Backpackers’ hostel, budget hotel: fresh graduates’ ventures get thumbs up

The idea stemmed from a basic problem that they, like most other students and budget travellers, face while travelling – finding a safe, clean, and affordable place to stay in a good location.

So, what did this group of management and tech students do? Brainstormed their way into launching India’s first backpackers’ hostel which provides all the amenities at a neat price of Rs.499. Needless to say, Zostel has filled a big vacuum in the Indian hospitality industry and is doing exceedingly well.

Started in late 2013 by four students of the Indian Institute of Management (IIM)-Calcutta, two from the Indian Institute of Technology (IIT), and one from Gurgaon’s Management Development Institute (MDI), Zostel has a presence in key tourist locations in Rajasthan (Jaipur, Jodhpur, Udaipur), Uttar Pradesh (Agra, Varanasi), Delhi and Goa. And the list is getting longer.

In his 20s, Paavan Nanda, the MDI alumnus and co-founder of Zostel Hospitality Private Limited, said that they have a single motto: “Change the way India travels.”

“Zostel is not just a pad to crash in. It aims to provide a holistic experience to travellers. The atmosphere is designed to be fun and cool. Boarders are encouraged to congregate in the common rooms which are equipped with playstations, board games, cards games and other modes of recreation. There are bonfires and music sessions in the evenings, and the staff also help travellers join guided tours in the city, book tickets, even plan their itinerary for excursions in nearby regions,” Nanda told IANS.

At the given price, a traveller can avail a bed (usually a bunk bed) in an airconditioned dormitory, store luggage in a private locker and use the Wi-Fi and avail services of the community kitchen, library and common room. There are three-bed to 12-bed dorms, as well as private rooms for Rs.999. For women travellers there are all-girls’ dorms too.

“Zostel is a market leader in its category. When we started out, the concept of a backpackers’ hostel was still new in India and, therefore, 90 percent of our boarders were foreigners. But domestic demands soon surged. Now, the break-up between domestic and international guests is 50:50,” Nanda said.

Encouraged by the response, he went on to say that there will be 40 new Zostels coming up in the next four months in key tourist locations across the country.

Of course the journey hasn’t been a piece of cake for these youngsters.

“We bootstrapped it, to begin with,” Nanda said, adding: “But we had education loans to pay off and we wanted to expand to other cities fast, so we had to enter the market”.

So they decided to enter business-plan competitions where they would get a platform to present their ideas, fine-tune them and meet potential investors.

They participated in 14 such competitions, including one by the Richard Ivey School of Business, Canada; IIT-Bombay; and the Wharton India Economic Forum B-Plan contest and won all of them. They made Rs.40-Rs.50 lakh ($63,000-$78,000), all of which went into the business. Malaysia-based angel investor Presha Paragash also pitched in with Rs.5 crore.

The team has, however, not stopped at Zostel. Another initiative, Zo Rooms, which is in a similar space but with a different challenge – of good and reliable budget hotels – is their new baby.

“With the emergence of corporate travel and ever-increasing mobile penetration, India wants a reliable brand of budget hotels that is available at every locality within a city. We discovered that there was a high degree of uncertainty with unbranded hotels – wrong pictures, fake reviews, dicey booking statuses, non-functioning amenities and unhygienic surroundings,” Nanda said.

According to Nanda, the budget hotel industry in India is short of 100,000 well-serviced rooms under Rs.2,000 per night.

“Zo Rooms started with a vision to clean this space and provide a suave, tech-savvy option of accommodation to today’s youth. The four-month-old Zo Rooms has 120 hotels across 10 cities. Unlike other hotel chains, which offer a handful of properties in a city, Zo Rooms has a locality-level presence. This significantly reduces the guests’ intra-city travel time. By December 2015 the company plans to have 1,000 plus hotels across 50 cities in India on its platform,” he added.

As fresh graduates, Nanda admits, they have difficulty sourcing deals, negotiating prices of properties, and working out plans to expand pan-India.

“Our venture lies at the crossroads of technology and real estate. One is a sophisticated field, the other is considered dirty,” Nanda said.

But with a team that’s young, confident, and teeming with ideas there’s hardly any challenge that will stop them.