India’s Treebo Hotels raises $17 million for its budget hotel network

Budget hotel aggregators were one of the breakout startup ideas of last year, particularly in India. Hype around the industry has quietened down this year but there’s a big round today: Treebo Hotels has raised $17 million led by Bertelsmann India Investments with participation from existing investors SAIF Partners and Matrix Partners India.

Founded in June 2015 initially as Zipotel, Bangalore-based Treebo is a ‘tech-powered’ budget hotel aggregator that provides a standard of accommodation across a network of partner hotels in India, for example clean linen, bedding, free WiFi etc. Typical room cost is between $15 and $50. It sounds basic to Western standards but, as anyone who has ever traveled off the beaten path in Asia can testify, many of these things are often missing — and that can be very painful.

It’s much the same as the model pioneered by OYO Rooms, a popular startup that has raised over $125 million from the likes of SoftBank.

Treebo started out with just four hotel partners in Bangalore, now it has 125 hotels, covering around 3,000 rooms, across 25 cities in India. In an interview with TechCrunch, Treebo co-founder Rahul Chaudhary said that the company is aiming to reach at least 800 hotels before the end of 2017.

“India has a population of more than one billion which is a fairly large opportunity,” he said. “Budget accounts for around 65 percent of the market so we’re talking about [an industry that is worth] north of $15-20 billion per year.”

Chaudhary said that Treebo plans to invest the capital it has raised in three major areas: increasing its marketing and branding efforts, expanding its geographical footprint in India (as above), and further developing its technology stack.

“We’re building a large consumer brand and have taken a fairly brand-led approach compared to others,” he said. “But we can’t get into a ‘loved’ brand arena without significant brand marketing spend.”

In terms of technology, he explained that the company’s current headcount for tech — which includes product development and design — would double to 80 people before the end of this year.

“We want to build a digital hotel company,” he explained. “We are building the hospitality side but also need to build the tech.”

One thing to note about Treebo, which differentiates it from others in the budget hotel aggregation space, is that the company works exclusively with its partners in a franchise-style approach. That means that partner hotels use Treebo, and Treebo only, to manage their bookings and stays. So, while other networks allow hotels to list their rooms on other travel booking sites too or just sell partial inventory, Treebo runs what it calls a “full inventory model.”

OYO and others have headed overseas with their idea, and numerous companies have sprouted up in Southeast Asia, including Rocket Internet-backed Zen Rooms and RedDoorz, but Chaudhary said Treebo is not tempted to look outside of India.

“Not in the foreseeable future,” he said, “but I won’t rule out creating tech that can be replicated in say Vietnam or Romania, this is an emerging market problem. There’s a long long way to go and India can keep us busy for the next two to three years.”