StayZilla Vs Zo Rooms – Hotels & Alternative Stay Aggregators

StayZillaStayzilla is an aggregator of hotels and alternative accommodation on the Mobile App & Web. The company’s focus is to build supply, which it believes is the most difficult issue to resolve. It believes that there is enough pent-up demand to fill in any supply that will come online. Traffic on the platform also depends more on having inventory across a wider geographical coverage (number of towns/cities) rather than deeper coverage (more hotels within a geographical area).

Importance of supply can be seen from the fact that the company believes that the property owners are customers rather than those booking the hotel. Further, Stayzilla doesn’t believe that hotel owners / operators need technology for booking as is being focused on by traditional OTAs. This is because the average room inventory is 20 rooms/hotel and 15 rooms/alternative stays. Stayzilla has own pictures for 5,000 of the 30,000 properties currently but believes that importance of self-verified pictures is overstated given the quality of room changes over time.

Besides, it is also not a one-time cost and needs to have a structure in place to keep them updated. The strategy of the company is completely opposite to that of Oyo and Zo Rooms – it doesn’t brand hotels and in fact has even removed names of the hotels on the platform. The company also believes that branded budget hotel rooms could face scalability issues and they are not a competitor (no different than other franchisees).

Stayzilla charges commission for room booking from the property owner though it may initially start with no commission until the owner sees value in onboarding with Stayzilla. Commission rate can be ~10%.

Zo Rooms – From Hostels to Hotels

Zo Rooms started as a chain of branded travel hostels – 2 properties in Jodpur and Jaipur (tourist cities in Rajasthan) and has now entered the branded budget hotel segment. Currently has 8 hostels with capacity of 700 bunk beds. It has started a franchisee model which will increase the number of hostels to 48 and 4,800 bunk beds (3-4 will be international destinations). Take rate will be ~20%. Average rate per day is Rs500, 50% of the occupancy is by international tourists and 70% of the bookings are done through website while remaining is direct. Occupancy rate is 80%. Profit margin for own property is healthy.

What Issues Zo Rooms is Addressing ?
Four key issues when booking budget hotels – 1) security; 2) hygiene; 3) location; 4) affordability. The gap will only widen as demand is growing 18%yoy while supply is only growing 12% yoy. ~60% of the demand is contributed by business travel, which is relatively less cyclical and seasonal. Opportunity is large especially since there are few budget hotel chains in India – Ginger is the largest with 20-30 properties. However, location for business travel is important and there is a need for deeper coverage.

The company has a 250-points checklist for purpose on onboarding a hotel and any gaps are discussed with the property owner. The expenditure is either borne by the property owner or Zo Rooms in which case the company starts deducting a small amount from every booking over time to compensate itself for bearing the expenditure.

Beyond Doubt the new economy companies will change the entire Hotel Industry & Consumer Experience in the coming years. TripVillas is another interesting Business Model in this segment.