B funding round led by Bertelsmann India Investments (BII), along with existing investors, SAIF Partners and Matrix Partners India.

Tell us about your team and their strength?
We have a total team strength of ~300 people. About 20% of these are from hospitality background - people who have done their bachelors in hotel management and have obtained 5-10 years of experience at top hospitality brands like Taj, ITC, Oberoi, Hyatt, etc. Another 15% of our people are in the technology team - those who build cutting edge technology products for all parts of our business. The remaining team is led by functional experts and general management talent from top tier institutes like IITs/ IIMs and top tier companies like HUL/ McKinsey/ Amazon among others

What challenges have you been facing?
We started this business with the prime objective of delivering exceptional experience to guests and huge value to hotel partners. We weren’t in the race to scale-up mindlessly. It was definitely a contrarian approach when we started last year in the midst of startup frenzy. There were companies that had raised huge sums of money, and were burning cash like anything to attract guests and hotel owners. To stand out in that noise in initial days was really challenging. We had to convince so many different stakeholders why our business model would work. The partners were skeptical about working with us, and it was somewhat challenging to tell them how really we were going to add value in the long term. Guests, who were showered with discounts left and right, would not understand how we were different from other players. Gladly, we have now been able to prove our value through our actions. Our partners have witnessed their revenues and profits rise steeply. Our guests too have seen huge difference in quality of their experience after they stayed with us.


What are your marketing plans?
As we march into the next phase of our journey, we have three focus areas -
a) Continuing to innovate to offer a great guest experience - We have been the thought leaders in this space when it comes to maintaining quality at our properties. For example, we launched the crowdsourced mystery audit program called Friends of Treebo to monitor quality at our properties. We will continue to launch such innovations, primarily driven by technology, to offer unmatched value for money to our guests
b) Expand our footprint - By the end of CY 2016, we aim to be present in ~50 cities with a network of ~250 properties and 6,000 keys. By the end of CY 2018, these numbers would become 100+ cities, 1500 properties, 40,000 keys. This expansion is not just for posterity. As a budget segment brand, in order to be relevant to our target customers, we need to be present wherever our customers travel. Hence the need to have a wider presence
c) Invest in building brand Treebo - Our aim is to build the most loved consumer brand in the hospitality space. In order to do so we need to invest in building consumer awareness and recall. Therefore over the next few months we’ll be investing in marketing - both through conventional media as well as new-age, digital media - to reach a large base of customers

How big is the Indian hospitality market and what opportunity do you see for Treebo Hotels?
There is huge scope in this sector. The total hotels market in India is estimated to be ~$20B, and 50-60% of this is in the budget segment. There are 1.25 million hotel rooms in the country of which 70% are in the budget segment. So you can imagine how deep the Indian market already is. Further, travel is a sector that benefits hugely from improving per capital  incomes. Evidence from other countries suggests that when the per capital income of a country touches $1,500, there are some sectors that see breakaway growth. And travel & tourism is one such sector. This is because at such income levels, travel gets added to the consumption basket of more and more individuals despite being a discretionary spend item. The future of this space is therefore going to be very very exciting.