The online Indian travel industry has been growing rapidly, with budget accommodation emerging as the most popular option for travellers. Investors showed keen interest in the budget hotel segment, especially given how Indian travellers value the "value for money" concept.
The Rise and the Shine
A wave of online budget hotel aggregators mushroomed in recent years, fuelled by generous funding from domestic and international investors. OYO Rooms pioneered the budget hotel aggregation segment, raising $25 million in 2015 followed by approximately $100 million in Series B funding. Treebo Hotels, FabHotels, and others followed with significant funding rounds.
During this golden period, aggregators tied up with many hotels and built a huge user base.
The Free Fall
The market opportunity in budget hotels was huge — but it was driven almost entirely by deals and discounts. Aggregators gathered users by heavily discounting rooms and paying from their own pockets. They went further by:
- Pre-purchasing inventory regardless of whether it sold
- Spending heavily on promotions to create a larger-than-life image
- Burning investor funds simply to acquire market share
As soon as discounting stopped, the user base reduced. When large OTAs stopped listing aggregators on their portals, the aggregators' own apps and marketing channels alone couldn't fill pre-purchased rooms. This short-term discounting strategy gave them valuations, but not profits.
It also lowered the consumer's perception about budget offerings to an unrealistic level and damaged the marketability of budget properties by misleading customers on quality.
Key Takeaways for Hoteliers
This multi-hundred-million-dollar experiment shows that building a single omnichannel monopoly in hotel bookings is extremely difficult. The travel landscape is far more complex than industries like restaurants or bus bookings:
- OTAs still struggle to break into the corporate booking segment
- Offline travel agents still control about 70% of the hotel market in India
- The largest OTA accounts for less than 5–6% of overall hotel bookings
- Google and TripAdvisor remain among the largest marketing platforms
This means hotels need a strategy for each segment instead of signing away their future to a single player promising high occupancy. The key is to keep the basics strong:
- A strong distribution base across multiple channels
- Well-managed sales and operations
- A strong understanding of market dynamics through analytics and business intelligence
Don't put all your eggs in one basket. Hotels that build their own distribution strength — through their booking engine, channel manager, and direct marketing — are best positioned for long-term, sustainable revenue.
