Home is where the hotel is
Standalone brands and hospitality chains shift into overdrive as post-pandemic demand accelerates
Whether it is taking a walk in a tea estate, swimming with sharks, or an adventurous forest trail, experiences drive the modern traveller. If anything, the Covid-19induced lockdown that forced people to remain cooped up at home has only added more to the trend.
But the pandemic has also permanently changed travellers’ hospitality preferences. Brands such as Airbnb and home-grown properties such as Oyo, Vista Rooms and Saffronstays stepped in almost six to eight years ago to fill in the white space left by traditional hospitality chains. In the process, these brands have carved out a billion-dollar category and an alternative universe for travellers. Being the early movers, they are reaping the benefits in the post-pandemic world. Now, however, several home-grown brands are looking to cash in on the exponentially growing demand.
So what is fuelling demand for homestays? Principally the benefit of fewer guests because the establishments are significantly smaller than traditional hotels. Whether it is “workcationing” millennials who are driving the “work from anywhere” culture, the exponentially larger segment of hygiene-sensitive travellers or authentic-experience seekers, the decision to stay at a branded homestay has gained significant momentum, according to a report released by Hotelivate last month on trends that are shaping the hospitality industry.
Travel-deprived Indians are lapping up the opportunity to use alternative accommodation options that allow them to explore new places in a more intimate manner, it said. This, in turn, is driving the aggressive expansion plans charted by local homestay brands.
Take Vista Rooms for instance. The Rajan Anandan-backed start-up — the largest in the segment — has seen its revenue double in the last one year, said Pranav Maheshwari, co-founder of Vista Rooms, which has 400 rooms in nine clusters across the country and plans to create six additional clusters taking the total to 15 over the next three years. The expansion will take the number of rooms to 2,000.
“It’s a win-win for everyone,” said Maheshwari. While the owners of these homes — most of whom are high-networth individuals (HNIS) — get a good yield (7-8 per cent, double of what they would have got if the property were let out) on their second homes, guests get the differentiated experience and the luxury of space without compromising on privacy and safety.
Others too are rolling out the red carpet. Saffronstays, the Mumbai-based homestay brand founded by Tejas and Devendra Parulekar, also has its expansion plans stitched up. The Maharashtra focused brand is looking to have a panindia presence and ramp up the number of homes from 152 currently to 225 by the end of 2021-22 and 500 by 2022-23.
Had it not been for Covid-19, Saffronstays would have been much larger in terms of scale and presence. The pandemic forced the Sixth Sensebacked start-up to unpack and revisit the plans. “Just before Covid-19 struck, we had 175 homes across various locations. We had to whittle it down to 50 to 60 and focus around Mumbai and Pune. From there we doubled our inventory back to 150-plus. The strategy paid off,” says Tejas Parulekar.
Vista’s guests are those who would typically stay in a four- or five-star hotel. Depending on the property size, amenities it offers and the destination, Vista’s homes command ~25,000 to 30,000 per night, rising to ~85,000-100,000 per night for curated, luxury villas. Saffronstays charges ~8,000-12,000 per night.
Vista is going in for a second round of fund-raising from its existing investors, including DSG Partners and Anandan, and is also exploring a presence in South East Asia. Last month, it entered Dubai.
The idea is to have a presence in countries that are frequently visited by Indians, said Maheshwari.
“We have not even scratched the surface. The possibilities are immense,” said Tejas, on the market potential of branded homestays.
Maheshwari concurs. It is estimated that there are close to 230,000 second homes belonging to HNIS. There are also large land parcels that will see housing development. More owners are opening up their homes, he said, adding, “There won’t be any dearth of supply or demand.”
Meanwhile, the large hotel chains too have realised the untapped potential in alternative accommodation. Indian Hotels (IHCL), which launched its luxury homestay brand amã Trails & Stays in February 2019, was quick to jump in.
Having tasted success, IHCL now plans to scale it up in a big way — from 51 bungalows to 500 over the next couple of years, a senior executive of the company said during a panel discussion at a recent hospitality industry conference. The average price of the property is ~70,000 per night for a family of four.
Other legacy brands are bracing to wrest the odds in their favour by creating niches within their portfolio for offering bespoke services to their guests. ITC Hotels, for instance, is set to launch new brands called Mementos and Storii — both aimed at offering unique experiences to travellers at exquisite locations.
Other hotel chains, too, are testing the waters, said Nandivardhan Jain, CEO, Noesis Capital Advisors. “Compared to standalone brands, hotel chains are better positioned to offer smaller-format accommodation like a homestay with their management bandwidth and benefit of a wide distribution.” The limitation here is that for hotels the business model works on a hub-and-spoke structure — the smaller properties have to be located within a 30- to 40-minute drive from their traditional hotel brand so that the latter can feed the former.
As the standards of hotel companies creep into the homestay experience, this trend is the one to watch as this market grows and develops.