The Hosteller, a chain of hostels, has raised $4 million, or about ₹32 crore, in a Series A funding round led by V3 Ventures. Six other existing investment companies, individuals and family offices also participated in the funding round.
The company plans to more than double its network as it competes with 10-year-old Zostel, which is one of the largest chains of branded hostels in the country, as well as ArtBuzz and goSTOPS.
The Hosteller will deploy the funds to expand its network to over 150 locations across India by 2026, the company said in a statement. At present, it operates in 60 locations in metro cities and tourist destinations.
It intends to increase its presence in urban centres and emerging travel spots. The company will also strengthen existing operations while venturing into new regions.
Sustainable growth
Arjun Vaidya, co-founder of V3 Ventures, said the funding will allow the company to scale up quickly and continue capturing a larger share of the travel and backpacker market across India. Participants in this funding round included LV Angel Fund, venture capital company FAO Ventures, private equity firm Synergy Capital Partners, Unit-e Consulting, Ice.VC and Thrive Ventures.
Founder and CEO Pranav Dangi said the company will focus on sustainable growth. The funding round will support its broader strategy of providing travel experiences.
He added that the company will add about five hostels to its portfolio every month. Since its launch in 2014, the company has expanded primarily in Himachal Pradesh, Uttarakhand, and Karnataka. It operates its own properties.
Bookings for alternative accommodation on MakeMyTrip increased 24% in 2023. According to research by the online travel company, rooms under ₹2,500 per night were preferred the most by travellers looking for hostels and apartments.
A lot of this demand came from the north of the country. But this was not the case in the east, where travellers preferred hotels. Alternative accommodation like homestays were favoured more by those in the south.
The sector has attracted other funding in the past. In 2021, goSTOPS raised $2 million in its Pre-Series A and bridge rounds from Mumbai Angels Network, The Chennai Angels and others.
Last week, The Hive Hostels, a student hostel company that does not directly compete with The Hosteller, raised ₹11.5 crore. Zostel has raised $14.8 million across three rounds since 2014.
While the sector has received some funding, many hostel businesses in India are finding long-term survival hard and are moving towards more premium offerings and trying their hand at homestays.
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