The Treebo Story - building india’s most loved budget hotel brand

Treebo started with a simple question – how do you put dignity back into budget travel? The company’s mission is to answer this question – and so every idea, every property we on-board, every hire, every strategic decision, every trade-off we make is put through this lens to see if it helps us answer this question a little better each day.

It’s been just over two years since the company’s founding, and Treebo is already India’s highest rated and third largest hotel brand in India (behind only Taj and ITC). While it’s still early days and there is a long way to go, the company is well on it’s path to create India’s largest and most loved hotel brand, leveraged by technology.

We are fortunate that the founders - Rahul, Sid and Kaddy decided to partner with Matrix India, along with SAIF Partners, as their first investors for their Series A round of funding. Since then, the company has raised additional capital fromBertelsmann India and today are announcing their Series C fund raise led by Karst Peak and Ward Ferry, both deeply experienced travel investors.

The founding team and idea

It was April 2015, and Rahul & Sid had just moved on from their roles as co-leads of the strategy team at Myntra. They had earlier left McKinsey with the eventual goal to do something entrepreneurial and felt their short stint at Myntra had prepared them well to transition to a startup. Soon they were joined by Kaddy, a veteran CTO with a strong understanding of the travel domain given his experience as first employee and VP-Engineering of MyGola, a startup acquired by MakeMyTrip. I honestly think this is one of those rare founding teams, where each founder comes highly referenced, where each one has left a strong mark on whatever challenge he has taken up earlier and is independently backable – a perfect fit for Matrix’s “founders first” investment philosophy.

While the $40B online travel industry in India has attracted truck loads of capital over the years, one of the problems largely unsolved has been the quality of stay experience at budget hotels, especially in the Rs 1000 to Rs 3000 price segment. Unlike the US (which has several chains like Best Western, America’s Best Value Inn, Days Inn, Red Roof Inn, Econolodge, etc) and China (which has China Lodging, Home Inns, 7 Days Inn, etc), there is extremely low penetration of branded chains in the budget segment in India.

Phase one of cracking the $10B accommodation market in India involved solving the discovery problem – most budget hotels weren’t even online to begin with and several aggregators including MakeMyTrip, Ibibo, Yatra and Oyo have done a good job at solving this by bringing information about these hotels online and provided a real-time booking experience.

Phase two involves assuring the actual quality of stay consistently which can only be done by standardization, which requires a tight end-to-end vertical integration with the supply. One of the biggest issues in budget hotel stay is that one doesn’t know what to expect leading to a lot of anxiety in the mind of the budget traveler – is my reservation confirmed – what if they are overbooked and deny a room, will I get hot water, do they provide wi-fi, is there room-service, clean linen, toiletries, basic hygiene, etc? As someone once told me, while a bad cab experience is an irritant (and all of us have had some of those), a bad hotel experience can ruin your entire trip. Imagine reaching a hotel only to find out the hotel is oversold and can’t honor your ‘confirmed’ reservation? Or waking up for an early meeting only to find out there’s no hot water and you’re in Delhi in the winters (been there, done that!). Or seeing stains on the bedsheet. You get the drift – these are very hard problems and solving them at scale without taking control of the properties is even harder! in a broken experience. There is no standardization, poor quality supply and low trust. There is a glaring need to enable this long tail of unorganized supply by building a value-for-money, budget hotel brand with quality as its key brand promise. Just like Ola/Uber did for cabs, Peter England did for office apparel and Aashirwad did for staples.

For the small budget hotel owner, the problem is even more pronounced – she’s stuck in an over-supplied market, with an undifferentiated positioning leading to lower occupancy/earnings and an inability to leverage technology. Secondly, the long-tail of budget hotel owners, don’t necessarily have prior hospitality experience. Infact, more often than not, their primary business is something else. At the same time, they have real-estate that they want to monetize. A combination of these factors leads to a broken experience for the guest.

The Treebo Solution

While several players have tried various approaches to solving this problem, it was Treebo who truly pioneered the asset light, full-inventory model in India using the trifecta of Technology, Training and Audit. The slides below lucidly explain what Treebo does.

The result? Treebo increased net earnings of budget hotel owners by upto 6x, so there’s negligible partner churn. And the budget traveler loves our guest-first DNA leading to high and steadily increasing NPS. No surprise that authorities in travel including Conde Nast, Lonely Planet, Trip Advisor and Booking have recognized Treebo through various awards and certificates of excellence.

The road ahead

Today, Treebo has 7000+ keys, in 300+ properties across 50+ cities. It has the highest RevPAR (Revenue per available room adjusted for occupancy levels), 30% higher than the industry average. Our benchmark Hotel and Guest NPS is consistently >60%. And the founders have done this while being capital efficient with a focus on profitable-growth with take rates between 20-25%. I have no doubt that Treebo will go from strength to strength from here on. That’s not to say, that we haven’t had our share of problems, with near death experiences on more than one occasion J But this has only strengthened the founders’ resolve. I’ll conclude by saying this - there’s a lot to be done and several things yet to be improved. But it gives me great satisfaction that the entire Treebo team works relentlessly every day to answer one simple question – how do you put dignity back into budget travel?