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Exclusive: Zostel eyes South East Asia and European markets while expanding in India

Exclusive: Zostel eyes South East Asia and European markets while expanding in India
For a company that started its journey two years back when there was no backpacking culture in India, would it be surprising if we tell you Zostel – the only established hostel chain for travel freaks - is now gung-ho on its plans to move into South East Asian and European markets. They already have one hostel running in Vietnam, and the aim is to run hostels in Barcelona, Puerto and Sri Lanka in the next three months.

It’s not that one doesn’t expect such a mammoth step from a relatively new company present in a space that the Indian market may be not fully prepared for. But it irks a bit to think how Zostel is expanding outside without having made inroads into the Indian market fully.

When it came into the picture in August 2013, Zostel followed an operation heavy model where it would lease properties and run them as its own. In March this year, they shifted to a franchise model. Under what they called ‘Zostel Entrepreneurship Development Programme’, the company invited people who wanted to run their own hostels. It was a one-of-its-kind initiative to aid aspiring entrepreneurs to start their own Zostels with the performance linked seed amount of Rs 10 lakhs. Its funda was simple – “you do the investment and run the property as per Zostel’s specifications, we will take care of your sales, marketing, branding and technology support to help you get backpackers”. In return, it charged 15 per cent commission on each booking made from its platform — both app and website — and a monthly marketing fee. As a part of instilling trust in people, Zostel also decided to go ‘public’ with sensitive information about its business and operations like capital expenditure requirements and breakup of the same on per bed basis for setting up a backpacker hostel, operational expenditure requirements, revenue, expenses and profit margin of the company as well as occupancy in last few months.

The offer attracted 2,000 applications from across the world out of which Zostel has decided to go ahead with nearly 60 of them. One was from Vietnam where the company has already begun running its first international hostel in Dalat. Now it has decided to stray into Barcelona, Puerto and Sri Lanka because they received applications from there too. This is not to say that there are no further plans for India though. Only last month, the company announced the launch of four hostels across India in Jaisalmer, Pushkar, Rishikesh and Goa taking its total properties in India to 11. Khajuraho, Jaipur, Mysore, Otty, Manali, Spiti, Leh, Puri, Kochi are many other places that will soon get come under Zostel’s net.

But we still asked if Zostel finds international markets more benefitable than Indian market and whether they feel the home market is not ready for the famous western concept of backpacking yet? One of its co-founder said: “No that’s not that case.”

“When we started out in 2013, 90 percent of our customers were foreigners and 10 per cent were Indians. It’s now 65 per cent foreigners and 30 per cent Indians. So, Zostel created the market that did not exist in India. Yes, we are slightly ahead of the curve and would shape a better market in India in the coming years,” said Akhil Malik.

“We are focusing on growing the Zostel network to 25 properties across national and international destinations by the year end. Our vision is to emerge as the largest youth brand with our footprints all over the globe,” the Zostel Hospitality co-founder said.

As it goes big, there is hardly any investment the company is making in marketing. Backpackers move in groups and are well connected and by giving them good services at affordable rates, Zostel claims, it has been able to come this far. And that’s how it will move forward too.

The new Zostel properties are being established under the Zostel Entrepreneurship Development Programme. Currently, over 20,000 backpackers stay in Zostels every month. The company offers travelers rooms (women-only dorm, mixed dorm, private rooms) at budgets of Rs 500 a day, and offer services like laundry, access to internet, library, board games and other interactive facilities. It is in the process of launching a one-of-its-kind backpacker app that will tap into this community to share relevant information for the backpacking ecosystem.

(Image credit: Zostel)