When Kamala and Vinod Parekh moved back to India from the US sometime in 1982, they wanted to continue what they had been doing in Chicago — research on human development. Working with the Institute of Cultural Affairs, an affiliate of a UN agency, the duo had travelled the world over. To ensure their children understood Indian culture and grew up around family, Parekhs chose Nashik to build a home.

“When we decided to return, we wanted to be close to a rural area and have a live lab of human development,” says Kamala. They bought seven acres of land surrounded by hills in Nashik and made it home. Two decades later, their architect daughter-in-law divided the palatial house into three and the Parekhs began to host guests in one of the divisions.

Familiar with the bed-and-breakfast concept they had seen abroad, the family first hosted a Japanese guest in 2007. By 2010, they were ready to welcome travellers regularly and launched their website. Today, weekends are packed at the Gulmohur Homestay, which Parekhs have named after the tree with flamboyant flowers.

In Kerala’s Thiravoor, midway between Kochi and Alappuzha, Francis Xavier, an ayurvedic practitioner, is extremely busy between October and March every year. He has turned his 200-year-old ancestral home along the backwaters into a comfortable accommodation for tourists. Xavier’s eco-friendly houseboat is an added attraction for those staying with family.

Parekhs and Xaviers are among the thousands of families who are now turning their homes into homestays. The number of homestays has gone up from 17 in 2004 to 1,663 in 2014 and is spread across 207 destinations in the country, says a research by HolidayIQ. But the study excludes self-catering villas, houseboats and farmhouses as they are not the conventional hotel accommodation. If these were to be included, the numbers would have gone up significantly. In the top 50 emerging tourism destinations of India, homestays form 13 per cent of the total accommodation, it says.

It is not without reason that homestays are gaining popularity. Hari Nair, CEO of HolidayIQ, points out two factors. “On the supply side, it is the economics of accommodation in India that is driving growth. The cost of land and building a property is high while the average occupancy rate of hotels is only 40 to 45 per cent. It is not enough to justify fresh investments in rooms.”

Growth and profitability of traditional hotels chains is hampered by high real estate and financial costs. These properties are mostly financed through debt which makes capital (interest and depreciation) cost one of the biggest expenditures for hotel chains eat into their profitability. Take the case of India Hotels Co — India’s largest hotel chain. In FY15, the company spent ₹467 crore on interest and depreciation, more than its operating profits.

In contrast, homestays are rooms that already exist or are an extension of an existing property. So the costs are minimal. “Most of these places have been built by the owner for his/her own use. So maintenance, and not revenue, is usually the target,” agrees Sanjai Saxena, CEO of Indianhomestays.org, a website that brings together homestay owners and travellers. Kamala agrees: “This is not our bread and butter. So revenue is not the prime consideration.”

On the demand side, says Nair, travellers today prefer an alternative to the usual resorts and hotels. “You get to stay with the family and often the local food is a big draw,” he says.

Nair seems to be right. Mauli Village, a homestay spread over 17 acres in Maharashtra’s Alibaug, is regularly packed with college-goers, families and even movie production units. “The traditional Maharashtrian food, prepared by the owner’s family, is one of the reasons I keep going back to Mauli. They grow vegetables and fruits in the property which makes it very green. Besides, the tariffs are much lower than other properties in Alibaug,” says Manish Sharma, a regular at the homestay. Kamala says the biggest difference is the environment. “People who come from metros, short on fresh oxygen, are completely relaxed. The experience is not mechanical. Unlike hotels, where you have four walls and a TV for yourself, homestays are refreshing and therapeutic,” she says.

Saxena says families particularly prefer homestays. “They need flexibility as there could be special dietary requirements. Moreover, every thing is personalised in a homestay. So while hotels are fine for business travel, we are seeing people returning regularly to homestays for vacations,” he says.

As of now, homestays are in a nascent stage in India. “The scale is small but it is gradually growing,” says Saxena. His firm began with 25 homestays in 2010 and had 60 bookings that year. Today, it has over 150 homestay facilities listed on the website and made 700 bookings in 2015. Ditto for Kamala’s Gulmohur Homestay. “There is rarely a weekend without guests,” she says.

Indianhomestays, Saxena says, could grow faster but they are deliberately going slow. “We have a team which visits every homestay, stays there, meets people and does a physical check of things. Facilities as well as safety of guests are paramount. We don’t list a property till we are sure about it,” he adds.

Achin Khanna, managing director of the Consulting & Valuation practice at HVS South Asia, says while a homestay is an established concept abroad, it is not yet well-known in India. “Yes, there is a demand for it. But you need robust distribution channels to cater to that demand. Currently, it is more by word of mouth or local travel agencies. It is not yet fully structured,” he says.

And this is the issue a handful of aggregators are looking to address. Sensing the demand, online players along the lines of indianhomestay.org are coming up. Saffronstays.com, MyIndianStay.com and cheersBye.com, which lists over 1,000 properties across 70 locations on it, are a few of them.

These aggregators charge homeowners for marketing their properties. The commission typically varies between 10 and 20 per cent of the tariff.

While homestays are taking away business from hotels and resorts, they are not a threat to each other and will continue to co-exist, says Nair of HolidayIQ. Homestays, he says, will flourish in smaller and less accessible destinations. But once these places gain scale and visibility, hotel chains will enter the market and build businesses. However, in peak seasons, when hotels are full but the demand persistent, homestays answer that demand. “This is exactly what happened in Coorg,” he points out. Given that economics is tilted in favour of homestays, the growth potential is more compared to hotels. “I think homestays will see one million new rooms in the next decade,” claims Nair.

However, the biggest obstacle to the sector’s growth is government policy. There is no comprehensive policy at the national level but a few states like Kerala and Karnataka have come up with their own. Kerala has formed a State Homestay and Tourism Society, which is a consortium of homestay providers and tourism promoters to ensure quality of service.

But owners are levied commercial rates and extra taxes in states without homestay policies. “It often becomes a hassle to deal with local government officials,” says Nair. While homestay owners are going all out to create comfortable stays for guests, it is now the turn of the state governments to provide them a supportive regulatory environment. After all, if the government treats them as purely commercial establishments, homestays will lose their charm and go the hotel way.

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