With rising disposable incomes, Indians are traveling like never before.
That's why the Indian tourism industry is projected to touch $157 billion by 2024 – up from $80 billion in 2013. Hotel players are recognizing this trend and coming up with newer offerings – particularly in the budget segment for the domestic traveler.
Oyo Rooms' Ritesh Agarwal (who was part of Forbes Asia's 30 Under 30 list) is running India’s largest branded network of hotels while Bangalore's StayZilla focuses on home-stays. And there are a host of budget hotel brands like Red
A small Mumbai player called Byke Resorts is doing its part by wooing travelers with "pure vegetarian" fare at its resorts. (It's made it to Forbes Asia's Best Under a Billion for two years in a row.) Into this mix comes Gurgaon’s FabHotels with $10.5 million in funding from Accel Partners,
In this Q & A co-founder Adarsh Manpuria,28, describes the business model; the competitive scenario and the key differentiation.
What is your business model?
FabHotels operates in the $30 per night, value-for-money, 3-star hotel segment. Our hotels are located conveniently near a business hub, airport or railway station and are typically the best 3-star or business budget hotels in that neighborhood. We work on a 100% exclusive franchisee model with long-term contracts. This is along the lines of global brands like Ibis or China's Home Inns and China Lodging .
How many hotels do you currently run?
We have more than 100 locations in the top 15 Indian cities ranging from New Delhi to Bangalore to Chennai. We operate more than 2,500 rooms and we are able to generate 85 percent occupancy month on month. We expect to become larger than Lemon Tree (which runs business and leisure hotels) before the end of 2016.
Gurgaon's FabHotels operates more than 100 hotels across 15 cities in India. Source:FabHotels
How are hotel owners reacting to this model?
We are seeing strong incoming interest from hoteliers across India. Typically, these budget hotels operate at 50-55 percent capacity. We increase occupancy and we also provide operational support. So we are highly valued by our franchisee partners.
What is the background of the founders?
FabHotels was founded in 2014 by Vaibhav Aggarwal and me. We are Wharton business school alumni. Vaibhav, 31, is an alumnus of IIT Guwahati. He cofounded FabFurnish.com and worked with Bain & Company before that. I also worked with Bain & Company and Bain Capital prior to that.
Could you describe the landscape for the hotel segment in India?
India is a unique hotels market. It's a multi-billion dollar segment but it's largely unorganized. More than 85 percent of the room supply is within the budget segment but there isn't much of a branded presence. So online hotel penetration is also low compared to China or the US and Europe.
What is FabHotels trying to do in this marketplace?
What we are doing differently is solving problems on the hotel operations side. We are building customized technology for managing real-time inventory, room-pricing and guest experience. Our entire tech stack has been built in-house from scratch. We are not using off-the-shelf hotel technology which is best suited for larger hotels with more than a hundred rooms.
