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Stayzilla to shutdown operations; plans to ‘reboot’ with a new business model

Stayzilla is shuttering down its operations across all cities it operates and will look to “reboot with a different business model,” the company’s founder Yogendra Vasupal said in a blog post. The company began operations in 2007 as budget hotel aggregator and later moved on to offer homestays, which was launched in late 2015. It currently claims to have more than 8000 homestays listed on its portal across 900 towns.

Vasupal said in his post that all new bookings on the Stayzilla website and app are suspended. “Bookings with check-in dates on or before 28th February 2017 will be honored. Any booking with check-in after that date will be cancelled and the guests will receive 100% refund,” he added.

When Stayzilla added homestays, it said that it would look to add about 500,000 rooms in the next three years and claimed to service over 7,000 budget hotels a day. It also launched a semi-closed wallet service named ‘Rupeesz’ in November last year, mainly to ease cashback and refunds.

Why the company had to shut down

Expanding on the reason behind the closure of its service, Vasupal said that “the demand and supply for homestays was non-existent 18 months back (before the launch of homestays), 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…but this stretched us thin.”

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“Some of India’s key macro trends further deteriorated our ability to expand quickly and cost effectively. A homestays marketplace needs to invest in educating the market on the concept and even using Internet and not just the product. 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,” Vasupal said.

Note that Stayzilla’s shutdown comes at a time when two online travel agencies—MakeMyTrip and GoIbibo—announced one of the biggest consolidations in the travel industry.

Stayzilla funding

Chennai-based Stayzilla has raised more than $30 million since the launching of operations in 2007. Last year, it raised $13.5 million in a series C round from investors like Matrix Partners, Nexus Ventures among others. The company also raised $20 million in 2015, an undisclosed amount in 2014 from Matrix, and close to $500,000 in 2012.

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