Treebo Hotels, one of the most prominent members of India’s emerging budget hotel networks, has closed a $34 million Series C round.
The deal was led by new backers Ward Ferry Management and Karst Peak Capital, two Hong Kong PE firms, with participation from existing investors SAIF Partners, Matrix Partners India and Bertelsmann India Investments. Before this deal, two-year-old Treebo had raised $23 million, including its $17 million Series B last year.
Startups like Treebo and OYO, which has raised over $250 million from investors like SoftBank and Sequoia, have sprouted up to offer a tech-enabled response to the problem of vastly differing quality of hotels across India.
They propose a base standard for guests which includes clean linen, bedding, free WiFi and more, for a price range of 1,000-3,000 INR, or roughly $15-$50, per night. In addition, they use a mobile app as a virtual concierge service to help with check-in, orders, answer questions and more.
The idea is to set standards where none exist. That might not sound all that impressive in a Western context, but anyone who has traveled in India, or other parts of Asia, can attest to the peace of mind that these guarantees can give.
Treebo claims to offer nearly 300 hotels (covering over 6,000 rooms) in more than 50 cities in India. Unlike OYO, it hasn’t ventured overseas. Co-founder Rahul Chaudhary told TechCrunch last year that the India opportunity is a large enough challenge to tackle. He estimates that budget hotels represent 65 percent of the national hotel market, which means roughly $15-20 billion in spend per year.
The company does differentiate from the competition slightly with its approach. Treebo operates a full franchise model which means it takes on hotels exclusively, working with hotel owners to provide its branding, customer acquisition channels, management software and more. In exchange, it takes a revenue cut that can be as high as 40 percent.
OYO and others operate partial inventory, allowing some rooms at a hotel to be unlisted or available via other platforms. However, they have begun to move in the same direction as Treebo. Earlier this year, OYO said it had 30,000 rooms under full inventory, but it isn’t clear what portion of its total reach that is.
Treebo said it plans to spend the new capital on improving its customer experience, marketing, tech and expansions. This year it began using TV advertising, with high-profile actor Irrfan Khan its ambassador, to grow among new audiences. We can likely expect more of the same thanks to this new war chest of cash.