Homestay aggregator Stayzilla shuts operations, plans alternate model

Chennai-based online homestay and alternative stay aggregator Stayzilla has announced that it has suspended operations at a time when competition in India’s online travel sector is heating up through consolidation.

Stayzilla, which focused mainly on providing consumers alternatives to regular hotel stays, said that it was halting operations and looking to reboot with a different business model. The move follows the merger of MakeMyTrip and the Ibibo Group which created India’s largest travel platform late last year.

"This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting homestays on the map of India," said Yogendra Vasupal, co-founder and CEO at Stayzilla, in a blog post on Thursday.

Here is the full blog post: Link

Founded in 2005, the company’s website claims it had over 55,000 stays spread across 4,000 towns in India. The move to focus on alternative stays meant the company began investing in getting owners to convert their holiday homes or second homes in cities and towns in order to build supply.

The company has raised $34 million in four funding rounds from Nexus Venture Partners, Matrix Partners and Sequoia Capital.

In his post, Vasupal said that the model forced the company to spread itself too thin and the lack of a local network effect in the travel marketplace meant the company’s ability to expand quickly and cost effectively was deteriorated.

"This was further exacerbated by the discounting-based growth rampant in the travel industry since 2015. Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth," added Vasupal.

Apart from local competition from players such as MakeMyTrip, Ibibo, Cleartrip and OyoRooms, global players such as Airbnb have also been steadily expanding their operations in India. Unlike in e-commerce and taxi hailing markets, Airbnb has not cornered the market by investing heavily and offering discounts yet, but the brand’s global customer base makes it a lot more attractive to homestay owners.

As a way forward, Stayzilla is looking to build on its Stayzilla Verified Homestays concept which it says has seen success with the company creating over 8,000 homestays across 900 towns. Instead of handling distribution on its own platform, it will work with both online and offline travel partners to offer quality homestays to their customers. 

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