• Treebo ups India’s budget challenge

Treebo Hotels, the India-based budget hotel chain, has raised USD34m in its latest funding round.

The company, which operates under the franchise model, said that it would use the money to expand its footprint, at a time when branding in India’s budget sector is gathering pace.

The funding round was led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital. Existing investors, SAIF Partners, Matrix Partners India, and Bertelsmann India Investments also participated in the round. Prior to this round, the company had raised a total of USD23m over two rounds from SAIF Partners, Matrix Partners India, and Bertelsmann India Investments.

Founded in 2015, Treebo Hotels is a technology-enabled budget hotel brand with close to 300 franchisees operating exclusively under its brand across more than 50 cities. The company offers high-quality accommodation options to travellers in the Rs 1,000 (USD15) to 3,000 per night price range.

Sidharth Gupta, co-founder, Treebo Hotels said: “Ward Ferry and Karst Peak are both seasoned investors in the global markets including in the travel and hospitality space. Between them they have invested in hotel chains, cruise ships, OTAs, F&B chains, duty free shops, and several other sub-segments within the space.

“In the past two years Treebo has grown and transformed into what it is and our focus will remain on building budget hotels. One of the biggest focus areas of this fundraiser will be to ensure a better customer service experience at our hotels. We’ve been experimenting with different models in pockets of cities like Bengaluru where our hotel density is higher. We intend to expand that to other cities.”

Rahul Chaudhary, co-founder, Treebo Hotels said, “We pioneered the technology-enabled franchise-based model in the budget hospitality segment in India. We have several breakthrough initiatives in the offing to further enhance the experience we offer to our guests, and the value we create for our franchise partners. This new capital will allow us to invest in these endeavours. We are thrilled to receive continued support from new and existing investors.”

Founded in 2015, Treebo’s franchise model offers its brand name, quality oversight, access to vendors, staff training, and sales and marketing expertise to the property.

The company said that it offered “a quality accommodation alternative to India’s USD20bn unorganised and fragmented budget segment”.

The funding round came shortly after Oyo, the budget hotels bookings marketplace, announced a move into asset management, a decision it said would “redefine our partnership from with real estate asset owners”.

The company said that it could deliver a 100% increase in revenue in six months, 80% occupancy and 50% corporate consumers. The group added that it could also offer loans for through its “strategic partnerships” with financial institutions, which have so far seen loans made to more than 100 properties.

The launch came seven months after the group launched its latest brand, Oyo Townhouse, which it described as based on the needs of the millennial traveller, with “brand-new systems and services have replaced the older, wasteful conventions of the past. So, guests will get stellar features and dynamic service, with the added benefit of a hyper-local address”.

Anupam Narayan, chairman, Rockwood Associates, told Hotel Analyst: “Treebo is an interesting twist to the Oyo rooms model. It is playing in the budget space which has the greatest need for some quality assurance and branding. Interesting difference is that while Oyo basically had some rooms in a hotel, Treebo is branding the whole hotel.

“The challenge that remains in India is maintaining quality control/safety/standards in this segment when you do not own or manage the asset. And the Indian owner is very smart about wanting a return on investment or affiliation. And quite frankly, too many owners cut corners to save a few bucks. So a great idea to watch if they can deliver on their customer promise as they grow. Or if they will match the life cycle of Oyo. Up and then down.”

HA Perspective [by Katherine Doggrell]: India has been a hard nut to crack for the global operators, with many giving up and going home, consumed in read tape and unable to gain enough traction in a population of 1.3 billion to build a coherent brand.

The country’s hotel sector is now benefiting from the local upswell in technological know-how, with Oyo Rooms one of the first to take advantage of the need for branding and distribution, with its budget marketplace. Now Treebo, with its soft brand approach, is getting deeper into traditional operations and also ensures that, unlike the aggregators like Oyo, it has exclusive access to its hotels.

Sources close to Hotel Analyst pointed out that, although the location may be different, the issues were likely to be the same – brands focus on the customer promise and owners focus on returns. Treebo’s Chaudhary estimates that 65% of the Indian hotel market is accounted for by budget hotels, representing more than USD15bn to USD20bn per year. So if you fall out with one owner, another one is likely to be along.

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