Why these veteran hoteliers decided to venture into the hostel accommodation space

Why these veteran hoteliers decided to venture into the hostel accommodation space

Monday July 02, 2018,

4 min Read

U Hostels, a branded chain of premium hostels, provides personalised service offerings for the millennial traveller, the corporate employee, and even the student. 

At a glance:

Startup: U Hostels

Founders: Gaurav Marya and Sudhir Sinha

Year it was founded: 2017

Based out of: Delhi-NCR

Funding: Bootstrapped

Sector: Hospitality

The millennial traveller seems to live by the maxim, “One's destination is never a place, but always a new way of seeing things.”

Gone are the days when travellers would opt for a tried-and-tested hotel booking, or choose a particular kind of stay. Today’s traveller wants variety and options. In fact, not just the traveller, but many “immediate migrants” are also on the lookout for short and long-stay options before they finding permanent accommodations. 

No wonder then, that several online travel aggregators, including MakeMyTrip and Booking, are offering stay options other than the run-of-the-mill hotel chains. 

It was to tap this market that Gaurav Marya, Chairman, Franchise India, who has founded several firsts in various business verticals, conceived the idea of U Hostels along with Sudhir Sinha, the COO of Best Western India Hotel chain. 

Team at U Hostel

Building quality shared spaces

U Hostels are a brand of premium and upscale hostels, at par with international hospitality standards, and yet catering to free-spirited travellers. 

Sudhir says,

“Being from the hospitality industry, I appreciated this idea, and Gaurav and I jointly conceptualised this product. Accommodation and hotels in India currently display a high contrast; lodging options with premium services are high priced for long-stay options. On the other hand, those priced lower lack quality and consistency. U Hostels offers the perfect balance of upscale amenities and a social character preferred by urban travellers with a penchant for high comfort and memorable experiences.”

The hostels are quality shared accommodations with economical pricing, sustainable infrastructure, customised cultural events, and interactive experiences. The first operational hostel is located in Delhi-NCR, and will start in July this year; hostels will soon come up in the business districts of Mumbai, Hyderabad, Bengaluru, Pune, and Kolkata.

Each location will provide shared accommodation, cultural events, co-working space, pay-per workout gym, extended stay option, laundromat, restaurant, housekeeping, and free WiFi. 

U Hostels operates under three business models – the lease model and the Franchisee-owned franchisee-operated (FOFO) model. 

Tackling the challenges

One of the biggest challenges the team faces is working around the regulatory grey areas. 

Sudhir says this particular industry vertical has no clear government guidelines, licences, or incentives. “We are trying to find the best possible ways to address these issues and comply with existing regulations, but clear guidelines and incentive structure will help greatly,” he says. 

The core U Hostels team has been built by roping in people from the hospitality and hotel industry. The team is currently investing Rs 300 crore into building 10 to 12 premium hostels. The price points range from Rs 8,000 to Rs 15,000 for long stay of over 90 days for twin, triple and quadruple sharing. For per day, one bed in a shared room costs Rs 999 to Rs 1,500; single occupancy per day is priced from Rs 2,500 to Rs 3,000.  

The total company size of the parent company spans 300 cities with over 1,000 employees in 50-plus offices. The current size is around 40 rooms per property, with an occupancy rate of 80 to 90 percent. U Hostels is targeting revenues of Rs 1,000 crore in the next 10 years. Next in line for U Hostels are Gurgaon, Noida, Bangalore, Hyderabad, and Navi Mumbai. 

Looking to the future

Sudhir pegs the current market size of the shared accommodation space to be over $30 billion. The team is in talks with developers with unsold inventory. Currently bootstrapped, they are also looking for investors. 

According to media reports, a larger segment of country’s migrant population – aged between 15 to 29 years - need proper accommodation spaces. Hostel chains like The Hostel Crowd, Moustache Hostel, and Zostel are serving this space. Co-living spaces like StayAdobe and Nestaway also come under the same segment. 

But Sudhir believes the premium hostel segment is lacking in India, and they are “looking at filling that gap”. 

Renowned brands such as Gym 99, UClean, and Entrepreneur USA are partnering with the brand for extended services and value-adds for the guests. Our product is personalised for urban corporate travelers and also for millennial students who travel frequently or have long-stay needs,” he says. 

Over the next two-three years, U Hostels plans to set up 10-12 premium hostels for corporates and students in all metro cities. “At our current pace, we are looking at setting up 80-100 hostels, with about 100 rooms reach, in the next seven to 10 years,” Sudhir ends.