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Zostel Hospitality, which owns and operates ZO Rooms, has reported its revenue in FY14-15 at INR 2.6 crores.
Its competitor OYO Rooms had reported a turnover of INR 2.4 crores in the same period. Going by these numbers, the two companies appeared to be neck-to-neck at the close of previous financial year.
However, it is in this financial year that both of them and the sector itself, have seen tremendous amount of funds pouring in and expansion as a result. Both companies are in the hospitality industry and are disrupting the budget hotel accommodation space in the country.
The ZO-OYO Rivalry
The ZO and OYO rivalry goes back to April, 2015 when OYO managed to get a stay order against ZO Rooms claiming it stole OYO’s copyright material. This was followed by ambush marketing campaign by ZO on the launch of OYO’s mobile app in May, 2015.
About ZO Rooms
Zostel, which started as a chain of backpackers’ hostels, launched ZO Rooms in December, 2014 to provide affordable budget hotel to travellers. The company was founded by a group of IIT and IIM alumni and incorporated in 2013.
It is an online aggregator of budget hotels and claims to have around 800 hotels across 54 cities in India, on its platform. Apart from OYO Rooms, Stayzilla and other Online Travel Agencies (OTA) like MakeMyTrip, Cleartrip, Yatra, etc. are its major competitors in this space.
Financial Performance of ZO Rooms
ZO Rooms reported revenue of INR 2.6 crores in FY 2014-15 as against INR 27 lacs in FY 2013-14. The company made a loss of INR 1.99 crores as against a profit of INR 2 lacs the previous fiscal. However, these figures may also include the results from Zostel’s another business of backpackers’ hostels chain.
Funding Received and shareholding pattern
As per the documents available with the Registrar of Companies (RoC), the company has raised total funds of INR 37 crores so far. In July 2015, they had filed a funding of INR 30 crores (roughly $5 million) from Tiger Global and Orios Ventures. However, as per media reports, the company has raised a total of $35 million – $5 million in July 2015 and $30 million in August 2015. So far, no documents have been filed with the RoC to reflect the second round.
After the latest round of funding, the shareholding pattern looks like this:
|Internet Fund (Tiger Global)||40.47%|
However, rival OYO seems to be taking a lead in terms of funding. It has raised INR 748 crores (as per RoC filings) from its investors in FY 2015-16 alone, to carry out its massive expansion plan.
Other Players in the Budget Accommodation Space
The budget accommodation industry has attracted multiple players in the past 2 years. Apart from ZO and OYO Rooms, these include Stayzilla, Zip Rooms and Wudstay. While ZO Rooms has expanded its network of hotels to 54 cities in India, its major competitors Stayzilla and OYO Rooms claim to be present across 4500 towns and 152 cities, respectively. Recently Wudstay acquired Awesome Stays to expand its reach to over 35 cities across India. Zip Rooms claims its presence in 36 cities.
In October this year, OTAs like MakeMyTrip, Goibibo, etc., in a move to protect their market share, blocked ZO Rooms and OYO from listing hotels on their sites. With a number of players entering the hospitality sector in India, each offering a technology-driven, asset light model with a promise of quality, the struggle to “stay” in competition will be one to watch out for.
[About the author: Vishal and Anchal form the team that runs the Tofler blog. They like to explore and track companies, their performance and senior management. Tofler (tofler.in) is a Business Research Platform.]