StayZilla, one of India's largest start-ups to concentrate on hotel and homestay aggregation, has suspended operations amid fears that it has shut down for good. However, indications are that the company still has a few things going for it, and hence may return in a new or altered avatar.
Yogendra Vasupal, Rupal Yogendra and Sanchit Singhi had launched a website called Inasra in 2005, which was rebranded as StayZilla in 2010. It has raised several million dollars in funding over the years, but never managed to turn over a profit that makes the market sit up and take notice, despite often offering deep discounts.
In a blog post on Thursday that had an oddly cheerful tone in some parts despite delivering some bad news, Yogendra Vasupal said: "I would like to announce today that we would be bringing to a halt the operations of Stayzilla in its current form, and looking to reboot it with a different business model."
He added: "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!"
The cheerful notes were hit while describing the various teams that powered Stayzilla as well as the investors. And then Vasupal got down to the brass tacks, candidly admitting what went wrong with the start-up.
Reason for failure
Vasupal explained in the blog post: "The travel marketplace does not have local network effects and, therefore, we 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."
And then came the economic problems. Vasupal said: "A homestays marketplace needs to invest in educating the market on the concept and even using Internet and not just the product. The costs, both financial and opportunity costs, creep up on you over a period of time and get rationalised as cost of doing business in India. This was further exacerbated by the discounting-based growth rampant in the travel industry since 2015. Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth."
Keeping some hope alive — possibly for after another round of fundraising — Vasupal said: "I see Stayzilla becoming a hassle-free distribution channel going out to the right audience, wherever they may be. We will look to work closely with both online and offline travel partners to offer the best of Indian homestays to their valued customers."
He added: "Focusing all our energies on the supply side will allow us to build on our core strength that we have developed over the last 18 months. Specialised solutions such as the concept of 'Stayzilla Verified Homestays' excite me in particular." Vasupal also said: "I am looking at this as a clean start to get back to the roots I am comfortable with."
It now remains to be seen how Vasupal returns with SatyZilla — if at all — in a market that is growing ever more competitive.