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Dharamveer ChouhanThe creator of Zostel & Zo Rooms! Published On: Tuesday, August 18, 2015 Views 2540

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Dharamveer Chouhan – the name which has become a hot topic amongst the investors & tech-business community in the recent times, is the proud founder of Zostel.com & Zo Rooms.

Zostel is a chain of hostels spread across India which has been started to offer budgeted yet luxurious – air-conditioned dormitories, both mixed and female-only to backpackers from across the world. It aims to provide safe, clean and cheap accommodation to budget travellers, especially in the 18-35 age groups. Whereas on the other end, Zo Rooms simply put is a low-budget hotel chain that enables the masses to book rooms (be it at 2am) through a mobile-app, which geo-detects a location and books into the nearest available Zo Room.

Talking about Dharamveer; Coming from a family of entrepreneurs since the time of his grandfather; he unlike them had opted for a path otherwise. He began by pursuing his IIM (Calcutta) and IIT (BHU).

As a matter of fact, since his early days, he wanted to make games and always dreamt of getting into the Gaming Industry, and had even interned with Zynga. But eventually he realized that the environment in India at that time wasn’t ready to accept a gamer who also worked.

Anyways, after a few turn of events, he was eventually led into the course he was meant to be in!

Story Of Zostel

So this is how it all began!

Soon after Dharamveer completed his IIT, he could clearly sense that engineering just wasn’t his thing and he was made for something else, something which did not make him a corporate slave, something more relevant to his likes!

Having that figured, he began hunt for the one!

Amazingly, while he was unemployed and hunting, he got an internship in Germany, where he got the opportunity to backpack around Europe on his weekend offs. While he was at it, keeping in mind the set and short budget he used to usually stay in affordable hostels which more than often were clean, comfortable and dirt cheap.

After he got done with his internship, he came back to India enrolled himself at Indian Institute of Management, Calcutta in 2012. There he happened to befriend the future co- founders of Zostel.

Zostel

Surprisingly, what was common between all of them was that, they all simply were passionate travellers. But then again they also noticed that, nothing comparable to abroad seemed to exist in India.

Here, it was either the so-called budget hotel with a charge of roughly Rs. 2,000 /night to crash at, or some shabby-looking guest house charging somewhere around Rs. 300-400, but nothing which was even close to the lines of foreign-based hostels.

Whereas upon researching, they also figured that according to a 2012 report submitted by PricewaterhouseCoopers, India’s hospitality service industry was short of 150,000 rooms.

Inspired Team

That is when the team got deep into the research mode. What helped them even more was that, because Dharamveer was an avid gamer and used to try his luck at games which had a prize component, he luckily happened to win $10,000. This amount gave them the leverage to start experimenting with and implementing their ideas.

And finally on Independence Day 2013, Dharamveer along with six other men, launched – Zostel – India’s first & now largest chain of budget backpacker’s hostels.

The idea behind Zostel was to give a similar experience like in Amsterdam or Berlin to the backpackers who travelled across India—a dorm-inspired place where backpackers can interact with each other and share their experiences.

backpacker hostel zostel

It aimed to provide beds for as little as Rs 500 ($8) rent per night along with access to private lockers, free Wi-Fi, complimentary breakfast, laundry services, and a common room where they could interact with one another. The motto was to keep the ambience fun and cool, but at the same time safe and comfortable.

First Zostel in Jodhpur

The first Zostel was opened at Jodhpur in Rajasthan. The reason to opt for Jodhpur was because, it being Dharamveer’s hometown and his parents being into the hospitality business for a good-enough period, it gave them a significant amount of advantage to start-up. Plus given the support system, it certainly was a safe bet.

Clearly they all had collectively chipped in their own money to start the venture, but the problem was that, they also had education loans to pay off. And to be able to survive scalability was of utmost importance.

Jodhpur Zostel

Now one very important thing about their kind of venture is that it lies right at the centre of two genres – hospitality and real estate. And unlike technology start-ups, operated via virtual platforms, here there was far more brick-and-mortar involved as well and keeping them in mind, the biggest problems they faced as fresh graduates was sourcing deals, negotiating prices of properties, and working out plans to expand to other parts of the country.

So the founders in an unlikely move, decided to enter business-plan competitions, where they not only got a platform to test their ideas, fine-tune them, and meet potential investors, but also won huge amounts of money.

Funding

Over the next one year, they went on to participate in 14 competitions such as the ones run by Richard Ivey School of Business, Canada, Indian Institute of Technology, Bombay, and Wharton India Economic Forum B-Plan contest and won all of them and made close to Rs 40- 50 lakhs, all of which was used to grow the business.

That is when they began to gain the eye of the investors and soon after that in early 2014, Malaysia-based Presha Paragash, a banker turned angel investor, pumped in $1 million (roughly Rs. 5 Cr.) as seed investment.

Zostel

To promote the idea of travelling, Zostel in another unique stunt launched one of the most innovative social media campaigns, an online programme called – #BestInternshipEver in the same year. The programme aimed to select 2 or more interns to become CEO’s i.e. Chief Exploration Officers and travel across the country for a period of over 50 days, cover over 15 towns across at least 15 states documenting their experiences as they go and promote the idea of travel and exploration. Basically a seven-week paid vacation!

The only requirement was that the applicants were supposed to be wishful travel writers, who in return would receive a stipend of Rs. 50,000 in the end. The program received a whooping 70,000+ applications.

Growth

And talking about the present year; although the company does not prefer to open up about their revenues, but currently within a period of two years, the company has expanded to eight Zostel properties in India including Jodhpur, Jaipur, Delhi, Agra, Udaipur, Goa, Vadodara and Varanasi & also have plans to expand further in the near future. More precisely speaking; over the next four months, Zostel is aiming to range out to open 40 more outlets through a franchise model, subsequently go global with Thailand and Sri Lanka, next year.

Now what the company rightly fears and wants to prepare for is the fact that; as the model proves itself, other bigger brands would eventually enter the market and pose a grave threat to Zostel with their deeper pockets and larger nationwide networks.

But that’s not the only challenge the company faces. In the current scenario, it is becoming increasingly difficult to acquire or develop infrastructure, and get licenses to operate.

Enter Zo Rooms

Now while the team was engrossed at Zostel, Dharamveer noticed that getting reasonably- priced accommodation in metros was still a huge challenge for the masses at large. Even though there were a few like Stayzilla and Oyo Rooms, but for some reason the problem still existed. Nevertheless, it still was a highly-potential untapped market.

Hence, without wasting any time, team Zostel entered the new market in 2014 with Zo Rooms!

Zo Rooms was simply a chain of low-budget hotels across the country which leveraged the masses to book rooms (be it at 2am) through a mobile-app, which geo-detects a location and books into the nearest available Zo Room.

Unlike its competitors Stayzilla who worked on a marketplace model focusing on low-budget accommodation, and Oyo Rooms which had adopted an inventory-led model, Zo Rooms decided to go for a Commission Model, wherein the company charges a percentage share of the sales that would be generated through Zo Rooms.

Zo Rooms very strategically opted to be hyper-local and dissected a city into zones and localities, and accordingly partnered with hotels. Their idea was to be as accessible as possible.

Zo Rooms

Since its beginning; Zo Rooms managed to gain immense popularity, which not only was due to its strategy and quality but also due to its technology offering. Right since the beginning they had noticed that, majorly all the unbranded hotels were not sophisticated, technologically equipped and did not manage their online listing, bookings, and customer reviews. Additionally, they clearly weren’t aware of the essential requirements of today’s tech-savvy budget traveller as well. Hence, Zo Rooms also went ahead and installed inventory and property management software. As a part of the tie-up Zo Rooms also manages the online presence of their partner hotels.

They also claim to be the only hospitality service provider in the world in the budget segment at each property. These tablets in turn have helped them manage inventory, one-touch check- in, and record instant feedback & immediately address the issues.

With such intelligent moves Zo Rooms is also seen to be growing at a really fast pace. Going by their stats, currently they are adding two properties per day and have already added 100 hotels across Delhi, Gurgaon, Noida, Mumbai, Bangalore, Hyderabad, Jaipur, Goa, Jodhpur, etc., in a matter of just four months. Additionally, they have also signed up with more than 20 MNCs to be their accommodation partner.

Zo Room Cities

On the other end, customer response across online as well as offline channels towards them has also been tremendously positive. So far they have managed to bag 15000 room nights a month and this number is believed to rise up drastically with the recent launch of their social media and mobile app launch.

The only challenge they face and yet to find a solution for is dead inventory. Having said that; the company claims that the number of dead inventory is barely existing as they work on an ultra-high occupancy level of 85%. Nevertheless, high-scaled growth is clearly imminent!

Moving on and lastly talking about the funding of Zostel & Zo Rooms; apart from the inital seed investment, collectively the duo has raised a total of $45 Million from Orios Venture Partners & Tiger Global Management in two rounds.

Achievements

  • Won 14 Business Plan competitions such as the ones run by Richard Ivey School of Business, Canada, Indian Institute of Technology, Bombay, and Wharton India Economic Forum B-Plan contest
  • Ranked No.1 in Jaipur by TripAdvisor (the world’s largest travel website company)

Author:

“A businessman by blood, but a business writer out of passion”! As a Business Writer; Karan’s forte lies in writing some really interesting Case Studies about Companies/Eminent Personalities covering aspects which certainly, would not bore you to death!

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