Stayzilla shuts operations

Priyanka Pani Mumbai | Updated on January 13, 2018


To come out with a new business model

2017 has been a bad start for the several Internet companies and tech-startups in India. Chennai-based Stayzilla, an alternate and homestay aggregator, has shut operations. A day ago on Tuesday, Snapdeal, a leading e-commerce marketplace, laid-off about 600 people and shut several offices across the country. It's founder Kunal Bahl in a mail to its employees admitted that the company's strategy has gone wrong.

Similarly, Yogendra Vasupal, founder of Stayzilla, in a blog on Medium announced that the company would be halting its operations and is looking to reboot it with a different business model. However, he has not given any time frame for the come-back.

"This has been one of the toughest decisions that I have taken so far but it is the right thing to do. The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting Homestays on the map of India. I am the most fortunate to have had such a team on my side at this juncture. Whatever and how much ever I write about them is not going to do justice to their commitment. But try, I must!," Vasupal said in the blog.

Business Line had sent a mail to the company in the afternoon with a query on why all the properties on Stayzilla mentioned sold-out.

Stayzilla, started in 2007, had about 8000 homestay properties in about 900 towns and had tied up with various state tourism boards in the last one year including Madhya Pradesh, Rajasthan, Odisha among a few others. However, it was facing a stiff competition from Airbnb, Oyo and Treebo. Besides, it was facing some regulatory issues and had initiated the conversations with Central Government in April 2016 for easing the homestay guidelines.

The company had also raised about $40 million from investors Matrix and Nexus Venture Partners and Indian Angel Network.

Citing the reasons for failure, Vasupal said that despite having a very clear lead and a first mover advantage, there were few roadblocks. He said that the travel marketplace in India does not have local network effects and, therefore, one can’t really take a focused city-by-city approach in terms of matching supply and demand.

"The demand and supply for Homestays was non-existent 18 months back, excluding a few small pockets. As a result, we had to invest extensively in both sides of the marketplace, creating Homestays as well as guests who would choose a homestay across the country. We were actually successful at this — we have created 8000 Homestays in over 900 towns — but this stretched us thin," he said.

These macro trends deteriorated the company's ability to expand quickly and cost effectively, Vasupal said adding that India does not have a lot of public goods, often taken for granted in mature markets like logistics, tech savvy suppliers and online user demand. Besides, the discounting game in the travel segment forced the company to also slash prices, which requires lot of funds and was not sustainable.

Stayzilla's losses have jumped four-fold jump at Ra 95 crore for FY 16 as against R19.62 crore a year ago, according to data collated by business research platform Tofler. The company's revenues also jumped three-fold at Rs 13.8 crore in the same period from Rs 4.21 crore in the previous year,

Published on February 24, 2017

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