Budget hospitality brand Zostel is betting big on hyper-local domestic travel and workations at a time when hotel chains and travel service providers have put their expansion plans on hold due to the Covid-19 disruption that has hit the hospitality and tourism sector hard.
Co-founder and CEO Dharamveer Singh Chouhan said the chain plans to open 500 new properties in the next two years.
The new properties would be a mix of hostels, home stays and new products and would be worth Rs 2500 crore, he said.
Zostel currently has 60 properties which are a mix of hostels and homestays. The company is also raising a Rs 10 crore round from the market.
“Over 4000 unique individuals either want to invest with us or offer their properties to us. There is latent investment and partnership demand in the market,” said Chouhan in an interview to ET.
“There are land partners, investors who want to invest and make properties and operators who run these properties. We are just connecting everybody together so that the whole system works. We are analysing land banks across the country where vacation homes and hostels could be created. There are young millenials who would prefer an alternate investment instead of buying a house. Our properties generate phenomenal yields. If someone takes franchising on lease as well and invests their IRR is over 40%. The break even is under 18 months,” he added.
Chouhan said 40% of the Zostel supply is currently open in India and revenues are at 25% of pre Covid levels.
Zostel plans to create ‘safe’ destinations every 20-40 kms across highways.
He said the demand for workations is also pushing the company towards new projects. He said the chain’s Gokarna property is sold out for long term stays because of demand from Bengaluru and the company is looking for two more properties in the destination seeing the demand. In July, the company said it is offering ‘value-driven’ holiday packages spanning over 15, 21 and 30 days for its operational properties.
“These 500 destinations are not just for short term travel. We are seeing companies are reducing their office spaces and announcing 50 to 100% remote working. People have the freedom to work from anywhere. They just need great wi-fi and electricity. And if you can give them that and keep them near the riverside, there is nothing better than that.”