Treebo, which competes with budget hotel room aggregator OYO Rooms, which is backed by Softbank Corp and Sequoia Capital, will use the capital to quadruple its network to 12,000 rooms across 450 properties in the next 12 months.
The deal underlines how companies with favourable unit economics even with a lower market share are able to raise capital in a tough funding environment.
“Treebo has shown a tremendous ability to drive steady scale, and healthy unit economics at the same time,” said Tarun Davda, Managing Director at Matrix Partners which co-led Rs 38-crore round with SAIF Partners in June 2015.
Treebo was founded in February 2015 by former Myntra executives Sidharth Gupta and Rahul Chaudhary along MakeMyTrip’s Kadam Jeet Jain. The company offers budget hotels rooms to travelers in the Rs 1,000-3,000 price range, with average booking rate at Rs 2,000. It currently has a network of 3,000 rooms, where it is able to drive around a 75% occupancy rate on an average.
“Over the past 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,” said Pankaj Makkar, MD of Bertelsmann, which has backed players like furniture retailer Pepperfry and small business lender Lendkingkart.
Branded budget stay players like OYO and Treebo aggregate smaller hotels which 10-50 rooms and put standard amenities in rooms, like TV, air-conditioning, complimentary breakfast and WiFi.
But where OYO and Treebo differ is that the latter works with a hotel only when it can sell full inventory of hotel rooms while the former owns only a part of the inventory.
“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,” Gupta told.
“We understood early on that these two things are interlinked, and partroom aggregation will not get us the customer experience.”
Last year, Treebo was a distant third to biggest rival OYO Rooms, which secured $100 million in funding from Soft-Bank and deep-pocketed New York-based firm Tiger Global invested in ZO Rooms with a promise of more. The price war also led to OYO and ZO getting thrown out of online travel portals (OTAs) like MakeMyTrip and Goibibo, who started seeing them as a competitor.
Source: The Economic Times